Ross Stores (ROST) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Ross Stores (United States)

Based on various researches at Oak Spring University , Ross Stores is operating in a macro-environment that has been destablized by – increasing commodity prices, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, etc

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Introduction to SWOT Analysis of Ross Stores

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Ross Stores can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ross Stores, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ross Stores 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 Ross Stores can be done for the following purposes –
1. Strategic planning of Ross Stores
2. Improving business portfolio management of Ross Stores
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 Ross Stores

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

The strengths of Ross Stores are -

Organizational Resilience of Ross Stores

– The covid-19 pandemic has put organizational resilience at the centre of everthing Ross Stores does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Low bargaining power of suppliers

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

Training and development

– Ross Stores 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 Ross Stores 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.

Successful track record of launching new products

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

Ability to recruit top talent

– Ross Stores is one of the leading players in the Retail (Apparel) industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.

High brand equity

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

Learning organization

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

Diverse revenue streams

– Ross Stores is present in almost all the verticals within the Retail (Apparel) industry. This has provided Ross Stores 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.

Superior customer experience

– The customer experience strategy of Ross Stores in Retail (Apparel) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Effective Research and Development (R&D)

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

Digital Transformation in Retail (Apparel) industry

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

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

The weaknesses of Ross Stores are -

High bargaining power of channel partners in Retail (Apparel) industry

– because of the regulatory requirements in United States, Ross Stores 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.

Need for greater diversity

– Ross Stores 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.

High dependence on Ross Stores ‘s star products

– The top 2 products and services of Ross Stores 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 Ross Stores has relatively successful track record of launching new products.

Skills based hiring in Retail (Apparel) industry

– The stress on hiring functional specialists at Ross Stores 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 Ross Stores supply chain. Even after few cautionary changes, Ross Stores is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ross Stores vulnerable to further global disruptions in South East Asia.

Increasing silos among functional specialists

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

Employees’ less understanding of Ross Stores strategy

– From the outside it seems that the employees of Ross Stores 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.

Slow decision making process

– As mentioned earlier in the report, Ross Stores 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. Ross Stores 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.

Interest costs

– Compare to the competition, Ross Stores 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.

Lack of clear differentiation of Ross Stores products

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

Compensation and incentives

– The revenue per employee of Ross Stores 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.

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

The opportunities of Ross Stores are -

Redefining models of collaboration and team work

– As explained in the weaknesses section, Ross Stores is facing challenges because of the dominance of functional experts in the organization. Ross Stores 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.

Manufacturing automation

– Ross Stores can use the latest technology developments to improve its manufacturing and designing process in Retail (Apparel) 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.

Finding new ways to collaborate

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

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. Ross Stores 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. Ross Stores 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.

Developing new processes and practices

– Ross Stores 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.

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 Ross Stores 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.

Learning at scale

– Online learning technologies has now opened space for Ross Stores 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.

Buying journey improvements

– Ross Stores can improve the customer journey of consumers in the Retail (Apparel) 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Ross Stores 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.

Leveraging digital technologies

– Ross Stores 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.

Remote work and new talent hiring opportunities

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

Loyalty marketing

– Ross Stores 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.

Reforming the budgeting process

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

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

The threats of Ross Stores are -

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.

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 Ross Stores in the Retail (Apparel) sector and impact the bottomline of the organization.

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. Ross Stores can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Retail (Apparel) industry are lowering. It can presents Ross Stores 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, Ross Stores 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.

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. Ross Stores needs to understand the core reasons impacting the Retail (Apparel) industry. This will help it in building a better workplace.

Increasing international competition and downward pressure on margins

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

Environmental challenges

– Ross Stores 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. Ross Stores can take advantage of this fund but it will also bring new competitors in the Retail (Apparel) industry.

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 Ross Stores.

Technology acceleration in Forth Industrial Revolution

– Ross Stores has witnessed rapid integration of technology during Covid-19 in the Retail (Apparel) industry. As one of the leading players in the industry, Ross Stores needs to keep up with the evolution of technology in the Retail (Apparel) sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Ross Stores 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.

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 Ross Stores business can come under increasing regulations regarding data privacy, data security, etc.

Regulatory challenges

– Ross Stores 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 (Apparel) industry regulations.

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Weighted SWOT Analysis of Ross Stores Template, Example

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

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