Based on various researches at Oak Spring University , Shake Shack Inc is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions,
supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Shake Shack Inc can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Shake Shack Inc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Shake Shack Inc 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 Shake Shack Inc can be done for the following purposes –
1. Strategic planning of Shake Shack Inc
2. Improving business portfolio management of Shake Shack Inc
3. Assessing feasibility of the new initiative in United States
4. Making a Restaurants sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Shake Shack Inc
Strengths of Shake Shack Inc | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Shake Shack Inc are -
High switching costs
– The high switching costs that Shake Shack Inc 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.
Ability to lead change in Restaurants
– Shake Shack Inc is one of the leading players in the Restaurants industry in United States. Over the years it has not only transformed the business landscape in the Restaurants industry in United States but also across the existing markets. The ability to lead change has enabled Shake Shack Inc in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Shake Shack Inc in the Services sector have low bargaining power. Shake Shack Inc has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Shake Shack Inc to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Restaurants industry
- digital transformation varies from industry to industry. For Shake Shack Inc digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Shake Shack Inc 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.
Strong track record of project management in the Restaurants industry
– Shake Shack Inc is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Shake Shack Inc
– The covid-19 pandemic has put organizational resilience at the centre of everthing Shake Shack Inc does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Shake Shack Inc 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 Shake Shack Inc is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Shake Shack Inc emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Shake Shack Inc is one of the leading players in the Restaurants 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.
Successful track record of launching new products
– Shake Shack Inc has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Shake Shack Inc 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.
Training and development
– Shake Shack Inc 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.
High brand equity
– Shake Shack Inc has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Shake Shack Inc to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Shake Shack Inc 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.
Weaknesses of Shake Shack Inc | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shake Shack Inc are -
High cash cycle compare to competitors
Shake Shack Inc has a high cash cycle compare to other players in the Restaurants industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Shake Shack Inc 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 Shake Shack Inc products
– To increase the profitability and margins on the products, Shake Shack Inc needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Shake Shack Inc has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Restaurants industry over the last five years. Shake Shack Inc 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.
High operating costs
– Compare to the competitors, Shake Shack Inc has high operating costs in the Restaurants industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Shake Shack Inc lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the Restaurants industry, Shake Shack Inc 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.
High bargaining power of channel partners in Restaurants industry
– because of the regulatory requirements in United States, Shake Shack Inc 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 Restaurants industry.
Compensation and incentives
– The revenue per employee of Shake Shack Inc is just above the Restaurants 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Shake Shack Inc is slow explore the new channels of communication. These new channels of communication can help Shake Shack Inc to provide better information regarding Restaurants products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Shake Shack Inc has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Restaurants industry using digital technology.
Ability to respond to the competition
– As the decision making is very deliberative at Shake Shack Inc, in the dynamic environment of Restaurants industry it has struggled to respond to the nimble upstart competition. Shake Shack Inc has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Shake Shack Inc Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Shake Shack Inc are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Shake Shack Inc can use these opportunities to build new business models that can help the communities that Shake Shack Inc operates in. Secondly it can use opportunities from government spending in Restaurants sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Shake Shack Inc in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Restaurants industry, and it will provide faster access to the consumers.
Developing new processes and practices
– Shake Shack Inc can develop new processes and procedures in Restaurants 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Shake Shack Inc can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Shake Shack Inc 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.
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. Shake Shack Inc can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Restaurants industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Shake Shack Inc 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. Shake Shack Inc 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Shake Shack Inc is facing challenges because of the dominance of functional experts in the organization. Shake Shack Inc can utilize new technology in the field of Restaurants industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Restaurants industry, but it has also influenced the consumer preferences. Shake Shack Inc can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions in Restaurants industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Shake Shack Inc in the Restaurants industry. Now Shake Shack Inc can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Shake Shack Inc 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 Restaurants industry.
Better consumer reach
– The expansion of the 5G network will help Shake Shack Inc to increase its market reach. Shake Shack Inc 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, Shake Shack Inc 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 Shake Shack Inc to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Shake Shack Inc External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Shake Shack Inc are -
Shortening product life cycle
– it is one of the major threat that Shake Shack Inc is facing in Restaurants sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Shake Shack Inc 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 Restaurants industry and other sectors.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Shake Shack Inc 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 Shake Shack Inc prominent markets.
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 Shake Shack Inc in the Restaurants sector and impact the bottomline of the organization.
Environmental challenges
– Shake Shack Inc 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. Shake Shack Inc can take advantage of this fund but it will also bring new competitors in the Restaurants industry.
Technology acceleration in Forth Industrial Revolution
– Shake Shack Inc has witnessed rapid integration of technology during Covid-19 in the Restaurants industry. As one of the leading players in the industry, Shake Shack Inc needs to keep up with the evolution of technology in the Restaurants 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 Shake Shack Inc in Restaurants industry. The Restaurants 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.
Easy access to finance
– Easy access to finance in Restaurants industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Shake Shack Inc can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Regulatory challenges
– Shake Shack Inc 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 Restaurants industry regulations.
Stagnating economy with rate increase
– Shake Shack Inc 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 Restaurants industry.
High dependence on third party suppliers
– Shake Shack Inc 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.
Weighted SWOT Analysis of Shake Shack Inc Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Shake Shack Inc 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 Shake Shack Inc 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 Shake Shack Inc 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 Shake Shack Inc 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 Shake Shack Inc needs to make to build a sustainable competitive advantage.
