MercadoLibre.com, eBay's Latin-American partner, needed to decide how far it was going to follow eBay's practice of offering "free listing days" and discounted special-feature days. Was this type of promotion prudent, given MercadoLibre.com's customer base, revenue expectations, and position in the Latin American market?
Authors :: F. Asis Martinez-Jerez, Joshua Bellin, James Dillon
Swot Analysis of "MercadoLibre.com" written by F. Asis Martinez-Jerez, Joshua Bellin, James Dillon includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Mercadolibre.com Ebay's facing as an external strategic factors. Some of the topics covered in MercadoLibre.com case study are - Strategic Management Strategies, Customers, Internet, Performance measurement and Sales & Marketing.
Some of the macro environment factors that can be used to understand the MercadoLibre.com casestudy better are - – talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, wage bills are increasing, there is increasing trade war between United States & China, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion,
increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in MercadoLibre.com case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mercadolibre.com Ebay's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mercadolibre.com Ebay's 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 MercadoLibre.com can be done for the following purposes –
1. Strategic planning using facts provided in MercadoLibre.com case study
2. Improving business portfolio management of Mercadolibre.com Ebay's
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Mercadolibre.com Ebay's
Strengths MercadoLibre.com | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mercadolibre.com Ebay's in MercadoLibre.com Harvard Business Review case study are -
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Mercadolibre.com Ebay's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Mercadolibre.com Ebay's 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.
High brand equity
– Mercadolibre.com Ebay's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Mercadolibre.com Ebay's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Mercadolibre.com Ebay's has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in MercadoLibre.com HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Mercadolibre.com Ebay's 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 industry. The technology infrastructure suggested by F. Asis Martinez-Jerez, Joshua Bellin, James Dillon can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy in the MercadoLibre.com Harvard Business Review case study comprises – understanding the underlying the factors in the 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.
Learning organization
- Mercadolibre.com Ebay's 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 Mercadolibre.com Ebay's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in MercadoLibre.com Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Mercadolibre.com Ebay's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in MercadoLibre.com Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Mercadolibre.com Ebay's is present in almost all the verticals within the industry. This has provided firm in MercadoLibre.com case study 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.
Superior customer experience
– The customer experience strategy of Mercadolibre.com Ebay's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Mercadolibre.com Ebay's has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study MercadoLibre.com - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Mercadolibre.com Ebay's is one of the most innovative firm in sector. Manager in MercadoLibre.com Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Mercadolibre.com Ebay's 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 MercadoLibre.com | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of MercadoLibre.com are -
Lack of clear differentiation of Mercadolibre.com Ebay's products
– To increase the profitability and margins on the products, Mercadolibre.com Ebay's needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study MercadoLibre.com, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the MercadoLibre.com HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Mercadolibre.com Ebay's has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study MercadoLibre.com has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Mercadolibre.com Ebay's 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Mercadolibre.com Ebay's, firm in the HBR case study MercadoLibre.com needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the segment, Mercadolibre.com Ebay's 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Mercadolibre.com Ebay's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study MercadoLibre.com can help to provide better information regarding 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 Mercadolibre.com Ebay's supply chain. Even after few cautionary changes mentioned in the HBR case study - MercadoLibre.com, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Mercadolibre.com Ebay's vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study MercadoLibre.com, is just above the industry average. Mercadolibre.com Ebay's 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study MercadoLibre.com, it seems that the employees of Mercadolibre.com Ebay's 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.
Capital Spending Reduction
– Even during the low interest decade, Mercadolibre.com Ebay's 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 industry using digital technology.
Opportunities MercadoLibre.com | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study MercadoLibre.com are -
Loyalty marketing
– Mercadolibre.com Ebay's 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Mercadolibre.com Ebay's 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.
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 Mercadolibre.com Ebay's 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.
Creating value in data economy
– The success of analytics program of Mercadolibre.com Ebay's has opened avenues for new revenue streams for the organization in the industry. This can help Mercadolibre.com Ebay's to build a more holistic ecosystem as suggested in the MercadoLibre.com case study. Mercadolibre.com Ebay's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Mercadolibre.com Ebay's 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 Mercadolibre.com Ebay's to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Mercadolibre.com Ebay's 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 Sales & Marketing segment.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Mercadolibre.com Ebay's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Mercadolibre.com Ebay's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Mercadolibre.com Ebay's 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Mercadolibre.com Ebay's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Mercadolibre.com Ebay's 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. Mercadolibre.com Ebay's 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 Mercadolibre.com Ebay's to increase its market reach. Mercadolibre.com Ebay's 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.
Developing new processes and practices
– Mercadolibre.com Ebay's can develop new processes and procedures in Sales & Marketing 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.
Threats MercadoLibre.com External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study MercadoLibre.com are -
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 Mercadolibre.com Ebay's business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Mercadolibre.com Ebay's 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 Sales & Marketing industry regulations.
High dependence on third party suppliers
– Mercadolibre.com Ebay's 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Mercadolibre.com Ebay's 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 prominent markets illustrated in HBR case study MercadoLibre.com .
Technology acceleration in Forth Industrial Revolution
– Mercadolibre.com Ebay's has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Mercadolibre.com Ebay's needs to keep up with the evolution of technology in the Sales & Marketing 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.
Increasing wage structure of Mercadolibre.com Ebay's
– 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 Mercadolibre.com Ebay's.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Mercadolibre.com Ebay's in the Sales & Marketing industry. The Sales & Marketing 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.
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 Mercadolibre.com Ebay's in the Sales & Marketing sector and impact the bottomline of the organization.
Consumer confidence and its impact on Mercadolibre.com Ebay's 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 the industry and other sectors.
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. Mercadolibre.com Ebay's 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study MercadoLibre.com, Mercadolibre.com Ebay's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Shortening product life cycle
– it is one of the major threat that Mercadolibre.com Ebay's is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Mercadolibre.com Ebay's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of MercadoLibre.com Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study MercadoLibre.com 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 the case study MercadoLibre.com 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 the Harvard case study MercadoLibre.com 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 MercadoLibre.com is 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 Mercadolibre.com Ebay's needs to make to build a sustainable competitive advantage.
