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 inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, geopolitical disruptions, 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 -

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.

Low bargaining power of suppliers

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

Sustainable margins compare to other players in Furniture & Fixtures industry

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

Analytics focus

– Lovesac 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 Furniture & Fixtures 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.

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.

High brand equity

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

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.

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.

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.

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.

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.

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.

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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 -

High dependence on Lovesac ‘s star products

– The top 2 products and services of Lovesac still accounts for major business revenue. This dependence on star products in Furniture & Fixtures industry has resulted into insufficient focus on developing new products, even though Lovesac has relatively successful track record of launching new products.

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.

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.

Slow to harness new channels of communication

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

High cash cycle compare to competitors

Lovesac has a high cash cycle compare to other players in the Furniture & Fixtures industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

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.

No frontier risks strategy

– From the 10K / annual statement of Lovesac, it seems that company is thinking out the frontier risks that can impact Furniture & Fixtures 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, Lovesac has high operating costs in the Furniture & Fixtures industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lovesac lucrative customers.

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.

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.

Ability to respond to the competition

– As the decision making is very deliberative at Lovesac, in the dynamic environment of Furniture & Fixtures industry it has struggled to respond to the nimble upstart competition. Lovesac has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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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 -

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.

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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Lovesac can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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.

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. Lovesac can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

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.

Buying journey improvements

– Lovesac can improve the customer journey of consumers in the Furniture & Fixtures 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.

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.

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.

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.

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.

Building a culture of innovation

– managers at Lovesac 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 Furniture & Fixtures industry.

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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 -

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.

High dependence on third party suppliers

– Lovesac 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 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.

Stagnating economy with rate increase

– Lovesac can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Furniture & Fixtures industry.

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.

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.

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.

Consumer confidence and its impact on Lovesac 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 Furniture & Fixtures industry and other sectors.

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. Lovesac 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.

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.

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.

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.

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.

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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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