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 - – competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy,
geopolitical disruptions, talent flight as more people leaving formal jobs, 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 -
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.
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.
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.
Sustainable margins compare to other players in Strategy & Execution industry
– Scale Effects, Network Effects, and Investment Strategy firm has clearly differentiated products in the market place. This has enabled Effects Models to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Effects Models to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Effects Models 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 Scale Effects, Network Effects, and Investment Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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.
High brand equity
– Effects Models has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Effects Models to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
Operational resilience
– The operational resilience strategy in the Scale Effects, Network Effects, and Investment Strategy 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.
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 cash cycle compare to competitors
Effects Models has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of 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.
Products dominated business model
– Even though Effects Models 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 - Scale Effects, Network Effects, and Investment Strategy should strive to include more intangible value offerings along with its core products and services.
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.
Skills based hiring
– The stress on hiring functional specialists at Effects Models 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Effects Models 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 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.
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.
No frontier risks strategy
– After analyzing the HBR case study Scale Effects, Network Effects, and Investment Strategy, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Interest costs
– Compare to the competition, Effects Models 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.
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 -
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Effects Models 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.
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.
Manufacturing automation
– Effects Models 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 Effects Models in the consumer business. Now Effects Models can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Effects Models has opened avenues for new revenue streams for the organization in the industry. This can help Effects Models to build a more holistic ecosystem as suggested in the Scale Effects, Network Effects, and Investment Strategy case study. Effects Models can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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 Effects Models 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.
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.
Developing new processes and practices
– Effects Models 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.
Better consumer reach
– The expansion of the 5G network will help Effects Models to increase its market reach. Effects Models 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.
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.
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 -
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. Effects Models needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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.
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.
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.
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.
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.
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 Effects Models business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Effects Models has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Effects Models 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.
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.