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 - – increasing commodity prices, increasing household debt because of falling income levels, there is backlash against globalization, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption,
there is increasing trade war between United States & China, supply chains are disrupted by pandemic , 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 -
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.
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.
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.
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.
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.
Innovation driven organization
– Ecircle C2c is one of the most innovative firm in sector. Manager in eCircle AG Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Ecircle C2c is one of the leading recruiters in the industry. Managers in the eCircle AG are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Learning organization
- Ecircle C2c 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 Ecircle C2c is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in eCircle AG Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Ecircle C2c is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Ecircle C2c 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.
Weaknesses eCircle AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of eCircle AG are -
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.
Capital Spending Reduction
– Even during the low interest decade, Ecircle C2c 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.
Slow decision making process
– As mentioned earlier in the report, Ecircle C2c 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. Ecircle C2c 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.
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.
Slow to strategic competitive environment developments
– As eCircle AG HBR case study mentions - Ecircle C2c 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.
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.
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.
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.
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.
High cash cycle compare to competitors
Ecircle C2c 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.
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.
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 -
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.
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.
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.
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.
Buying journey improvements
– Ecircle C2c can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. eCircle AG 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.
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.
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. Ecircle C2c can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
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.
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.
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 -
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 .
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 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.
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. Ecircle C2c needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Ecircle C2c in the Strategy & Execution sector and impact the bottomline of the organization.
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.
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.
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.
Stagnating economy with rate increase
– Ecircle C2c 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.
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.
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.