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 household debt because of falling income levels, geopolitical disruptions, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing,
challanges to central banks by blockchain based private currencies, increasing commodity prices, 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 -
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.
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.
Training and development
– Neopets Users has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in NeoPets, Inc. 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.
Operational resilience
– The operational resilience strategy in the NeoPets, Inc. Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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.
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.
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.
Ability to lead change in Strategy & Execution field
– Neopets Users 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 Neopets Users 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
– 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.
Analytics focus
– Neopets Users 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 Thomas R. Eisenmann, Liz Kind 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
- 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.
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.
Weaknesses NeoPets, Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of NeoPets, Inc. are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the NeoPets, Inc. 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 Neopets Users has relatively successful track record of launching new products.
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.
Low market penetration in new markets
– Outside its home market of Neopets Users, firm in the HBR case study NeoPets, Inc. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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.
Lack of clear differentiation of Neopets Users products
– To increase the profitability and margins on the products, Neopets Users needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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 Neopets Users supply chain. Even after few cautionary changes mentioned in the HBR case study - NeoPets, Inc., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Neopets Users vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Neopets Users is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study NeoPets, Inc. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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 -
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Neopets Users is facing challenges because of the dominance of functional experts in the organization. NeoPets, Inc. 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.
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.
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Neopets Users 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.
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.
Using analytics as competitive advantage
– Neopets Users 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 NeoPets, Inc. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Neopets Users to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Neopets Users can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Neopets Users can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Neopets Users to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Neopets Users to hire the very best people irrespective of their geographical location.
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 -
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. Neopets Users can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. .
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.
Stagnating economy with rate increase
– Neopets Users 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.
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.
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 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.
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.
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.
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 .
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. Neopets Users needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Neopets Users with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.