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 - – increasing energy prices, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing transportation and logistics costs, talent flight as more people leaving formal jobs, 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 -
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.
Superior customer experience
– The customer experience strategy of Appliance Gome in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Organizational Resilience of Appliance Gome
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Appliance Gome does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
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.
Effective Research and Development (R&D)
– Appliance Gome 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 GOME Home Appliance Co., Ltd. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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.
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.
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 -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study GOME Home Appliance Co., Ltd., in the dynamic environment Appliance Gome has struggled to respond to the nimble upstart competition. Appliance Gome has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
Aligning sales with marketing
– It come across in the case study GOME Home Appliance Co., Ltd. that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case GOME Home Appliance Co., Ltd. can leverage the sales team experience to cultivate customer relationships as Appliance Gome is planning to shift buying processes online.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study GOME Home Appliance Co., Ltd., it seems that the employees of Appliance Gome 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study GOME Home Appliance Co., Ltd., is just above the industry average. Appliance Gome 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 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.
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.
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.
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.
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 -
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Appliance Gome can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Appliance Gome in the consumer business. Now Appliance Gome can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
Loyalty marketing
– Appliance Gome 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.
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.
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.
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.
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.
Leveraging digital technologies
– Appliance Gome can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Appliance Gome 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, GOME Home Appliance Co., Ltd., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats 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 -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Appliance Gome with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Appliance Gome in the Strategy & Execution industry. The Strategy & Execution 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.
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 Appliance Gome.
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.
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.
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.
Environmental challenges
– Appliance Gome 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. Appliance Gome can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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. .
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.
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.
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.
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.
