Farfetch A (FTCH) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Farfetch A (United States)

Based on various researches at Oak Spring University , Farfetch A is operating in a macro-environment that has been destablized by – technology disruption, wage bills are increasing, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, geopolitical disruptions, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Farfetch A

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Farfetch A can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Farfetch A, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Farfetch A 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Farfetch A can be done for the following purposes –
1. Strategic planning of Farfetch A
2. Improving business portfolio management of Farfetch A
3. Assessing feasibility of the new initiative in United States
4. Making a Business Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Farfetch A

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Strengths of Farfetch A | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Farfetch A are -

High brand equity

– Farfetch A has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Farfetch A to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Digital Transformation in Business Services industry

- digital transformation varies from industry to industry. For Farfetch A digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Farfetch A has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

Learning organization

- Farfetch A 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 Farfetch A is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Farfetch A emphasize – knowledge, initiative, and innovation.

Diverse revenue streams

– Farfetch A is present in almost all the verticals within the Business Services industry. This has provided Farfetch A a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.

Effective Research and Development (R&D)

– Farfetch A has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Farfetch A staying ahead in the Business Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Sustainable margins compare to other players in Business Services industry

– Farfetch A has clearly differentiated products in the market place. This has enabled Farfetch A to fetch slight price premium compare to the competitors in the Business Services industry. The sustainable margins have also helped Farfetch A to invest into research and development (R&D) and innovation.

Low bargaining power of suppliers

– Suppliers of Farfetch A in the Services sector have low bargaining power. Farfetch A has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Farfetch A to manage not only supply disruptions but also source products at highly competitive prices.

High switching costs

– The high switching costs that Farfetch A 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.

Analytics focus

– Farfetch A is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Business Services industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Training and development

– Farfetch A 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.

Ability to lead change in Business Services

– Farfetch A is one of the leading players in the Business Services industry in United States. Over the years it has not only transformed the business landscape in the Business Services industry in United States but also across the existing markets. The ability to lead change has enabled Farfetch A in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Strong track record of project management in the Business Services industry

– Farfetch A is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

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Weaknesses of Farfetch A | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Farfetch A are -

Workers concerns about automation

– As automation is fast increasing in the Business Services industry, Farfetch A 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.

High bargaining power of channel partners in Business Services industry

– because of the regulatory requirements in United States, Farfetch A 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 Business Services industry.

High operating costs

– Compare to the competitors, Farfetch A has high operating costs in the Business Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Farfetch A lucrative customers.

Compensation and incentives

– The revenue per employee of Farfetch A is just above the Business Services 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.

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 Farfetch A supply chain. Even after few cautionary changes, Farfetch A is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Farfetch A vulnerable to further global disruptions in South East Asia.

Interest costs

– Compare to the competition, Farfetch A has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

Increasing silos among functional specialists

– The organizational structure of Farfetch A is dominated by functional specialists. It is not different from other players in the Business Services industry, but Farfetch A needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Farfetch A to focus more on services in the Business Services industry rather than just following the product oriented approach.

Capital Spending Reduction

– Even during the low interest decade, Farfetch A has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Business Services industry using digital technology.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Farfetch A is slow explore the new channels of communication. These new channels of communication can help Farfetch A to provide better information regarding Business Services products and services. It can also build an online community to further reach out to potential customers.

High cash cycle compare to competitors

Farfetch A has a high cash cycle compare to other players in the Business Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Need for greater diversity

– Farfetch A has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

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Farfetch A Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Farfetch A are -

Use of Bitcoin and other crypto currencies for transactions in Business Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Farfetch A in the Business Services industry. Now Farfetch A 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 Farfetch A 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.

Leveraging digital technologies

– Farfetch A 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.

Developing new processes and practices

– Farfetch A can develop new processes and procedures in Business Services 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.

Learning at scale

– Online learning technologies has now opened space for Farfetch A 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Farfetch A in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Business Services industry, and it will provide faster access to the consumers.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Farfetch A can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Farfetch A to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Farfetch A to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Farfetch A to hire the very best people irrespective of their geographical location.

Manufacturing automation

– Farfetch A can use the latest technology developments to improve its manufacturing and designing process in Business Services 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Farfetch A 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.

Loyalty marketing

– Farfetch A 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.

Building a culture of innovation

– managers at Farfetch A can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Business Services industry.

Better consumer reach

– The expansion of the 5G network will help Farfetch A to increase its market reach. Farfetch A will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

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Threats Farfetch A External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Farfetch A are -

Shortening product life cycle

– it is one of the major threat that Farfetch A is facing in Business Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

High dependence on third party suppliers

– Farfetch A 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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Business Services industry are lowering. It can presents Farfetch A with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Business Services sector.

Technology acceleration in Forth Industrial Revolution

– Farfetch A has witnessed rapid integration of technology during Covid-19 in the Business Services industry. As one of the leading players in the industry, Farfetch A needs to keep up with the evolution of technology in the Business Services sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

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 Farfetch A in the Business Services sector and impact the bottomline of the organization.

Environmental challenges

– Farfetch A 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. Farfetch A can take advantage of this fund but it will also bring new competitors in the Business Services industry.

Increasing wage structure of Farfetch A

– 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 Farfetch A.

Consumer confidence and its impact on Farfetch A 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 Business Services industry and other sectors.

Regulatory challenges

– Farfetch A needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Business Services industry regulations.

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 Farfetch A business can come under increasing regulations regarding data privacy, data security, etc.

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.

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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Farfetch A 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 Farfetch A prominent markets.

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Weighted SWOT Analysis of Farfetch A Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Farfetch A 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 Farfetch A 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 Farfetch A 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 Farfetch A 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 Farfetch A needs to make to build a sustainable competitive advantage.

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