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 - – cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, increasing commodity prices,
there is backlash against globalization, increasing government debt because of Covid-19 spendings, 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 -
High brand equity
– Ecircle C2c has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ecircle C2c to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Ecircle C2c digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ecircle C2c 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.
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.
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.
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.
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.
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.
Organizational Resilience of Ecircle C2c
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ecircle C2c does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Weaknesses eCircle AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of eCircle AG are -
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.
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.
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.
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.
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.
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 Ecircle C2c supply chain. Even after few cautionary changes mentioned in the HBR case study - eCircle AG, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ecircle C2c vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study eCircle AG 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 Ecircle C2c 's lucrative customers.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ecircle C2c is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study eCircle AG can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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 -
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. Ecircle C2c can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Ecircle C2c has opened avenues for new revenue streams for the organization in the industry. This can help Ecircle C2c to build a more holistic ecosystem as suggested in the eCircle AG case study. Ecircle C2c 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. 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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ecircle C2c can use these opportunities to build new business models that can help the communities that Ecircle C2c operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
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.
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.
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.
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.
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.
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.
Loyalty marketing
– Ecircle C2c 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.
Using analytics as competitive advantage
– Ecircle C2c 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 eCircle AG - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ecircle C2c to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 -
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.
Shortening product life cycle
– it is one of the major threat that Ecircle C2c is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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 .
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. Ecircle C2c can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Ecircle C2c 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.
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.
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.
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 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.
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.
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. Ecircle C2c will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for 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.
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.