Lovesac (LOVE) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Lovesac (United States)

Based on various researches at Oak Spring University , Lovesac is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, increasing commodity prices, cloud computing is disrupting traditional business models, there is backlash against globalization, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, etc

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Introduction to SWOT Analysis of Lovesac

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lovesac can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lovesac, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lovesac 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 Lovesac can be done for the following purposes –
1. Strategic planning of Lovesac
2. Improving business portfolio management of Lovesac
3. Assessing feasibility of the new initiative in United States
4. Making a Furniture & Fixtures sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lovesac

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

The strengths of Lovesac are -

Highly skilled collaborators

– Lovesac has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Furniture & Fixtures industry. Secondly the value chain collaborators of Lovesac have helped the firm to develop new products and bring them quickly to the marketplace.

High switching costs

– The high switching costs that Lovesac 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.

Ability to lead change in Furniture & Fixtures

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

Operational resilience

– The operational resilience strategy of Lovesac comprises – understanding the underlying the factors in the Furniture & Fixtures industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.

Diverse revenue streams

– Lovesac is present in almost all the verticals within the Furniture & Fixtures industry. This has provided Lovesac 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.

Successful track record of launching new products

– Lovesac has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lovesac 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.

Effective Research and Development (R&D)

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

Cross disciplinary teams

– Horizontal connected teams at the Lovesac 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.

Superior customer experience

– The customer experience strategy of Lovesac in Furniture & Fixtures industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Strong track record of project management in the Furniture & Fixtures industry

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

Training and development

– Lovesac has one of the best training and development program in Consumer Cyclical 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.

Learning organization

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

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

The weaknesses of Lovesac are -

Low market penetration in new markets

– Outside its home market of United States, Lovesac needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Capital Spending Reduction

– Even during the low interest decade, Lovesac 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 Furniture & Fixtures industry using digital technology.

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

Products dominated business model

– Even though Lovesac has some of the most successful models in the Furniture & Fixtures industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Lovesac should strive to include more intangible value offerings along with its core products and services.

Employees’ less understanding of Lovesac strategy

– From the outside it seems that the employees of Lovesac 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.

Compensation and incentives

– The revenue per employee of Lovesac is just above the Furniture & Fixtures 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.

Slow decision making process

– As mentioned earlier in the report, Lovesac has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Furniture & Fixtures industry over the last five years. Lovesac even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

Skills based hiring in Furniture & Fixtures industry

– The stress on hiring functional specialists at Lovesac has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

Increasing silos among functional specialists

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

Aligning sales with marketing

– From the outside it seems that Lovesac needs to have more collaboration between its sales team and marketing team. Sales professionals in the Furniture & Fixtures industry have deep experience in developing customer relationships. Marketing department at Lovesac can leverage the sales team experience to cultivate customer relationships as Lovesac is planning to shift buying processes online.

Lack of clear differentiation of Lovesac products

– To increase the profitability and margins on the products, Lovesac needs to provide more differentiated products than what it is currently offering in the marketplace.

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

The opportunities of Lovesac are -

Manufacturing automation

– Lovesac can use the latest technology developments to improve its manufacturing and designing process in Furniture & Fixtures 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.

Leveraging digital technologies

– Lovesac 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lovesac can use these opportunities to build new business models that can help the communities that Lovesac operates in. Secondly it can use opportunities from government spending in Furniture & Fixtures sector.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Furniture & Fixtures industry, but it has also influenced the consumer preferences. Lovesac can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Developing new processes and practices

– Lovesac can develop new processes and procedures in Furniture & Fixtures 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lovesac 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 Lovesac to hire the very best people irrespective of their geographical location.

Lowering marketing communication costs

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

Loyalty marketing

– Lovesac 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Lovesac is facing challenges because of the dominance of functional experts in the organization. Lovesac can utilize new technology in the field of Furniture & Fixtures industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Use of Bitcoin and other crypto currencies for transactions in Furniture & Fixtures industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lovesac in the Furniture & Fixtures industry. Now Lovesac can target international markets with far fewer capital restrictions requirements than the existing system.

Creating value in data economy

– The success of analytics program of Lovesac has opened avenues for new revenue streams for the organization in Furniture & Fixtures industry. This can help Lovesac to build a more holistic ecosystem for Lovesac products in the Furniture & Fixtures industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Using analytics as competitive advantage

– Lovesac has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Furniture & Fixtures sector. This continuous investment in analytics has enabled Lovesac to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lovesac to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Furniture & Fixtures industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lovesac can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Lovesac can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.

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

The threats of Lovesac are -

Regulatory challenges

– Lovesac 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 Furniture & Fixtures industry regulations.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Lovesac in Furniture & Fixtures industry. The Furniture & Fixtures industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

Barriers of entry lowering

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

Environmental challenges

– Lovesac 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. Lovesac can take advantage of this fund but it will also bring new competitors in the Furniture & Fixtures industry.

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.

Increasing international competition and downward pressure on margins

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

Shortening product life cycle

– it is one of the major threat that Lovesac is facing in Furniture & Fixtures sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Easy access to finance

– Easy access to finance in Furniture & Fixtures industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lovesac can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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.

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. Lovesac needs to understand the core reasons impacting the Furniture & Fixtures industry. This will help it in building a better workplace.

Increasing wage structure of Lovesac

– 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 Lovesac.

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 Lovesac.

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 Lovesac in the Furniture & Fixtures sector and impact the bottomline of the organization.

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Weighted SWOT Analysis of Lovesac Template, Example

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

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