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 - – wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs,
increasing government debt because of Covid-19 spendings, technology disruption, 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 -
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.
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.
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.
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.
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.
Ability to lead change in Sales & Marketing field
– Dot Segment is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Dot Segment in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Organizational Resilience of Dot Segment
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Dot Segment does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Dot Segment is one of the leading recruiters in the industry. Managers in the Finding Sustainable Profitability in Electronic Commerce are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Diverse revenue streams
– Dot Segment is present in almost all the verticals within the industry. This has provided firm in Finding Sustainable Profitability in Electronic Commerce 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.
Training and development
– Dot Segment has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Finding Sustainable Profitability in Electronic Commerce 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.
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 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.
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.
Need for greater diversity
– Dot Segment has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Finding Sustainable Profitability in Electronic Commerce, is just above the industry average. Dot Segment 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.
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.
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.
Interest costs
– Compare to the competition, Dot Segment has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Dot Segment is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Finding Sustainable Profitability in Electronic Commerce can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Finding Sustainable Profitability in Electronic Commerce, in the dynamic environment Dot Segment has struggled to respond to the nimble upstart competition. Dot Segment has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– After analyzing the HBR case study Finding Sustainable Profitability in Electronic Commerce, 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.
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 -
Creating value in data economy
– The success of analytics program of Dot Segment has opened avenues for new revenue streams for the organization in the industry. This can help Dot Segment to build a more holistic ecosystem as suggested in the Finding Sustainable Profitability in Electronic Commerce case study. Dot Segment can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
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.
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.
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.
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.
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. Dot Segment can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Dot Segment 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.
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.
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.
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 -
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.
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.
Consumer confidence and its impact on Dot Segment 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.
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.
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.
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.
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.
Regulatory challenges
– Dot Segment 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 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 .
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Finding Sustainable Profitability in Electronic Commerce, Dot Segment 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 .
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.
Shortening product life cycle
– it is one of the major threat that Dot Segment is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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.