Richemont (RITN) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Richemont (Germany)

Based on various researches at Oak Spring University , Richemont is operating in a macro-environment that has been destablized by – geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, increasing commodity prices, etc

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Introduction to SWOT Analysis of Richemont

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

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

The strengths of Richemont are -

Organizational Resilience of Richemont

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

Diverse revenue streams

– Richemont is present in almost all the verticals within the Jewelry & Silverware industry. This has provided Richemont 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.

High switching costs

– The high switching costs that Richemont 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.

Low bargaining power of suppliers

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

Innovation driven organization

– Richemont is one of the most innovative firm in Jewelry & Silverware sector.

Sustainable margins compare to other players in Jewelry & Silverware industry

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

Ability to recruit top talent

– Richemont is one of the leading players in the Jewelry & Silverware industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.

Training and development

– Richemont 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.

Cross disciplinary teams

– Horizontal connected teams at the Richemont 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

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

Highly skilled collaborators

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

Ability to lead change in Jewelry & Silverware

– Richemont is one of the leading players in the Jewelry & Silverware industry in Germany. Over the years it has not only transformed the business landscape in the Jewelry & Silverware industry in Germany but also across the existing markets. The ability to lead change has enabled Richemont in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

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

The weaknesses of Richemont are -

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

Workers concerns about automation

– As automation is fast increasing in the Jewelry & Silverware industry, Richemont 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.

Increasing silos among functional specialists

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

High bargaining power of channel partners in Jewelry & Silverware industry

– because of the regulatory requirements in Germany, Richemont 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 Jewelry & Silverware industry.

Lack of clear differentiation of Richemont products

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

Aligning sales with marketing

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

Need for greater diversity

– Richemont 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.

Skills based hiring in Jewelry & Silverware industry

– The stress on hiring functional specialists at Richemont 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 Richemont ‘s star products

– The top 2 products and services of Richemont still accounts for major business revenue. This dependence on star products in Jewelry & Silverware industry has resulted into insufficient focus on developing new products, even though Richemont has relatively successful track record of launching new products.

Employees’ less understanding of Richemont strategy

– From the outside it seems that the employees of Richemont 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.

Ability to respond to the competition

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

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

The opportunities of Richemont are -

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. Richemont 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 Richemont can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Learning at scale

– Online learning technologies has now opened space for Richemont 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.

Remote work and new talent hiring opportunities

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

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Richemont can use these opportunities to build new business models that can help the communities that Richemont operates in. Secondly it can use opportunities from government spending in Jewelry & Silverware sector.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Richemont is facing challenges because of the dominance of functional experts in the organization. Richemont can utilize new technology in the field of Jewelry & Silverware industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Better consumer reach

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

Buying journey improvements

– Richemont can improve the customer journey of consumers in the Jewelry & Silverware 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.

Leveraging digital technologies

– Richemont 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.

Creating value in data economy

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

Developing new processes and practices

– Richemont can develop new processes and procedures in Jewelry & Silverware 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.

Building a culture of innovation

– managers at Richemont 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 Jewelry & Silverware industry.

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 Richemont 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.

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

The threats of Richemont are -

Consumer confidence and its impact on Richemont 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 Jewelry & Silverware industry and other sectors.

Increasing international competition and downward pressure on margins

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

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Richemont in Jewelry & Silverware industry. The Jewelry & Silverware 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.

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.

Learning curve for new practices

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

Easy access to finance

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

Regulatory challenges

– Richemont 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 Jewelry & Silverware industry regulations.

Technology acceleration in Forth Industrial Revolution

– Richemont has witnessed rapid integration of technology during Covid-19 in the Jewelry & Silverware industry. As one of the leading players in the industry, Richemont needs to keep up with the evolution of technology in the Jewelry & Silverware 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.

High dependence on third party suppliers

– Richemont 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.

Environmental challenges

– Richemont 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. Richemont can take advantage of this fund but it will also bring new competitors in the Jewelry & Silverware industry.

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. Richemont needs to understand the core reasons impacting the Jewelry & Silverware industry. This will help it in building a better workplace.

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 Richemont.

Stagnating economy with rate increase

– Richemont 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 Jewelry & Silverware industry.

Weighted SWOT Analysis of Richemont Template, Example

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

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