Case Study Description of Razor-and-Blades Pricing Revisited
From razors and blades to printers and ink cartridges to smartphones and monthly usage charges to media devices and content, razor-and-blades pricing is commonplace. The argument for such a business model is compelling: entice consumers to adopt with a low initial price for the 'razor,' build up an installed base, and more than make up for the initial subsidy by charging a high price for replacement 'blades.' The problem is, many consumer enticement, customer lock-in, and competitive lock-out mechanisms look less and less tenable given modern-day developments such as the Internet, Google searches, social media, the hacker revolution, the 'maker movement,' rapidly improving technology, leaky supply chains, and global markets. This article characterizes the what, why, and how of razor-and-blades pricing; then examines the present-day tenability of such a pricing practice; and concludes with an impetus and a call for innovation-innovation in, perhaps, the pricing of and the purchasing arrangement for the initial razor; the value proposition from the razor and the razor-and-blades system; the architecture of the razor-and-blades system; and the delivery, especially in terms of customer experience, of value from the razor-and-blades system.
Swot Analysis of "Razor-and-Blades Pricing Revisited" written by Anirudh Dhebar includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Razor Blades facing as an external strategic factors. Some of the topics covered in Razor-and-Blades Pricing Revisited case study are - Strategic Management Strategies, Marketing, Motivating people, Pricing, Supply chain and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Razor-and-Blades Pricing Revisited casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%,
geopolitical disruptions, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Razor-and-Blades Pricing Revisited
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Razor-and-Blades Pricing Revisited case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Razor Blades, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Razor Blades 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 Razor-and-Blades Pricing Revisited can be done for the following purposes –
1. Strategic planning using facts provided in Razor-and-Blades Pricing Revisited case study
2. Improving business portfolio management of Razor Blades
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 Razor Blades
Strengths Razor-and-Blades Pricing Revisited | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Razor Blades in Razor-and-Blades Pricing Revisited Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Razor Blades in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Razor Blades has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Razor-and-Blades Pricing Revisited 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.
Ability to lead change in Sales & Marketing field
– Razor Blades 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 Razor Blades 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 Razor Blades 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.
Successful track record of launching new products
– Razor Blades has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Razor Blades 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.
Sustainable margins compare to other players in Sales & Marketing industry
– Razor-and-Blades Pricing Revisited firm has clearly differentiated products in the market place. This has enabled Razor Blades to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Razor Blades to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Razor Blades is one of the leading recruiters in the industry. Managers in the Razor-and-Blades Pricing Revisited are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Razor Blades digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Razor Blades 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
– Razor Blades has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Razor Blades to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Razor Blades in the sector have low bargaining power. Razor-and-Blades Pricing Revisited has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Razor Blades to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Razor Blades 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 Razor Blades is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Razor-and-Blades Pricing Revisited Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Razor Blades is one of the most innovative firm in sector. Manager in Razor-and-Blades Pricing Revisited Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Razor-and-Blades Pricing Revisited | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Razor-and-Blades Pricing Revisited are -
High bargaining power of channel partners
– Because of the regulatory requirements, Anirudh Dhebar suggests that, Razor Blades 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.
Lack of clear differentiation of Razor Blades products
– To increase the profitability and margins on the products, Razor Blades needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Razor-and-Blades Pricing Revisited HBR case study mentions - Razor Blades 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Razor-and-Blades Pricing Revisited, is just above the industry average. Razor Blades needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Razor-and-Blades Pricing Revisited 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 Razor Blades has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Razor Blades is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Razor Blades needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Razor Blades to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Razor Blades 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 - Razor-and-Blades Pricing Revisited should strive to include more intangible value offerings along with its core products and services.
Skills based hiring
– The stress on hiring functional specialists at Razor Blades has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Razor-and-Blades Pricing Revisited, in the dynamic environment Razor Blades has struggled to respond to the nimble upstart competition. Razor Blades has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Razor Blades 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Razor Blades is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Razor-and-Blades Pricing Revisited can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Razor-and-Blades Pricing Revisited | 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 Razor-and-Blades Pricing Revisited are -
Creating value in data economy
– The success of analytics program of Razor Blades has opened avenues for new revenue streams for the organization in the industry. This can help Razor Blades to build a more holistic ecosystem as suggested in the Razor-and-Blades Pricing Revisited case study. Razor Blades 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 Razor Blades 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 Razor Blades to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Razor Blades can use these opportunities to build new business models that can help the communities that Razor Blades operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
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 Razor Blades 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.
Using analytics as competitive advantage
– Razor Blades has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Razor-and-Blades Pricing Revisited - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Razor Blades to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Razor Blades to increase its market reach. Razor Blades 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.
Loyalty marketing
– Razor Blades 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Razor Blades can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Razor Blades 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. Razor Blades 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.
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. Razor Blades can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Razor Blades is facing challenges because of the dominance of functional experts in the organization. Razor-and-Blades Pricing Revisited 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 Razor Blades 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Razor Blades 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.
Threats Razor-and-Blades Pricing Revisited External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Razor-and-Blades Pricing Revisited are -
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.
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. Razor Blades 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. Razor Blades can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Razor Blades.
High dependence on third party suppliers
– Razor Blades 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.
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 Razor Blades business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Razor Blades 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Razor Blades with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Razor Blades 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Razor-and-Blades Pricing Revisited, Razor Blades 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 .
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.
Technology acceleration in Forth Industrial Revolution
– Razor Blades has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Razor Blades 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 Razor Blades
– 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 Razor Blades.
Weighted SWOT Analysis of Razor-and-Blades Pricing Revisited 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 Razor-and-Blades Pricing Revisited 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 Razor-and-Blades Pricing Revisited 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 Razor-and-Blades Pricing Revisited 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 Razor-and-Blades Pricing Revisited 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 Razor Blades needs to make to build a sustainable competitive advantage.
