Red 5 (RED) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Red 5 (Australia)

Based on various researches at Oak Spring University , Red 5 is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, there is backlash against globalization, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, etc

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Introduction to SWOT Analysis of Red 5

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Red 5 can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Red 5, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Red 5 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 Red 5 can be done for the following purposes –
1. Strategic planning of Red 5
2. Improving business portfolio management of Red 5
3. Assessing feasibility of the new initiative in Australia
4. Making a Gold & Silver sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Red 5

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Strengths of Red 5 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Red 5 are -

Sustainable margins compare to other players in Gold & Silver industry

– Red 5 has clearly differentiated products in the market place. This has enabled Red 5 to fetch slight price premium compare to the competitors in the Gold & Silver industry. The sustainable margins have also helped Red 5 to invest into research and development (R&D) and innovation.

Highly skilled collaborators

– Red 5 has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Gold & Silver industry. Secondly the value chain collaborators of Red 5 have helped the firm to develop new products and bring them quickly to the marketplace.

High brand equity

– Red 5 has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Red 5 to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Strong track record of project management in the Gold & Silver industry

– Red 5 is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

High switching costs

– The high switching costs that Red 5 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.

Superior customer experience

– The customer experience strategy of Red 5 in Gold & Silver industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Low bargaining power of suppliers

– Suppliers of Red 5 in the Basic Materials sector have low bargaining power. Red 5 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Red 5 to manage not only supply disruptions but also source products at highly competitive prices.

Diverse revenue streams

– Red 5 is present in almost all the verticals within the Gold & Silver industry. This has provided Red 5 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.

Successful track record of launching new products

– Red 5 has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Red 5 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.

Operational resilience

– The operational resilience strategy of Red 5 comprises – understanding the underlying the factors in the Gold & Silver 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.

Analytics focus

– Red 5 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 Gold & Silver industry. The technology infrastructure of Australia 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.

Ability to recruit top talent

– Red 5 is one of the leading players in the Gold & Silver industry in Australia. It is in a position to attract the best talent available in Australia. The firm has a robust talent identification program that helps in identifying the brightest.

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Weaknesses of Red 5 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Red 5 are -

Interest costs

– Compare to the competition, Red 5 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.

Slow to strategic competitive environment developments

– As Red 5 is one of the leading players in the Gold & Silver industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Gold & Silver industry in last five years.

Employees’ less understanding of Red 5 strategy

– From the outside it seems that the employees of Red 5 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.

Compensation and incentives

– The revenue per employee of Red 5 is just above the Gold & Silver 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.

Increasing silos among functional specialists

– The organizational structure of Red 5 is dominated by functional specialists. It is not different from other players in the Gold & Silver industry, but Red 5 needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Red 5 to focus more on services in the Gold & Silver industry rather than just following the product oriented approach.

Slow decision making process

– As mentioned earlier in the report, Red 5 has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Gold & Silver industry over the last five years. Red 5 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.

Ability to respond to the competition

– As the decision making is very deliberative at Red 5, in the dynamic environment of Gold & Silver industry it has struggled to respond to the nimble upstart competition. Red 5 has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Low market penetration in new markets

– Outside its home market of Australia, Red 5 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High bargaining power of channel partners in Gold & Silver industry

– because of the regulatory requirements in Australia, Red 5 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 Gold & Silver industry.

Aligning sales with marketing

– From the outside it seems that Red 5 needs to have more collaboration between its sales team and marketing team. Sales professionals in the Gold & Silver industry have deep experience in developing customer relationships. Marketing department at Red 5 can leverage the sales team experience to cultivate customer relationships as Red 5 is planning to shift buying processes online.

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 Red 5 supply chain. Even after few cautionary changes, Red 5 is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Red 5 vulnerable to further global disruptions in South East Asia.

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Red 5 Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Red 5 are -

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Gold & Silver industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Red 5 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. Red 5 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.

Better consumer reach

– The expansion of the 5G network will help Red 5 to increase its market reach. Red 5 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.

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 Red 5 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.

Leveraging digital technologies

– Red 5 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 Red 5 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 Red 5 to hire the very best people irrespective of their geographical location.

Learning at scale

– Online learning technologies has now opened space for Red 5 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.

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. Red 5 can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Loyalty marketing

– Red 5 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.

Building a culture of innovation

– managers at Red 5 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 Gold & Silver industry.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Red 5 can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Red 5 is facing challenges because of the dominance of functional experts in the organization. Red 5 can utilize new technology in the field of Gold & Silver industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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, Red 5 can use these opportunities to build new business models that can help the communities that Red 5 operates in. Secondly it can use opportunities from government spending in Gold & Silver sector.

Developing new processes and practices

– Red 5 can develop new processes and procedures in Gold & Silver 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.

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Threats Red 5 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Red 5 are -

Consumer confidence and its impact on Red 5 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 Gold & Silver 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.

Easy access to finance

– Easy access to finance in Gold & Silver industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Red 5 can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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 Red 5 in the Gold & Silver sector and impact the bottomline of the organization.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Red 5 in Gold & Silver industry. The Gold & Silver 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Red 5 may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Gold & Silver sector.

Stagnating economy with rate increase

– Red 5 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 Gold & Silver 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 Red 5.

High dependence on third party suppliers

– Red 5 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.

Technology acceleration in Forth Industrial Revolution

– Red 5 has witnessed rapid integration of technology during Covid-19 in the Gold & Silver industry. As one of the leading players in the industry, Red 5 needs to keep up with the evolution of technology in the Gold & Silver 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.

Environmental challenges

– Red 5 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. Red 5 can take advantage of this fund but it will also bring new competitors in the Gold & Silver industry.

Shortening product life cycle

– it is one of the major threat that Red 5 is facing in Gold & Silver sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Red 5 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 Red 5 prominent markets.

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Weighted SWOT Analysis of Red 5 Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Red 5 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 Red 5 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 Red 5 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 Red 5 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 Red 5 needs to make to build a sustainable competitive advantage.

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