Case Study Description of Scale Effects, Network Effects, and Investment Strategy
This technical note discusses scale economies, and direct and indirect network effects in the context of building better business models. Some of the great business disasters of the dot.com bubble were companies that scaled their infrastructure without working through the scaling effects. This note also discusses multi-sided platforms, the skewing of business models reflecting a mispricing to get one side on board, and suggests the importance of testing in establishing viable business models.
Swot Analysis of "Scale Effects, Network Effects, and Investment Strategy" written by Willy Shih includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Effects Models facing as an external strategic factors. Some of the topics covered in Scale Effects, Network Effects, and Investment Strategy case study are - Strategic Management Strategies, Economics, IT and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Scale Effects, Network Effects, and Investment Strategy casestudy better are - – challanges to central banks by blockchain based private currencies, technology disruption, increasing household debt because of falling income levels, increasing commodity prices, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings,
customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Scale Effects, Network Effects, and Investment Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Scale Effects, Network Effects, and Investment Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Effects Models, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Effects Models 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 Scale Effects, Network Effects, and Investment Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Scale Effects, Network Effects, and Investment Strategy case study
2. Improving business portfolio management of Effects Models
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 Effects Models
Strengths Scale Effects, Network Effects, and Investment Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Effects Models in Scale Effects, Network Effects, and Investment Strategy Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Effects Models in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Effects Models 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 Scale Effects, Network Effects, and Investment Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Effects Models is one of the leading recruiters in the industry. Managers in the Scale Effects, Network Effects, and Investment Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Effects Models in the sector have low bargaining power. Scale Effects, Network Effects, and Investment Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Effects Models to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Effects Models is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Effects Models digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Effects Models 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.
High switching costs
– The high switching costs that Effects Models 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.
Ability to lead change in Strategy & Execution field
– Effects Models 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 Effects Models in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Effects Models is one of the most innovative firm in sector. Manager in Scale Effects, Network Effects, and Investment Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Effects Models is present in almost all the verticals within the industry. This has provided firm in Scale Effects, Network Effects, and Investment Strategy 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.
Analytics focus
– Effects Models 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 Willy Shih 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.
Cross disciplinary teams
– Horizontal connected teams at the Effects Models 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 Scale Effects, Network Effects, and Investment Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Scale Effects, Network Effects, and Investment Strategy are -
High bargaining power of channel partners
– Because of the regulatory requirements, Willy Shih suggests that, Effects Models is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Low market penetration in new markets
– Outside its home market of Effects Models, firm in the HBR case study Scale Effects, Network Effects, and Investment Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Scale Effects, Network Effects, and Investment Strategy 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 Effects Models 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Effects Models 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. Effects Models 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Scale Effects, Network Effects, and Investment Strategy, in the dynamic environment Effects Models has struggled to respond to the nimble upstart competition. Effects Models has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Effects Models is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Scale Effects, Network Effects, and Investment Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Scale Effects, Network Effects, and Investment Strategy HBR case study mentions - Effects Models 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.
Aligning sales with marketing
– It come across in the case study Scale Effects, Network Effects, and Investment Strategy 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 Scale Effects, Network Effects, and Investment Strategy can leverage the sales team experience to cultivate customer relationships as Effects Models is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Effects Models is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Effects Models needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Effects Models to focus more on services rather than just following the product oriented approach.
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 Effects Models supply chain. Even after few cautionary changes mentioned in the HBR case study - Scale Effects, Network Effects, and Investment Strategy, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Effects Models vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Scale Effects, Network Effects, and Investment Strategy, it seems that the employees of Effects Models 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.
Opportunities Scale Effects, Network Effects, and Investment Strategy | 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 Scale Effects, Network Effects, and Investment Strategy are -
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. Effects Models can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Effects Models can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Scale Effects, Network Effects, and Investment Strategy 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Effects Models 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 Effects Models to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Effects Models 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 Scale Effects, Network Effects, and Investment Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Effects Models to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Effects Models can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Effects Models can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Leveraging digital technologies
– Effects Models 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.
Loyalty marketing
– Effects Models 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Effects Models can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Effects Models 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, Scale Effects, Network Effects, and Investment Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Effects Models 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.
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 Effects Models in the consumer business. Now Effects Models can target international markets with far fewer capital restrictions requirements than the existing system.
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. Effects Models 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. Effects Models 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.
Threats Scale Effects, Network Effects, and Investment Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Scale Effects, Network Effects, and Investment Strategy 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 Effects Models.
Shortening product life cycle
– it is one of the major threat that Effects Models is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Effects Models 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 Effects Models
– 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 Effects Models.
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 Effects Models in the Strategy & Execution sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Effects Models with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Effects Models 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.
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.
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.
Regulatory challenges
– Effects Models 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.
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. Effects Models can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Effects Models 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. Effects Models can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Effects Models 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 Scale Effects, Network Effects, and Investment Strategy 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 Scale Effects, Network Effects, and Investment Strategy 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 Scale Effects, Network Effects, and Investment Strategy 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 Scale Effects, Network Effects, and Investment Strategy 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 Scale Effects, Network Effects, and Investment Strategy 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 Effects Models needs to make to build a sustainable competitive advantage.
