Kering (PRTP) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Kering (France)

Based on various researches at Oak Spring University , Kering is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, technology disruption, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Kering

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

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

The strengths of Kering are -

Diverse revenue streams

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

Highly skilled collaborators

– Kering has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Apparel) industry. Secondly the value chain collaborators of Kering have helped the firm to develop new products and bring them quickly to the marketplace.

Effective Research and Development (R&D)

– Kering has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Kering 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.

Analytics focus

– Kering 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 France 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

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

Cross disciplinary teams

– Horizontal connected teams at the Kering 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.

Operational resilience

– The operational resilience strategy of Kering 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.

Digital Transformation in Retail (Apparel) industry

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

Innovation driven organization

– Kering is one of the most innovative firm in Retail (Apparel) sector.

Strong track record of project management in the Retail (Apparel) industry

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

Low bargaining power of suppliers

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

High switching costs

– The high switching costs that Kering 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.

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

The weaknesses of Kering are -

Slow decision making process

– As mentioned earlier in the report, Kering 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. Kering 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.

Aligning sales with marketing

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

Interest costs

– Compare to the competition, Kering 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.

Ability to respond to the competition

– As the decision making is very deliberative at Kering, in the dynamic environment of Retail (Apparel) industry it has struggled to respond to the nimble upstart competition. Kering 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 France, Kering needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High dependence on Kering ‘s star products

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

Need for greater diversity

– Kering 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.

Employees’ less understanding of Kering strategy

– From the outside it seems that the employees of Kering 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 operating costs

– Compare to the competitors, Kering has high operating costs in the Retail (Apparel) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Kering lucrative customers.

High cash cycle compare to competitors

Kering has a high cash cycle compare to other players in the Retail (Apparel) 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 strategic competitive environment developments

– As Kering is one of the leading players in the Retail (Apparel) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Apparel) industry in last five years.

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

The opportunities of Kering are -

Low interest rates

– Even though inflation is raising its head in most developed economies, Kering 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.

Buying journey improvements

– Kering 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.

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 Kering in the Retail (Apparel) industry. Now Kering can target international markets with far fewer capital restrictions requirements than the existing system.

Manufacturing automation

– Kering 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.

Developing new processes and practices

– Kering 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.

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

Better consumer reach

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

Loyalty marketing

– Kering 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.

Using analytics as competitive advantage

– Kering 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 Kering to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kering to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Creating value in data economy

– The success of analytics program of Kering has opened avenues for new revenue streams for the organization in Retail (Apparel) industry. This can help Kering to build a more holistic ecosystem for Kering products in the Retail (Apparel) industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Reforming the budgeting process

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

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 Kering 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Kering 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 Kering to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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

The threats of Kering are -

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

Regulatory challenges

– Kering 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.

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

Stagnating economy with rate increase

– Kering 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.

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.

Shortening product life cycle

– it is one of the major threat that Kering is facing in Retail (Apparel) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Environmental challenges

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

Increasing wage structure of Kering

– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Kering.

Trade war between China and United States

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

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 Kering.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Kering 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 dependence on third party suppliers

– Kering 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

– Kering has witnessed rapid integration of technology during Covid-19 in the Retail (Apparel) industry. As one of the leading players in the industry, Kering 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.

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Weighted SWOT Analysis of Kering Template, Example

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

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