Case Study Description of GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge
GOME, founded by Wong Kwongyu, had grown from merely a 100-square-metre store in Beijing in 1987 to the industry leader in electrical and home appliance retailing in China, with 259 traditional stores and 4 digital stores by 2006. Its success stemmed from its low-margin, high-volume strategy, which was complemented by its striving for service quality and innovation. In 2006, GOME faced the new challenge of tuangou, or group purchase. In order to amass bargaining power to demand discounts from retailers, consumers with similar needs in China united through the Internet and showed up en masse at retailers at pre-arranged times and dates. They would put relentless pressure on retailers and would press for greater discounts. This emerging consumer behavior had spread like wildfire in China and retailers had different reactions. Some yielded to the pressure and offered greater discounts, some only entertained tuangou that had been pre-arranged and/or pre-registered, while others refused to give in and maintained a fixed-price policy. It was up to GOME to determine how best it could deal with this new phenomenon.
Swot Analysis of "GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge" written by Benjamin Yen, Andrew Lee includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Gome Tuangou facing as an external strategic factors. Some of the topics covered in GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge case study are - Strategic Management Strategies, Supply chain and Sales & Marketing.
Some of the macro environment factors that can be used to understand the GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge casestudy better are - – increasing household debt because of falling income levels, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, increasing energy prices, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Gome Tuangou, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Gome Tuangou 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 GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge can be done for the following purposes –
1. Strategic planning using facts provided in GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge case study
2. Improving business portfolio management of Gome Tuangou
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 Gome Tuangou
Strengths GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gome Tuangou in GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge Harvard Business Review case study are -
Diverse revenue streams
– Gome Tuangou is present in almost all the verticals within the industry. This has provided firm in GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge 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.
Organizational Resilience of Gome Tuangou
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Gome Tuangou does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Gome Tuangou in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Gome Tuangou is one of the most innovative firm in sector. Manager in GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– Gome Tuangou 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 GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Gome Tuangou 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 GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Gome Tuangou 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 Gome Tuangou is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Gome Tuangou has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Gome Tuangou to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Gome Tuangou is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Gome Tuangou 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 Benjamin Yen, Andrew Lee 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.
Ability to recruit top talent
– Gome Tuangou is one of the leading recruiters in the industry. Managers in the GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Gome Tuangou has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Gome Tuangou 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.
Weaknesses GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge are -
Capital Spending Reduction
– Even during the low interest decade, Gome Tuangou 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.
Lack of clear differentiation of Gome Tuangou products
– To increase the profitability and margins on the products, Gome Tuangou needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge, is just above the industry average. Gome Tuangou 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge, in the dynamic environment Gome Tuangou has struggled to respond to the nimble upstart competition. Gome Tuangou has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Gome Tuangou is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge 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 Gome Tuangou supply chain. Even after few cautionary changes mentioned in the HBR case study - GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Gome Tuangou vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge HBR case study mentions - Gome Tuangou takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Gome Tuangou 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.
High operating costs
– Compare to the competitors, firm in the HBR case study GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge 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 Gome Tuangou 's lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Gome Tuangou is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Gome Tuangou needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Gome Tuangou to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Gome Tuangou 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.
Opportunities GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge | 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 GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge are -
Better consumer reach
– The expansion of the 5G network will help Gome Tuangou to increase its market reach. Gome Tuangou 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 Gome Tuangou 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.
Learning at scale
– Online learning technologies has now opened space for Gome Tuangou 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.
Building a culture of innovation
– managers at Gome Tuangou 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.
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. Gome Tuangou 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 Gome Tuangou can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Gome Tuangou can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge suggest that firm 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.
Loyalty marketing
– Gome Tuangou 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.
Manufacturing automation
– Gome Tuangou can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Gome Tuangou 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, as suggested in case study, GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Gome Tuangou is facing challenges because of the dominance of functional experts in the organization. GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Gome Tuangou has opened avenues for new revenue streams for the organization in the industry. This can help Gome Tuangou to build a more holistic ecosystem as suggested in the GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge case study. Gome Tuangou can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Gome Tuangou 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.
Threats GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge are -
Consumer confidence and its impact on Gome Tuangou 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.
Regulatory challenges
– Gome Tuangou 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.
Increasing wage structure of Gome Tuangou
– 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 Gome Tuangou.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Gome Tuangou with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Gome Tuangou 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 GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge .
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 Gome Tuangou.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Gome Tuangou 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.
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.
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. Gome Tuangou needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge, Gome Tuangou 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 .
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 Gome Tuangou business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Gome Tuangou 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.
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.
Weighted SWOT Analysis of GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge 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 GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge 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 GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge 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 GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge 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 GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge 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 Gome Tuangou needs to make to build a sustainable competitive advantage.
