Case Study Description of GOME Home Appliance Co., Ltd.
Describes the evolution and growth of Gome Home Appliance and its recent restructuring in the context of the fierce competition in the home appliance retail industry. In just 15 years, Gome's founder Huang Guangyu, had led the company to grow to the largest home appliance retail chain in China in terms of sales. In spite of its impressive performance, however, the company felt pressure from internal management and external competition. To respond to these challenges and the changing environment of the industry, Gome started a major organizational restructuring in October 2002.
Swot Analysis of "GOME Home Appliance Co., Ltd." written by Dongsheng Zhou, Kevin Lv includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Appliance Gome facing as an external strategic factors. Some of the topics covered in GOME Home Appliance Co., Ltd. case study are - Strategic Management Strategies, Growth strategy, Reorganization and Strategy & Execution.
Some of the macro environment factors that can be used to understand the GOME Home Appliance Co., Ltd. casestudy better are - – geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels,
cloud computing is disrupting traditional business models, increasing commodity prices, etc
Introduction to SWOT Analysis of GOME Home Appliance Co., Ltd.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in GOME Home Appliance Co., Ltd. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Appliance Gome, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Appliance Gome operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of GOME Home Appliance Co., Ltd. can be done for the following purposes –
1. Strategic planning using facts provided in GOME Home Appliance Co., Ltd. case study
2. Improving business portfolio management of Appliance Gome
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 Appliance Gome
Strengths GOME Home Appliance Co., Ltd. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Appliance Gome in GOME Home Appliance Co., Ltd. Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Appliance Gome in the sector have low bargaining power. GOME Home Appliance Co., Ltd. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Appliance Gome to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Appliance Gome 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 Dongsheng Zhou, Kevin Lv 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.
Learning organization
- Appliance Gome 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 Appliance Gome is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in GOME Home Appliance Co., Ltd. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Strategy & Execution industry
– GOME Home Appliance Co., Ltd. firm has clearly differentiated products in the market place. This has enabled Appliance Gome to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Appliance Gome to invest into research and development (R&D) and innovation.
Ability to lead change in Strategy & Execution field
– Appliance Gome 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 Appliance Gome in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Appliance Gome is one of the leading recruiters in the industry. Managers in the GOME Home Appliance Co., Ltd. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Appliance Gome has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Appliance Gome to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Appliance Gome 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.
Training and development
– Appliance Gome has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in GOME Home Appliance Co., Ltd. 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.
Diverse revenue streams
– Appliance Gome is present in almost all the verticals within the industry. This has provided firm in GOME Home Appliance Co., Ltd. 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.
Innovation driven organization
– Appliance Gome is one of the most innovative firm in sector. Manager in GOME Home Appliance Co., Ltd. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Appliance Gome 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.
Weaknesses GOME Home Appliance Co., Ltd. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of GOME Home Appliance Co., Ltd. are -
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Appliance Gome supply chain. Even after few cautionary changes mentioned in the HBR case study - GOME Home Appliance Co., Ltd., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Appliance Gome vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Appliance Gome 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.
Products dominated business model
– Even though Appliance Gome 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 - GOME Home Appliance Co., Ltd. should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Appliance Gome 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. Appliance Gome 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the GOME Home Appliance Co., Ltd. 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 Appliance Gome has relatively successful track record of launching new products.
Skills based hiring
– The stress on hiring functional specialists at Appliance Gome 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.
Increasing silos among functional specialists
– The organizational structure of Appliance Gome is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Appliance Gome needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Appliance Gome to focus more on services rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Appliance Gome is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study GOME Home Appliance Co., Ltd. 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 Appliance Gome products
– To increase the profitability and margins on the products, Appliance Gome 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 GOME Home Appliance Co., Ltd. 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 Appliance Gome 's lucrative customers.
Slow to strategic competitive environment developments
– As GOME Home Appliance Co., Ltd. HBR case study mentions - Appliance Gome 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.
Opportunities GOME Home Appliance Co., Ltd. | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study GOME Home Appliance Co., Ltd. are -
Buying journey improvements
– Appliance Gome can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. GOME Home Appliance Co., Ltd. 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.
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. Appliance Gome 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, Appliance Gome is facing challenges because of the dominance of functional experts in the organization. GOME Home Appliance Co., Ltd. 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 Appliance Gome 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Appliance Gome can use these opportunities to build new business models that can help the communities that Appliance Gome operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
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. Appliance Gome can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Appliance Gome in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Developing new processes and practices
– Appliance Gome can develop new processes and procedures in Strategy & Execution 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.
Better consumer reach
– The expansion of the 5G network will help Appliance Gome to increase its market reach. Appliance Gome 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.
Manufacturing automation
– Appliance Gome 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.
Creating value in data economy
– The success of analytics program of Appliance Gome has opened avenues for new revenue streams for the organization in the industry. This can help Appliance Gome to build a more holistic ecosystem as suggested in the GOME Home Appliance Co., Ltd. case study. Appliance Gome can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Appliance Gome 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.
Learning at scale
– Online learning technologies has now opened space for Appliance Gome 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.
Threats GOME Home Appliance Co., Ltd. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study GOME Home Appliance Co., Ltd. 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 Appliance Gome in the Strategy & Execution sector and impact the bottomline 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. Appliance Gome 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Appliance Gome can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study GOME Home Appliance Co., Ltd. .
Regulatory challenges
– Appliance Gome 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.
Technology acceleration in Forth Industrial Revolution
– Appliance Gome has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Appliance Gome needs to keep up with the evolution of technology in the Strategy & Execution 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.
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.
Consumer confidence and its impact on Appliance Gome 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.
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 Appliance Gome business can come under increasing regulations regarding data privacy, data security, etc.
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. Appliance Gome can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Appliance Gome 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
– Appliance Gome 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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Appliance Gome needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Weighted SWOT Analysis of GOME Home Appliance Co., Ltd. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study GOME Home Appliance Co., Ltd. needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study GOME Home Appliance Co., Ltd. is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study GOME Home Appliance Co., Ltd. is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of GOME Home Appliance Co., Ltd. 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 Appliance Gome needs to make to build a sustainable competitive advantage.