Gome, China's largest electronics retailer, is plotting the best course to go public. Unlike many high-growth businesses in China, Gome has only moderate financing needs. Its charismatic and ambitious chairman Wong Kwongyu has built an expansive retail network in China and successfully used trade credits by suppliers and banks to make Gome a highly cash generative business. The decision to go public has three inseparable components: why, where, and how. Does Gome really face substantial funding shortages for its operations? If so, are there any alternatives other than going public? If not, what are the other potential motivations to go public? Given these considerations, financial and otherwise, which stock market is the best one to list Gome's shares on? And between an IPO and a backdoor listing, which option suits Gome the best in terms of timing, costs, feasibility, and risks? Assuming Gome chooses to go public via a backdoor listing, what is the process and how are transactions structured? Lastly, for Wong and his top managers, how will each listing choice affect Gome's future development in the context of the pending market deregulation and expected industry consolidation?
Swot Analysis of "Gome: Going Public" written by Li Jin, Li Liao includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Gome Listing facing as an external strategic factors. Some of the topics covered in Gome: Going Public case study are - Strategic Management Strategies, Financial analysis, Financial markets, International business, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Gome: Going Public casestudy better are - – talent flight as more people leaving formal jobs, geopolitical disruptions, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies,
customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, etc
Introduction to SWOT Analysis of Gome: Going Public
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Gome: Going Public case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Gome Listing, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Gome Listing 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 Gome: Going Public can be done for the following purposes –
1. Strategic planning using facts provided in Gome: Going Public case study
2. Improving business portfolio management of Gome Listing
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Gome Listing
Strengths Gome: Going Public | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gome Listing in Gome: Going Public Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Gome: Going Public 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.
Learning organization
- Gome Listing 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 Gome Listing is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Gome: Going Public Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Gome Listing 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.
Successful track record of launching new products
– Gome Listing has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Gome Listing 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Gome: Going Public firm has clearly differentiated products in the market place. This has enabled Gome Listing to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Gome Listing to invest into research and development (R&D) and innovation.
Analytics focus
– Gome Listing 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 Li Jin, Li Liao 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.
Low bargaining power of suppliers
– Suppliers of Gome Listing in the sector have low bargaining power. Gome: Going Public has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Gome Listing to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Gome Listing 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 Gome: Going Public - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Gome Listing is present in almost all the verticals within the industry. This has provided firm in Gome: Going Public 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 Finance & Accounting field
– Gome Listing 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 Gome Listing in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Gome Listing 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 Gome: Going Public HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Gome Listing is one of the leading recruiters in the industry. Managers in the Gome: Going Public are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Gome: Going Public | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Gome: Going Public are -
No frontier risks strategy
– After analyzing the HBR case study Gome: Going Public, it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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.
Capital Spending Reduction
– Even during the low interest decade, Gome Listing 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.
Interest costs
– Compare to the competition, Gome Listing 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.
Need for greater diversity
– Gome Listing has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Gome: Going Public 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 Gome Listing has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Gome: Going Public 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 Gome Listing 's lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Gome: Going Public, in the dynamic environment Gome Listing has struggled to respond to the nimble upstart competition. Gome Listing has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study Gome: Going Public 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 Gome: Going Public can leverage the sales team experience to cultivate customer relationships as Gome Listing is planning to shift buying processes online.
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 Gome Listing supply chain. Even after few cautionary changes mentioned in the HBR case study - Gome: Going Public, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Gome Listing vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the segment, Gome Listing 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Li Jin, Li Liao suggests that, Gome Listing 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.
Opportunities Gome: Going Public | 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 Gome: Going Public are -
Using analytics as competitive advantage
– Gome Listing 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 Gome: Going Public - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Gome Listing to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Gome Listing can use these opportunities to build new business models that can help the communities that Gome Listing operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Gome Listing 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Gome Listing 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. Gome Listing 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.
Leveraging digital technologies
– Gome Listing 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.
Learning at scale
– Online learning technologies has now opened space for Gome Listing to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Gome Listing can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Gome Listing is facing challenges because of the dominance of functional experts in the organization. Gome: Going Public case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Gome Listing 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 Gome Listing to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Gome Listing to increase its market reach. Gome Listing 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.
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. Gome Listing can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Gome Listing can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Gome Listing 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 Finance & Accounting segment.
Threats Gome: Going Public External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Gome: Going Public are -
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. Gome Listing 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 Gome Listing in the Finance & Accounting industry. The Finance & Accounting 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Gome Listing with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Gome Listing has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Gome Listing needs to keep up with the evolution of technology in the Finance & Accounting 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.
Increasing wage structure of Gome Listing
– 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 Gome Listing.
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 Gome Listing business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Gome Listing 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
– Gome Listing 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 Finance & Accounting industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Gome: Going Public, Gome Listing may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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.
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 Gome Listing.
Environmental challenges
– Gome Listing 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. Gome Listing can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Weighted SWOT Analysis of Gome: Going Public 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 Gome: Going Public 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 Gome: Going Public 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 Gome: Going Public 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 Gome: Going Public 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 Gome Listing needs to make to build a sustainable competitive advantage.