eCircle, a German Internet-based group communications company, was founded in 1999 with a half-dozen employees and a few hundred thousand users on its new C2C platform. By early 2001, the cofounders had built eCircle's technology platform, had acquired 4.5 million users and 90 employees, and had raised two rounds of financing. It appeared that the company had overcome the initial challenges of a start-up--it had cash, advertising customers for its C2C business, and two customers for its new B2B business. However, despite their early success, the cofounders faced a number of challenges. Could they leverage a relatively successful C2C group communications platform into other profitable business lines, especially B2B offerings? Could they fend off new competition within Europe and the United States? And could they manage their cash flows to survive the financing market slump? The tight economic environment and the struggles and failures of numerous Internet start-ups in early 2001 made growth strategy more of a challenge for eCircle. Its margin for error in such an environment was smaller than when the company first started.
Authors :: Thomas Hellmann, Christopher S. Flanagan
Swot Analysis of "eCircle AG" written by Thomas Hellmann, Christopher S. Flanagan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ecircle C2c facing as an external strategic factors. Some of the topics covered in eCircle AG case study are - Strategic Management Strategies, Entrepreneurial finance, Internet, Marketing and Strategy & Execution.
Some of the macro environment factors that can be used to understand the eCircle AG casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, cloud computing is disrupting traditional business models, technology disruption, talent flight as more people leaving formal jobs,
there is increasing trade war between United States & China, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in eCircle AG case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ecircle C2c, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ecircle C2c 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 eCircle AG can be done for the following purposes –
1. Strategic planning using facts provided in eCircle AG case study
2. Improving business portfolio management of Ecircle C2c
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 Ecircle C2c
Strengths eCircle AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ecircle C2c in eCircle AG Harvard Business Review case study are -
Sustainable margins compare to other players in Strategy & Execution industry
– eCircle AG firm has clearly differentiated products in the market place. This has enabled Ecircle C2c to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Ecircle C2c to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Ecircle C2c in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Ecircle C2c 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.
Effective Research and Development (R&D)
– Ecircle C2c 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 eCircle AG - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Ecircle C2c in the sector have low bargaining power. eCircle AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ecircle C2c to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Ecircle C2c 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 eCircle AG HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Strategy & Execution field
– Ecircle C2c 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 Ecircle C2c in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Ecircle C2c has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in eCircle AG 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 eCircle AG 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.
Analytics focus
– Ecircle C2c 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 Hellmann, Christopher S. Flanagan 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.
Successful track record of launching new products
– Ecircle C2c has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ecircle C2c 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
– Ecircle C2c is present in almost all the verticals within the industry. This has provided firm in eCircle AG 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.
Weaknesses eCircle AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of eCircle AG are -
Low market penetration in new markets
– Outside its home market of Ecircle C2c, firm in the HBR case study eCircle AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study eCircle AG, it seems that the employees of Ecircle C2c 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 eCircle AG, is just above the industry average. Ecircle C2c 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.
Products dominated business model
– Even though Ecircle C2c 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 - eCircle AG should strive to include more intangible value offerings along with its core products and services.
Skills based hiring
– The stress on hiring functional specialists at Ecircle C2c has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Need for greater diversity
– Ecircle C2c 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the eCircle AG 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 Ecircle C2c has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Ecircle C2c 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.
Aligning sales with marketing
– It come across in the case study eCircle AG 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 eCircle AG can leverage the sales team experience to cultivate customer relationships as Ecircle C2c is planning to shift buying processes online.
Interest costs
– Compare to the competition, Ecircle C2c 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.
Lack of clear differentiation of Ecircle C2c products
– To increase the profitability and margins on the products, Ecircle C2c needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities eCircle AG | 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 eCircle AG are -
Leveraging digital technologies
– Ecircle C2c 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ecircle C2c 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 Ecircle C2c to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Ecircle C2c 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, Ecircle C2c 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ecircle C2c 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ecircle C2c 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, eCircle AG, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ecircle C2c can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Ecircle C2c 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. Ecircle C2c 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.
Better consumer reach
– The expansion of the 5G network will help Ecircle C2c to increase its market reach. Ecircle C2c 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.
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 Ecircle C2c 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.
Manufacturing automation
– Ecircle C2c 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.
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 Ecircle C2c in the consumer business. Now Ecircle C2c can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Ecircle C2c to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats eCircle AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study eCircle AG are -
Technology acceleration in Forth Industrial Revolution
– Ecircle C2c has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Ecircle C2c 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ecircle C2c with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Ecircle C2c 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. Ecircle C2c 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, Ecircle C2c 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 eCircle AG .
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.
Increasing wage structure of Ecircle C2c
– 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 Ecircle C2c.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ecircle C2c 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.
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 Ecircle C2c 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.
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 Ecircle C2c.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study eCircle AG, Ecircle C2c 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 .
Regulatory challenges
– Ecircle C2c 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.
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 Ecircle C2c business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of eCircle AG 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 eCircle AG 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 eCircle AG 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 eCircle AG 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 eCircle AG 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 Ecircle C2c needs to make to build a sustainable competitive advantage.