Overstockcom (OSTK) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Catalog & Mail Order)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Overstockcom (United States)
Based on various researches at Oak Spring University , Overstockcom is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing household debt because of falling income levels, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Overstockcom can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Overstockcom, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Overstockcom 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 Overstockcom can be done for the following purposes –
1. Strategic planning of Overstockcom
2. Improving business portfolio management of Overstockcom
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Catalog & Mail Order) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Overstockcom
Strengths of Overstockcom | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Overstockcom are -
Highly skilled collaborators
– Overstockcom has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Catalog & Mail Order) industry. Secondly the value chain collaborators of Overstockcom have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Overstockcom has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Overstockcom to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Retail (Catalog & Mail Order) industry
– Overstockcom has clearly differentiated products in the market place. This has enabled Overstockcom to fetch slight price premium compare to the competitors in the Retail (Catalog & Mail Order) industry. The sustainable margins have also helped Overstockcom to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy of Overstockcom comprises – understanding the underlying the factors in the Retail (Catalog & Mail Order) 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 Overstockcom in the Services sector have low bargaining power. Overstockcom has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Overstockcom to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Overstockcom 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 Overstockcom is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Overstockcom emphasize – knowledge, initiative, and innovation.
Strong track record of project management in the Retail (Catalog & Mail Order) industry
– Overstockcom is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Overstockcom 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 Retail (Catalog & Mail Order) 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.
Innovation driven organization
– Overstockcom is one of the most innovative firm in Retail (Catalog & Mail Order) sector.
Cross disciplinary teams
– Horizontal connected teams at the Overstockcom 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.
Effective Research and Development (R&D)
– Overstockcom has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Overstockcom staying ahead in the Retail (Catalog & Mail Order) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Overstockcom 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.
Weaknesses of Overstockcom | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Overstockcom are -
High dependence on Overstockcom ‘s star products
– The top 2 products and services of Overstockcom still accounts for major business revenue. This dependence on star products in Retail (Catalog & Mail Order) industry has resulted into insufficient focus on developing new products, even though Overstockcom has relatively successful track record of launching new products.
High bargaining power of channel partners in Retail (Catalog & Mail Order) industry
– because of the regulatory requirements in United States, Overstockcom 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 (Catalog & Mail Order) industry.
Compensation and incentives
– The revenue per employee of Overstockcom is just above the Retail (Catalog & Mail Order) 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 operating costs
– Compare to the competitors, Overstockcom has high operating costs in the Retail (Catalog & Mail Order) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Overstockcom lucrative customers.
Lack of clear differentiation of Overstockcom products
– To increase the profitability and margins on the products, Overstockcom needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Overstockcom has some of the most successful models in the Retail (Catalog & Mail Order) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Overstockcom should strive to include more intangible value offerings along with its core products and services.
Employees’ less understanding of Overstockcom strategy
– From the outside it seems that the employees of Overstockcom 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.
Low market penetration in new markets
– Outside its home market of United States, Overstockcom needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring in Retail (Catalog & Mail Order) industry
– The stress on hiring functional specialists at Overstockcom 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.
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 Overstockcom supply chain. Even after few cautionary changes, Overstockcom is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Overstockcom vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at Overstockcom, in the dynamic environment of Retail (Catalog & Mail Order) industry it has struggled to respond to the nimble upstart competition. Overstockcom has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Overstockcom Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Overstockcom are -
Buying journey improvements
– Overstockcom can improve the customer journey of consumers in the Retail (Catalog & Mail Order) 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.
Creating value in data economy
– The success of analytics program of Overstockcom has opened avenues for new revenue streams for the organization in Retail (Catalog & Mail Order) industry. This can help Overstockcom to build a more holistic ecosystem for Overstockcom products in the Retail (Catalog & Mail Order) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Overstockcom 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.
Loyalty marketing
– Overstockcom 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.
Manufacturing automation
– Overstockcom can use the latest technology developments to improve its manufacturing and designing process in Retail (Catalog & Mail Order) 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Overstockcom can use these opportunities to build new business models that can help the communities that Overstockcom operates in. Secondly it can use opportunities from government spending in Retail (Catalog & Mail Order) sector.
Better consumer reach
– The expansion of the 5G network will help Overstockcom to increase its market reach. Overstockcom 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.
Leveraging digital technologies
– Overstockcom 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.
Building a culture of innovation
– managers at Overstockcom 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 Retail (Catalog & Mail Order) industry.
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 Overstockcom 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Overstockcom 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Overstockcom 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 Overstockcom to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Catalog & Mail Order) industry, but it has also influenced the consumer preferences. Overstockcom can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Overstockcom External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Overstockcom are -
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. Overstockcom 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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Overstockcom in Retail (Catalog & Mail Order) industry. The Retail (Catalog & Mail Order) 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.
Regulatory challenges
– Overstockcom 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 Retail (Catalog & Mail Order) industry regulations.
High dependence on third party suppliers
– Overstockcom 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.
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 Overstockcom.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Overstockcom 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 (Catalog & Mail Order) sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Overstockcom 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 Overstockcom prominent markets.
Stagnating economy with rate increase
– Overstockcom 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 Retail (Catalog & Mail Order) industry.
Consumer confidence and its impact on Overstockcom 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 (Catalog & Mail Order) industry and other sectors.
Environmental challenges
– Overstockcom 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. Overstockcom can take advantage of this fund but it will also bring new competitors in the Retail (Catalog & Mail Order) industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Catalog & Mail Order) industry are lowering. It can presents Overstockcom with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Catalog & Mail Order) sector.
Weighted SWOT Analysis of Overstockcom Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Overstockcom 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 Overstockcom 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 Overstockcom 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 Overstockcom 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 Overstockcom needs to make to build a sustainable competitive advantage.