Freds (FRED) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Department & Discount)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Freds (United States)
Based on various researches at Oak Spring University , Freds is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, wage bills are increasing, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy,
there is increasing trade war between United States & China, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Freds can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Freds, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Freds operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Freds can be done for the following purposes –
1. Strategic planning of Freds
2. Improving business portfolio management of Freds
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Department & Discount) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Freds
Strengths of Freds | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Freds are -
Successful track record of launching new products
– Freds has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Freds has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Ability to lead change in Retail (Department & Discount)
– Freds is one of the leading players in the Retail (Department & Discount) industry in United States. Over the years it has not only transformed the business landscape in the Retail (Department & Discount) industry in United States but also across the existing markets. The ability to lead change has enabled Freds in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Freds
– The covid-19 pandemic has put organizational resilience at the centre of everthing Freds does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Freds in the Services sector have low bargaining power. Freds has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Freds to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Freds has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Sustainable margins compare to other players in Retail (Department & Discount) industry
– Freds has clearly differentiated products in the market place. This has enabled Freds to fetch slight price premium compare to the competitors in the Retail (Department & Discount) industry. The sustainable margins have also helped Freds to invest into research and development (R&D) and innovation.
Learning organization
- Freds is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Freds is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Freds emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Freds has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Cross disciplinary teams
– Horizontal connected teams at the Freds are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Freds has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Freds to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Freds has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Freds staying ahead in the Retail (Department & Discount) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Freds is one of the most innovative firm in Retail (Department & Discount) sector.
Weaknesses of Freds | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Freds are -
High bargaining power of channel partners in Retail (Department & Discount) industry
– because of the regulatory requirements in United States, Freds is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Retail (Department & Discount) industry.
Low market penetration in new markets
– Outside its home market of United States, Freds needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ less understanding of Freds strategy
– From the outside it seems that the employees of Freds don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Workers concerns about automation
– As automation is fast increasing in the Retail (Department & Discount) industry, Freds needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Ability to respond to the competition
– As the decision making is very deliberative at Freds, in the dynamic environment of Retail (Department & Discount) industry it has struggled to respond to the nimble upstart competition. Freds has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Freds is one of the leading players in the Retail (Department & Discount) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Department & Discount) industry in last five years.
Lack of clear differentiation of Freds products
– To increase the profitability and margins on the products, Freds needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Freds supply chain. Even after few cautionary changes, Freds is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Freds vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– From the 10K / annual statement of Freds, it seems that company is thinking out the frontier risks that can impact Retail (Department & Discount) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High operating costs
– Compare to the competitors, Freds has high operating costs in the Retail (Department & Discount) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Freds lucrative customers.
Compensation and incentives
– The revenue per employee of Freds is just above the Retail (Department & Discount) industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Freds Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Freds are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Freds can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Developing new processes and practices
– Freds can develop new processes and procedures in Retail (Department & Discount) industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Use of Bitcoin and other crypto currencies for transactions in Retail (Department & Discount) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Freds in the Retail (Department & Discount) industry. Now Freds can target international markets with far fewer capital restrictions requirements than the existing system.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Freds to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Buying journey improvements
– Freds can improve the customer journey of consumers in the Retail (Department & Discount) industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Loyalty marketing
– Freds has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Using analytics as competitive advantage
– Freds has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Department & Discount) sector. This continuous investment in analytics has enabled Freds to build a competitive advantage using analytics. The analytics driven competitive advantage can help Freds to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Freds in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Department & Discount) industry, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Freds has opened avenues for new revenue streams for the organization in Retail (Department & Discount) industry. This can help Freds to build a more holistic ecosystem for Freds products in the Retail (Department & Discount) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Freds can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Freds to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Leveraging digital technologies
– Freds can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Manufacturing automation
– Freds can use the latest technology developments to improve its manufacturing and designing process in Retail (Department & Discount) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats Freds External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Freds are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Freds business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Freds demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Retail (Department & Discount) industry and other sectors.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Freds needs to understand the core reasons impacting the Retail (Department & Discount) industry. This will help it in building a better workplace.
Environmental challenges
– Freds needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Freds can take advantage of this fund but it will also bring new competitors in the Retail (Department & Discount) industry.
High dependence on third party suppliers
– Freds high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Freds in the Retail (Department & Discount) sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Freds can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Freds prominent markets.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Freds will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing wage structure of Freds
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Freds.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Freds.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Freds may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Department & Discount) sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Freds Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Freds needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Freds is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Freds is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Freds to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Freds needs to make to build a sustainable competitive advantage.