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 – customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, increasing government debt because of Covid-19 spendings, there is backlash against globalization, increasing energy prices, increasing commodity prices, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, 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.

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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

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

The strengths of Richemont are -

Effective Research and Development (R&D)

– Richemont has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Richemont staying ahead in the Jewelry & Silverware industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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.

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.

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.

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.

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.

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.

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.

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.

High brand equity

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

Analytics focus

– Richemont 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 Jewelry & Silverware industry. The technology infrastructure of Germany 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.

Innovation driven organization

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

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

The weaknesses of Richemont are -

Slow decision making process

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

Capital Spending Reduction

– Even during the low interest decade, Richemont 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 Jewelry & Silverware industry using digital technology.

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.

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.

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.

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.

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.

Compensation and incentives

– The revenue per employee of Richemont is just above the Jewelry & Silverware 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.

High cash cycle compare to competitors

Richemont has a high cash cycle compare to other players in the Jewelry & Silverware 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, Richemont is slow explore the new channels of communication. These new channels of communication can help Richemont to provide better information regarding Jewelry & Silverware products and services. It can also build an online community to further reach out to potential customers.

Slow to strategic competitive environment developments

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

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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.

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.

Loyalty marketing

– Richemont 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Jewelry & Silverware industry, but it has also influenced the consumer preferences. Richemont can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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.

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.

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.

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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Richemont in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Jewelry & Silverware industry, and it will provide faster access to the consumers.

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

The threats of Richemont are -

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.

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.

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.

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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Jewelry & Silverware industry are lowering. It can presents Richemont with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Jewelry & Silverware sector.

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.

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.

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.

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.

Increasing wage structure of Richemont

– 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 Richemont.

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. Richemont 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.

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.

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 Richemont in the Jewelry & Silverware sector and impact the bottomline of the organization.

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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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