The Childrens Place (PLCE) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Apparel)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for The Childrens Place (United States)
Based on various researches at Oak Spring University , The Childrens Place is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, increasing commodity prices, technology disruption, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%,
increasing government debt because of Covid-19 spendings, increasing energy prices, etc
Introduction to SWOT Analysis of The Childrens Place
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that The Childrens Place can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the The Childrens Place, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which The Childrens Place 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 The Childrens Place can be done for the following purposes –
1. Strategic planning of The Childrens Place
2. Improving business portfolio management of The Childrens Place
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Apparel) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of The Childrens Place
Strengths of The Childrens Place | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of The Childrens Place are -
High brand equity
– The Childrens Place has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled The Childrens Place to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Retail (Apparel) industry
– The Childrens Place 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
– The Childrens Place 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.
Cross disciplinary teams
– Horizontal connected teams at the The Childrens Place 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.
Digital Transformation in Retail (Apparel) industry
- digital transformation varies from industry to industry. For The Childrens Place digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. The Childrens Place 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.
High switching costs
– The high switching costs that The Childrens Place 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.
Sustainable margins compare to other players in Retail (Apparel) industry
– The Childrens Place has clearly differentiated products in the market place. This has enabled The Childrens Place to fetch slight price premium compare to the competitors in the Retail (Apparel) industry. The sustainable margins have also helped The Childrens Place to invest into research and development (R&D) and innovation.
Ability to lead change in Retail (Apparel)
– The Childrens Place is one of the leading players in the Retail (Apparel) industry in United States. Over the years it has not only transformed the business landscape in the Retail (Apparel) industry in United States but also across the existing markets. The ability to lead change has enabled The Childrens Place 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 The Childrens Place comprises – understanding the underlying the factors in the Retail (Apparel) 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
– The Childrens Place is present in almost all the verticals within the Retail (Apparel) industry. This has provided The Childrens Place 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.
Low bargaining power of suppliers
– Suppliers of The Childrens Place in the Services sector have low bargaining power. The Childrens Place has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps The Childrens Place to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– The Childrens Place 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 (Apparel) 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.
Weaknesses of The Childrens Place | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Childrens Place are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, The Childrens Place is slow explore the new channels of communication. These new channels of communication can help The Childrens Place to provide better information regarding Retail (Apparel) products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the Retail (Apparel) industry, The Childrens Place 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.
Compensation and incentives
– The revenue per employee of The Childrens Place is just above the Retail (Apparel) 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 bargaining power of channel partners in Retail (Apparel) industry
– because of the regulatory requirements in United States, The Childrens Place 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 (Apparel) industry.
Employees’ less understanding of The Childrens Place strategy
– From the outside it seems that the employees of The Childrens Place 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.
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 The Childrens Place supply chain. Even after few cautionary changes, The Childrens Place is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left The Childrens Place vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at The Childrens Place, in the dynamic environment of Retail (Apparel) industry it has struggled to respond to the nimble upstart competition. The Childrens Place has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on The Childrens Place ‘s star products
– The top 2 products and services of The Childrens Place still accounts for major business revenue. This dependence on star products in Retail (Apparel) industry has resulted into insufficient focus on developing new products, even though The Childrens Place has relatively successful track record of launching new products.
Lack of clear differentiation of The Childrens Place products
– To increase the profitability and margins on the products, The Childrens Place needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of The Childrens Place is dominated by functional specialists. It is not different from other players in the Retail (Apparel) industry, but The Childrens Place needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help The Childrens Place to focus more on services in the Retail (Apparel) industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, The Childrens Place has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Apparel) industry over the last five years. The Childrens Place 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.
The Childrens Place Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of The Childrens Place are -
Using analytics as competitive advantage
– The Childrens Place has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Apparel) sector. This continuous investment in analytics has enabled The Childrens Place to build a competitive advantage using analytics. The analytics driven competitive advantage can help The Childrens Place to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help The Childrens Place to increase its market reach. The Childrens Place 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, The Childrens Place 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 The Childrens Place to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions in Retail (Apparel) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for The Childrens Place in the Retail (Apparel) industry. Now The Childrens Place can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for The Childrens Place 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 The Childrens Place to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, The Childrens Place is facing challenges because of the dominance of functional experts in the organization. The Childrens Place can utilize new technology in the field of Retail (Apparel) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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 The Childrens Place 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for The Childrens Place in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Apparel) industry, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects The Childrens Place can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Apparel) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. The Childrens Place 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. The Childrens Place 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.
Leveraging digital technologies
– The Childrens Place 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
– The Childrens Place can develop new processes and procedures in Retail (Apparel) 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, The Childrens Place can use these opportunities to build new business models that can help the communities that The Childrens Place operates in. Secondly it can use opportunities from government spending in Retail (Apparel) sector.
Threats The Childrens Place External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of The Childrens Place are -
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 The Childrens Place.
Environmental challenges
– The Childrens Place 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. The Childrens Place can take advantage of this fund but it will also bring new competitors in the Retail (Apparel) industry.
Shortening product life cycle
– it is one of the major threat that The Childrens Place is facing in Retail (Apparel) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 The Childrens Place business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Apparel) industry are lowering. It can presents The Childrens Place with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Apparel) sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, The Childrens Place 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 (Apparel) sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for The Childrens Place in Retail (Apparel) industry. The Retail (Apparel) 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 The Childrens Place in the Retail (Apparel) 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. The Childrens Place 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.
Stagnating economy with rate increase
– The Childrens Place 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 (Apparel) industry.
Easy access to finance
– Easy access to finance in Retail (Apparel) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. The Childrens Place 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. The Childrens Place needs to understand the core reasons impacting the Retail (Apparel) industry. This will help it in building a better workplace.
Weighted SWOT Analysis of The Childrens Place Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at The Childrens Place 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 The Childrens Place 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 The Childrens Place 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 The Childrens Place 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 The Childrens Place needs to make to build a sustainable competitive advantage.