Roots (ROOT) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Roots (Canada)

Based on various researches at Oak Spring University , Roots is operating in a macro-environment that has been destablized by – there is backlash against globalization, increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, etc

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Introduction to SWOT Analysis of Roots

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

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

The strengths of Roots are -

Effective Research and Development (R&D)

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

Superior customer experience

– The customer experience strategy of Roots in Apparel/Accessories industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

High switching costs

– The high switching costs that Roots 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.

High brand equity

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

Learning organization

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

Sustainable margins compare to other players in Apparel/Accessories industry

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

Operational resilience

– The operational resilience strategy of Roots comprises – understanding the underlying the factors in the Apparel/Accessories 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.

Low bargaining power of suppliers

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

Digital Transformation in Apparel/Accessories industry

- digital transformation varies from industry to industry. For Roots digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Roots 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.

Training and development

– Roots 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.

Diverse revenue streams

– Roots is present in almost all the verticals within the Apparel/Accessories industry. This has provided Roots 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

– Roots has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Roots 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 Roots | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Roots are -

Increasing silos among functional specialists

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

Interest costs

– Compare to the competition, Roots 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.

Ability to respond to the competition

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

High bargaining power of channel partners in Apparel/Accessories industry

– because of the regulatory requirements in Canada, Roots 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 Apparel/Accessories industry.

No frontier risks strategy

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

Low market penetration in new markets

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

Slow to harness new channels of communication

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

High cash cycle compare to competitors

Roots has a high cash cycle compare to other players in the Apparel/Accessories 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 Roots supply chain. Even after few cautionary changes, Roots is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Roots vulnerable to further global disruptions in South East Asia.

Need for greater diversity

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

The opportunities of Roots are -

Better consumer reach

– The expansion of the 5G network will help Roots to increase its market reach. Roots 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.

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

Creating value in data economy

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

Use of Bitcoin and other crypto currencies for transactions in Apparel/Accessories industry

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

Finding new ways to collaborate

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

Increase in government spending

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

Redefining models of collaboration and team work

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

Leveraging digital technologies

– Roots 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.

Buying journey improvements

– Roots can improve the customer journey of consumers in the Apparel/Accessories 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Roots 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

– Roots 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.

Developing new processes and practices

– Roots can develop new processes and procedures in Apparel/Accessories 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.

Using analytics as competitive advantage

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

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

The threats of Roots 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 Roots business can come under increasing regulations regarding data privacy, data security, etc.

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. Roots needs to understand the core reasons impacting the Apparel/Accessories industry. This will help it in building a better workplace.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Roots may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Apparel/Accessories sector.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Roots in Apparel/Accessories industry. The Apparel/Accessories 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.

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 Roots in the Apparel/Accessories sector and impact the bottomline of the organization.

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. Roots 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 international competition and downward pressure on margins

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

Barriers of entry lowering

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

High dependence on third party suppliers

– Roots 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.

Consumer confidence and its impact on Roots 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 Apparel/Accessories industry and other sectors.

Regulatory challenges

– Roots 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 Apparel/Accessories industry regulations.

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 Roots.

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.

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Weighted SWOT Analysis of Roots Template, Example

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

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