NeoPets.com, a rapidly growing Internet start-up headed by Chairman and CEO Doug Dohring, faces decisions about its international expansion strategy--whether to enter a joint venture with a conglomerate in Singapore to exploit Asian markets as well as which other regions to target. NeoPets allows its users--mostly children and teens--to create and care for virtual pets in an online world. The Web site is free to users and is supported by advertising akin to product placement in movies. NeoPets reached profitability four months after launching operations in late 1999, largely due to the fact that it spends nothing for customer acquisition, relying strictly on word-of-mouth. As of July, 2001, the company had over 8 million unique users and was ranked #four among all U.S. Web sites for "stickiness," the average amount of time that users spend online.
Swot Analysis of "NeoPets, Inc." written by Thomas R. Eisenmann, Liz Kind includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Neopets Users facing as an external strategic factors. Some of the topics covered in NeoPets, Inc. case study are - Strategic Management Strategies, Cross-cultural management, Disruptive innovation, Economics, Entrepreneurship, Growth strategy, Internet, Joint ventures, Networking, Strategy execution and Strategy & Execution.
Some of the macro environment factors that can be used to understand the NeoPets, Inc. casestudy better are - – increasing commodity prices, geopolitical disruptions, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, increasing energy prices,
there is increasing trade war between United States & China, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in NeoPets, Inc. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Neopets Users, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Neopets Users 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 NeoPets, Inc. can be done for the following purposes –
1. Strategic planning using facts provided in NeoPets, Inc. case study
2. Improving business portfolio management of Neopets Users
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 Neopets Users
Strengths NeoPets, Inc. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Neopets Users in NeoPets, Inc. Harvard Business Review case study are -
Strong track record of project management
– Neopets Users is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Neopets Users is one of the leading recruiters in the industry. Managers in the NeoPets, Inc. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Neopets Users 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 NeoPets, Inc. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Neopets Users
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Neopets Users does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Neopets Users 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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Neopets Users digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Neopets Users 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.
Diverse revenue streams
– Neopets Users is present in almost all the verticals within the industry. This has provided firm in NeoPets, Inc. 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
- Neopets Users 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 Neopets Users is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in NeoPets, Inc. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Strategy & Execution industry
– NeoPets, Inc. firm has clearly differentiated products in the market place. This has enabled Neopets Users to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Neopets Users to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Neopets Users has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in NeoPets, Inc. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Neopets Users in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Neopets Users is one of the most innovative firm in sector. Manager in NeoPets, Inc. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses NeoPets, Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of NeoPets, Inc. are -
High bargaining power of channel partners
– Because of the regulatory requirements, Thomas R. Eisenmann, Liz Kind suggests that, Neopets Users 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.
Capital Spending Reduction
– Even during the low interest decade, Neopets Users 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Neopets Users 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.
Increasing silos among functional specialists
– The organizational structure of Neopets Users is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Neopets Users needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Neopets Users to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study NeoPets, Inc. 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 Neopets Users 's lucrative customers.
Products dominated business model
– Even though Neopets Users 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 - NeoPets, Inc. should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Neopets Users has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study NeoPets, Inc., is just above the industry average. Neopets Users 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.
Slow decision making process
– As mentioned earlier in the report, Neopets Users 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. Neopets Users 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.
Slow to strategic competitive environment developments
– As NeoPets, Inc. HBR case study mentions - Neopets Users 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.
High cash cycle compare to competitors
Neopets Users 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 NeoPets, Inc. | 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 NeoPets, Inc. are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Neopets Users can use these opportunities to build new business models that can help the communities that Neopets Users operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Manufacturing automation
– Neopets Users 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.
Better consumer reach
– The expansion of the 5G network will help Neopets Users to increase its market reach. Neopets Users 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 Neopets Users has opened avenues for new revenue streams for the organization in the industry. This can help Neopets Users to build a more holistic ecosystem as suggested in the NeoPets, Inc. case study. Neopets Users can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Neopets Users 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.
Building a culture of innovation
– managers at Neopets Users 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.
Loyalty marketing
– Neopets Users 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.
Leveraging digital technologies
– Neopets Users 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.
Buying journey improvements
– Neopets Users can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. NeoPets, Inc. 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.
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. Neopets Users 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 Neopets Users 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.
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. Neopets Users 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. Neopets Users 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.
Developing new processes and practices
– Neopets Users 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.
Threats NeoPets, Inc. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study NeoPets, Inc. are -
Environmental challenges
– Neopets Users 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. Neopets Users can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Increasing wage structure of Neopets Users
– 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 Neopets Users.
Consumer confidence and its impact on Neopets Users 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.
Regulatory challenges
– Neopets Users 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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Neopets Users 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 NeoPets, Inc. .
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 Neopets Users business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Neopets Users is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study NeoPets, Inc., Neopets Users 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 .
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. Neopets Users 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.
High dependence on third party suppliers
– Neopets Users 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.
Technology acceleration in Forth Industrial Revolution
– Neopets Users has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Neopets Users 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.
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 Neopets Users.
Weighted SWOT Analysis of NeoPets, Inc. 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 NeoPets, Inc. 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 NeoPets, Inc. 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 NeoPets, Inc. 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 NeoPets, Inc. 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 Neopets Users needs to make to build a sustainable competitive advantage.
