Case Study Description of Finding Sustainable Profitability in Electronic Commerce
This is an MIT Sloan Management Review article. To sustain a competitive advantage, Web retailers must align their strategies with the product characteristics and buying practices of customers in their market segment, according to the author. He divides the dot-com retail market into four segments on the basis of the type of good sold and describes the strategies needed to succeed in each. The first segment is undifferentiated commodity products, such as barrels of oil. Competitive advantage goes to the low-cost provider with economies of scale, low overhead, low-cost production, and efficient distribution. The second segment, quasi-commodity products, such as books and toys, has attracted many dot-com retailers. First movers can gain competitive advantage by branding their Web site using site-specific loyalty programs, virtual communities, and timely delivery. Late entrants will encounter extreme difficulty. In the third segment, "look and feel" goods, such as clothes, homes, and furniture, are differentiated by their quality and reliability. Customers want to experience them in person before making a purchase. Dot-coms that don't create the products they sell will be forced to compete on price and will find margins difficult to maintain. In the fourth segment, "look and feel" goods with variable quality, such as fresh produce and original artwork, each individual product differs from every other one. Customers want to experience these products to ascertain their quality before buying. Dot-coms that establish a reputation for quality and sell low-priced goods to repeat customers have the best chance of success.
Swot Analysis of "Finding Sustainable Profitability in Electronic Commerce" written by John M. De Figueiredo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Dot Segment facing as an external strategic factors. Some of the topics covered in Finding Sustainable Profitability in Electronic Commerce case study are - Strategic Management Strategies, Innovation, Marketing, Technology and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Finding Sustainable Profitability in Electronic Commerce casestudy better are - – technology disruption, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , wage bills are increasing, central banks are concerned over increasing inflation,
increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Finding Sustainable Profitability in Electronic Commerce
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Finding Sustainable Profitability in Electronic Commerce case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Dot Segment, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Dot Segment 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 Finding Sustainable Profitability in Electronic Commerce can be done for the following purposes –
1. Strategic planning using facts provided in Finding Sustainable Profitability in Electronic Commerce case study
2. Improving business portfolio management of Dot Segment
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 Dot Segment
Strengths Finding Sustainable Profitability in Electronic Commerce | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Dot Segment in Finding Sustainable Profitability in Electronic Commerce Harvard Business Review case study are -
Analytics focus
– Dot Segment 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 John M. De Figueiredo 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.
Innovation driven organization
– Dot Segment is one of the most innovative firm in sector. Manager in Finding Sustainable Profitability in Electronic Commerce Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Dot Segment in the sector have low bargaining power. Finding Sustainable Profitability in Electronic Commerce has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Dot Segment to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Dot Segment 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 Finding Sustainable Profitability in Electronic Commerce - 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
- Dot Segment 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 Dot Segment is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Finding Sustainable Profitability in Electronic Commerce Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Dot Segment 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.
Highly skilled collaborators
– Dot Segment 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 Finding Sustainable Profitability in Electronic Commerce HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the Finding Sustainable Profitability in Electronic Commerce 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.
Successful track record of launching new products
– Dot Segment has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Dot Segment 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.
Strong track record of project management
– Dot Segment is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Dot Segment in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Dot Segment has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Dot Segment to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Finding Sustainable Profitability in Electronic Commerce | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Finding Sustainable Profitability in Electronic Commerce are -
High bargaining power of channel partners
– Because of the regulatory requirements, John M. De Figueiredo suggests that, Dot Segment 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 industry.
Workers concerns about automation
– As automation is fast increasing in the segment, Dot Segment 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.
Lack of clear differentiation of Dot Segment products
– To increase the profitability and margins on the products, Dot Segment needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Finding Sustainable Profitability in Electronic Commerce, it seems that the employees of Dot Segment 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.
Low market penetration in new markets
– Outside its home market of Dot Segment, firm in the HBR case study Finding Sustainable Profitability in Electronic Commerce needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Dot Segment has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Finding Sustainable Profitability in Electronic Commerce should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Dot Segment 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.
Slow decision making process
– As mentioned earlier in the report, Dot Segment has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Dot Segment 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.
High cash cycle compare to competitors
Dot Segment has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, firm in the HBR case study Finding Sustainable Profitability in Electronic Commerce 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 Dot Segment 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Dot Segment 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 Finding Sustainable Profitability in Electronic Commerce | 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 Finding Sustainable Profitability in Electronic Commerce are -
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 Dot Segment 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Dot Segment 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 Dot Segment to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Dot Segment is facing challenges because of the dominance of functional experts in the organization. Finding Sustainable Profitability in Electronic Commerce 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.
Leveraging digital technologies
– Dot Segment 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.
Building a culture of innovation
– managers at Dot Segment 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.
Better consumer reach
– The expansion of the 5G network will help Dot Segment to increase its market reach. Dot Segment 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
– Dot Segment 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.
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. Dot Segment 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. Dot Segment 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.
Buying journey improvements
– Dot Segment can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Finding Sustainable Profitability in Electronic Commerce 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.
Learning at scale
– Online learning technologies has now opened space for Dot Segment 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Dot Segment can use these opportunities to build new business models that can help the communities that Dot Segment operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Dot Segment in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Dot Segment 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, Finding Sustainable Profitability in Electronic Commerce, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Finding Sustainable Profitability in Electronic Commerce External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Finding Sustainable Profitability in Electronic Commerce are -
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 Dot Segment in the Sales & Marketing sector and impact the bottomline of the organization.
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 Dot Segment.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Dot Segment with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Dot Segment 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. Dot Segment can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
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. Dot Segment 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.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Dot Segment can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Dot Segment needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Dot Segment high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology 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.
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.
Stagnating economy with rate increase
– Dot Segment 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 field.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Dot Segment 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 Finding Sustainable Profitability in Electronic Commerce .
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 Dot Segment business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Finding Sustainable Profitability in Electronic Commerce 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 Finding Sustainable Profitability in Electronic Commerce 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 Finding Sustainable Profitability in Electronic Commerce 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 Finding Sustainable Profitability in Electronic Commerce 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 Finding Sustainable Profitability in Electronic Commerce 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 Dot Segment needs to make to build a sustainable competitive advantage.
