Case Study Description of Investing in Online Marketplaces
Simon Rothman had recently been promoted from executive-in-residence to Partner at esteemed venture capital firm Greylock Partners and placed in charge of managing a $100 million early-stage fund commitment dedicated to online marketplaces. In Greylock's view, 2014 was a special moment in time for online marketplaces, the beginning of a boom in the space that was being catalyzed by mobile technology and social identity. Rothman was the right man for the job. An early eBay employee, he had founded eBay Motors and turned it into a multi-billion dollar business and also advised several successful online marketplaces such as Lyft, Wanelo and TaskRabbit. For his first investment as Partner, Rothman was particularly interested in the food delivery space, which was ripe for disruption by online marketplaces. Rothman had five food delivery startup options to choose from, a philosophy on how to analyze marketplace businesses, and a few weeks to make his first ever investment as a Partner at Greylock.
Swot Analysis of "Investing in Online Marketplaces" written by Andrei Hagiu, Hermes Alvarez includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Marketplaces Rothman facing as an external strategic factors. Some of the topics covered in Investing in Online Marketplaces case study are - Strategic Management Strategies, Entrepreneurship, Financial management, Internet, Networking and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Investing in Online Marketplaces casestudy better are - – supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, there is backlash against globalization, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, challanges to central banks by blockchain based private currencies,
increasing energy prices, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Investing in Online Marketplaces
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Investing in Online Marketplaces case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Marketplaces Rothman, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Marketplaces Rothman 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 Investing in Online Marketplaces can be done for the following purposes –
1. Strategic planning using facts provided in Investing in Online Marketplaces case study
2. Improving business portfolio management of Marketplaces Rothman
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Marketplaces Rothman
Strengths Investing in Online Marketplaces | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Marketplaces Rothman in Investing in Online Marketplaces Harvard Business Review case study are -
Effective Research and Development (R&D)
– Marketplaces Rothman 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 Investing in Online Marketplaces - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Marketplaces Rothman is present in almost all the verticals within the industry. This has provided firm in Investing in Online Marketplaces 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.
Learning organization
- Marketplaces Rothman 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 Marketplaces Rothman is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Investing in Online Marketplaces Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Marketplaces Rothman is one of the most innovative firm in sector. Manager in Investing in Online Marketplaces Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Marketplaces Rothman has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Marketplaces Rothman 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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Marketplaces Rothman digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Marketplaces Rothman 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.
Strong track record of project management
– Marketplaces Rothman is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Marketplaces Rothman
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Marketplaces Rothman does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Investing in Online Marketplaces 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.
High switching costs
– The high switching costs that Marketplaces Rothman has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to lead change in Strategy & Execution field
– Marketplaces Rothman 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 Marketplaces Rothman in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Marketplaces Rothman 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 Andrei Hagiu, Hermes Alvarez 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.
Weaknesses Investing in Online Marketplaces | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Investing in Online Marketplaces are -
Capital Spending Reduction
– Even during the low interest decade, Marketplaces Rothman 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.
Increasing silos among functional specialists
– The organizational structure of Marketplaces Rothman is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Marketplaces Rothman needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Marketplaces Rothman to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Andrei Hagiu, Hermes Alvarez suggests that, Marketplaces Rothman 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.
No frontier risks strategy
– After analyzing the HBR case study Investing in Online Marketplaces, it seems that company is thinking about the frontier risks that can impact Strategy & Execution 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.
Low market penetration in new markets
– Outside its home market of Marketplaces Rothman, firm in the HBR case study Investing in Online Marketplaces needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the segment, Marketplaces Rothman 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Investing in Online Marketplaces, is just above the industry average. Marketplaces Rothman 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 cash cycle compare to competitors
Marketplaces Rothman 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Investing in Online Marketplaces, it seems that the employees of Marketplaces Rothman 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.
Lack of clear differentiation of Marketplaces Rothman products
– To increase the profitability and margins on the products, Marketplaces Rothman needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study Investing in Online Marketplaces 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 Marketplaces Rothman 's lucrative customers.
Opportunities Investing in Online Marketplaces | 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 Investing in Online Marketplaces are -
Manufacturing automation
– Marketplaces Rothman can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Marketplaces Rothman can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Marketplaces Rothman can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Marketplaces Rothman 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.
Building a culture of innovation
– managers at Marketplaces Rothman 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 Strategy & Execution segment.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Marketplaces Rothman can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Marketplaces Rothman can use these opportunities to build new business models that can help the communities that Marketplaces Rothman operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Better consumer reach
– The expansion of the 5G network will help Marketplaces Rothman to increase its market reach. Marketplaces Rothman 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.
Creating value in data economy
– The success of analytics program of Marketplaces Rothman has opened avenues for new revenue streams for the organization in the industry. This can help Marketplaces Rothman to build a more holistic ecosystem as suggested in the Investing in Online Marketplaces case study. Marketplaces Rothman can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Marketplaces Rothman has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Marketplaces Rothman 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.
Using analytics as competitive advantage
– Marketplaces Rothman 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 Investing in Online Marketplaces - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Marketplaces Rothman to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Marketplaces Rothman 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. Marketplaces Rothman 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.
Threats Investing in Online Marketplaces External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Investing in Online Marketplaces are -
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.
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. Marketplaces Rothman needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Marketplaces Rothman can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Marketplaces Rothman 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.
Increasing wage structure of Marketplaces Rothman
– 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 Marketplaces Rothman.
High dependence on third party suppliers
– Marketplaces Rothman 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.
Stagnating economy with rate increase
– Marketplaces Rothman 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, Marketplaces Rothman 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 Investing in Online Marketplaces .
Regulatory challenges
– Marketplaces Rothman 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 Strategy & Execution industry regulations.
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. Marketplaces Rothman 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Marketplaces Rothman with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Marketplaces Rothman business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Investing in Online Marketplaces 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 Investing in Online Marketplaces 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 Investing in Online Marketplaces 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 Investing in Online Marketplaces 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 Investing in Online Marketplaces 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 Marketplaces Rothman needs to make to build a sustainable competitive advantage.
