Skechers (SKX) SWOT Analysis / TOWS Matrix / MBA Resources
Footwear
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Skechers (United States)
Based on various researches at Oak Spring University , Skechers is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, 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, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Skechers can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Skechers, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Skechers 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 Skechers can be done for the following purposes –
1. Strategic planning of Skechers
2. Improving business portfolio management of Skechers
3. Assessing feasibility of the new initiative in United States
4. Making a Footwear sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Skechers
Strengths of Skechers | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Skechers are -
Highly skilled collaborators
– Skechers has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Footwear industry. Secondly the value chain collaborators of Skechers have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Skechers 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 Footwear 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.
Sustainable margins compare to other players in Footwear industry
– Skechers has clearly differentiated products in the market place. This has enabled Skechers to fetch slight price premium compare to the competitors in the Footwear industry. The sustainable margins have also helped Skechers to invest into research and development (R&D) and innovation.
Training and development
– Skechers 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.
Low bargaining power of suppliers
– Suppliers of Skechers in the Consumer Cyclical sector have low bargaining power. Skechers has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Skechers to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Skechers has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Skechers staying ahead in the Footwear industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management in the Footwear industry
– Skechers is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Skechers is one of the leading players in the Footwear 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.
Cross disciplinary teams
– Horizontal connected teams at the Skechers 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.
Learning organization
- Skechers 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 Skechers is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Skechers emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Skechers is one of the most innovative firm in Footwear sector.
High switching costs
– The high switching costs that Skechers 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 Skechers | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Skechers are -
Need for greater diversity
– Skechers 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 Skechers ‘s star products
– The top 2 products and services of Skechers still accounts for major business revenue. This dependence on star products in Footwear industry has resulted into insufficient focus on developing new products, even though Skechers has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of United States, Skechers needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Skechers is dominated by functional specialists. It is not different from other players in the Footwear industry, but Skechers needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Skechers to focus more on services in the Footwear industry rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative at Skechers, in the dynamic environment of Footwear industry it has struggled to respond to the nimble upstart competition. Skechers has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring in Footwear industry
– The stress on hiring functional specialists at Skechers 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 bargaining power of channel partners in Footwear industry
– because of the regulatory requirements in United States, Skechers 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 Footwear industry.
Slow decision making process
– As mentioned earlier in the report, Skechers has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Footwear industry over the last five years. Skechers 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 cash cycle compare to competitors
Skechers has a high cash cycle compare to other players in the Footwear industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Skechers is slow explore the new channels of communication. These new channels of communication can help Skechers to provide better information regarding Footwear products and services. It can also build an online community to further reach out to potential customers.
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 Skechers supply chain. Even after few cautionary changes, Skechers is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Skechers vulnerable to further global disruptions in South East Asia.
Skechers Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Skechers 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, Skechers can use these opportunities to build new business models that can help the communities that Skechers operates in. Secondly it can use opportunities from government spending in Footwear sector.
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 Skechers 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Footwear industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Skechers 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. Skechers 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.
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. Skechers can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Skechers can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Skechers 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 Skechers to hire the very best people irrespective of their geographical location.
Use of Bitcoin and other crypto currencies for transactions in Footwear industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Skechers in the Footwear industry. Now Skechers can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Skechers has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Footwear sector. This continuous investment in analytics has enabled Skechers to build a competitive advantage using analytics. The analytics driven competitive advantage can help Skechers to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Skechers can develop new processes and procedures in Footwear 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.
Creating value in data economy
– The success of analytics program of Skechers has opened avenues for new revenue streams for the organization in Footwear industry. This can help Skechers to build a more holistic ecosystem for Skechers products in the Footwear industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Skechers 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 Footwear industry.
Low interest rates
– Even though inflation is raising its head in most developed economies, Skechers 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Skechers 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 Skechers 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 Skechers External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Skechers are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Skechers 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 Skechers prominent markets.
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.
Easy access to finance
– Easy access to finance in Footwear industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Skechers can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Skechers needs to understand the core reasons impacting the Footwear industry. This will help it in building a better workplace.
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 Skechers in the Footwear 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. Skechers 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.
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 Skechers 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 Footwear industry are lowering. It can presents Skechers with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Footwear sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Skechers in Footwear industry. The Footwear 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.
Consumer confidence and its impact on Skechers 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 Footwear industry and other sectors.
Stagnating economy with rate increase
– Skechers 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 Footwear industry.
Shortening product life cycle
– it is one of the major threat that Skechers is facing in Footwear sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Skechers has witnessed rapid integration of technology during Covid-19 in the Footwear industry. As one of the leading players in the industry, Skechers needs to keep up with the evolution of technology in the Footwear 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.
Weighted SWOT Analysis of Skechers Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Skechers 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 Skechers 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 Skechers 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 Skechers 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 Skechers needs to make to build a sustainable competitive advantage.
