Case Study Description of Gome--King of China's Electrical Appliance Retail Chain
The chairman of Gome Ltd, a well known appliance retail chain, congratulated his management team for their excellent performance over the past year. For three consecutive years, Gome had been ranked the largest electrical appliance retail chain in China, and the second largest overall retail chain. Claiming to be the only true national player, Gome achieved total sales of RMB23.9 billion in 2004, and in 2005 doubled its number of stores to 426. The company's four-year plan is to capture 10-15% of the market share nationally. Gome would need to double the number of stores in the coming three years, and more importantly, work out a strategy to fend off its local and global competitors.
Swot Analysis of "Gome--King of China's Electrical Appliance Retail Chain" written by Shigefumi Makino, Anthony Fong includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Gome Appliance facing as an external strategic factors. Some of the topics covered in Gome--King of China's Electrical Appliance Retail Chain case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Gome--King of China's Electrical Appliance Retail Chain casestudy better are - – increasing commodity prices, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, increasing energy prices, digital marketing is dominated by two big players Facebook and Google,
geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Gome--King of China's Electrical Appliance Retail Chain
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Gome--King of China's Electrical Appliance Retail Chain case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Gome Appliance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Gome Appliance 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--King of China's Electrical Appliance Retail Chain can be done for the following purposes –
1. Strategic planning using facts provided in Gome--King of China's Electrical Appliance Retail Chain case study
2. Improving business portfolio management of Gome Appliance
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 Gome Appliance
Strengths Gome--King of China's Electrical Appliance Retail Chain | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gome Appliance in Gome--King of China's Electrical Appliance Retail Chain Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Gome Appliance in the sector have low bargaining power. Gome--King of China's Electrical Appliance Retail Chain has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Gome Appliance to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Gome Appliance is one of the most innovative firm in sector. Manager in Gome--King of China's Electrical Appliance Retail Chain Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Analytics focus
– Gome Appliance 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 Shigefumi Makino, Anthony Fong 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.
Superior customer experience
– The customer experience strategy of Gome Appliance in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Gome Appliance has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Gome Appliance 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.
Diverse revenue streams
– Gome Appliance is present in almost all the verticals within the industry. This has provided firm in Gome--King of China's Electrical Appliance Retail Chain 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.
Organizational Resilience of Gome Appliance
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Gome Appliance does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Gome Appliance 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.
Learning organization
- Gome Appliance 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 Gome Appliance is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Gome--King of China's Electrical Appliance Retail Chain Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Gome Appliance digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Gome Appliance 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
– Gome Appliance is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Gome Appliance has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Gome Appliance to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Gome--King of China's Electrical Appliance Retail Chain | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Gome--King of China's Electrical Appliance Retail Chain are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Gome--King of China's Electrical Appliance Retail Chain 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 Gome Appliance has relatively successful track record of launching new products.
Need for greater diversity
– Gome Appliance 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 strategic competitive environment developments
– As Gome--King of China's Electrical Appliance Retail Chain HBR case study mentions - Gome Appliance 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 Gome Appliance products
– To increase the profitability and margins on the products, Gome Appliance needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Gome--King of China's Electrical Appliance Retail Chain, is just above the industry average. Gome Appliance 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Gome--King of China's Electrical Appliance Retail Chain, it seems that the employees of Gome Appliance 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.
Capital Spending Reduction
– Even during the low interest decade, Gome Appliance 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.
Aligning sales with marketing
– It come across in the case study Gome--King of China's Electrical Appliance Retail Chain 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--King of China's Electrical Appliance Retail Chain can leverage the sales team experience to cultivate customer relationships as Gome Appliance is planning to shift buying processes online.
Products dominated business model
– Even though Gome Appliance 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--King of China's Electrical Appliance Retail Chain 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, Gome Appliance 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. Gome Appliance 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 bargaining power of channel partners
– Because of the regulatory requirements, Shigefumi Makino, Anthony Fong suggests that, Gome Appliance 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.
Opportunities Gome--King of China's Electrical Appliance Retail Chain | 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--King of China's Electrical Appliance Retail Chain are -
Loyalty marketing
– Gome Appliance 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.
Better consumer reach
– The expansion of the 5G network will help Gome Appliance to increase its market reach. Gome Appliance will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Buying journey improvements
– Gome Appliance can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Gome--King of China's Electrical Appliance Retail Chain 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Gome Appliance 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
– Gome Appliance 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 Gome--King of China's Electrical Appliance Retail Chain - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Gome Appliance to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Gome Appliance 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--King of China's Electrical Appliance Retail Chain, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Gome Appliance is facing challenges because of the dominance of functional experts in the organization. Gome--King of China's Electrical Appliance Retail Chain 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.
Leveraging digital technologies
– Gome Appliance 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.
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. Gome Appliance 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 Gome Appliance 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.
Developing new processes and practices
– Gome Appliance 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Gome Appliance can use these opportunities to build new business models that can help the communities that Gome Appliance operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Gome Appliance can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Gome--King of China's Electrical Appliance Retail Chain External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Gome--King of China's Electrical Appliance Retail Chain are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Gome Appliance.
Shortening product life cycle
– it is one of the major threat that Gome Appliance is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Gome Appliance business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Gome Appliance with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Gome Appliance 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Gome--King of China's Electrical Appliance Retail Chain, Gome Appliance may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
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.
Environmental challenges
– Gome Appliance 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. Gome Appliance can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Technology acceleration in Forth Industrial Revolution
– Gome Appliance has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Gome Appliance 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.
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 Gome Appliance in the Strategy & Execution sector and impact the bottomline of the organization.
Regulatory challenges
– Gome Appliance 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.
Consumer confidence and its impact on Gome Appliance 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.
High dependence on third party suppliers
– Gome Appliance 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.
Weighted SWOT Analysis of Gome--King of China's Electrical Appliance Retail Chain 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--King of China's Electrical Appliance Retail Chain 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--King of China's Electrical Appliance Retail Chain 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--King of China's Electrical Appliance Retail Chain 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--King of China's Electrical Appliance Retail Chain 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 Gome Appliance needs to make to build a sustainable competitive advantage.
