This note describes the emerging on-demand economy, also referred to as the sharing economy. The note highlights several companies including Uber and Airbnb that exemplify this new mode of competition, a model that threatens to disrupt traditional firms. Uber provides ride services much like a traditional taxi company, but it owns no cars and employs no drivers, and instead matches independent car owners with customers looking for rides. Airbnb provides a lodging service, but owns no hotels, and instead matches home owners with extra rooms with customers looking for a place to stay. The note allows students to explore what impact such companies might have on traditional business models, what impact they might have on labor and how people work, and whether existing regulations aimed at traditional business models are adequate for the new model.
Authors :: Cynthia A. Montgomery, James Weber, Elizabeth Anne Watkins
Swot Analysis of "The On-Demand Economy" written by Cynthia A. Montgomery, James Weber, Elizabeth Anne Watkins includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Matches Airbnb facing as an external strategic factors. Some of the topics covered in The On-Demand Economy case study are - Strategic Management Strategies, Labor, Organizational structure, Strategy, Workspaces and Strategy & Execution.
Some of the macro environment factors that can be used to understand the The On-Demand Economy casestudy better are - – geopolitical disruptions, increasing commodity prices, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs,
competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of The On-Demand Economy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The On-Demand Economy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Matches Airbnb, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Matches Airbnb 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 The On-Demand Economy can be done for the following purposes –
1. Strategic planning using facts provided in The On-Demand Economy case study
2. Improving business portfolio management of Matches Airbnb
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 Matches Airbnb
Strengths The On-Demand Economy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Matches Airbnb in The On-Demand Economy Harvard Business Review case study are -
Analytics focus
– Matches Airbnb 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 Cynthia A. Montgomery, James Weber, Elizabeth Anne Watkins 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.
Training and development
– Matches Airbnb has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The On-Demand Economy 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.
Organizational Resilience of Matches Airbnb
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Matches Airbnb does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Matches Airbnb in the sector have low bargaining power. The On-Demand Economy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Matches Airbnb to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Matches Airbnb is one of the leading recruiters in the industry. Managers in the The On-Demand Economy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Matches Airbnb has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Matches Airbnb 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.
Superior customer experience
– The customer experience strategy of Matches Airbnb in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Matches Airbnb has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Matches Airbnb to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Matches Airbnb is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Strategy & Execution field
– Matches Airbnb 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 Matches Airbnb in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Matches Airbnb 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.
High switching costs
– The high switching costs that Matches Airbnb 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.
Weaknesses The On-Demand Economy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The On-Demand Economy are -
Interest costs
– Compare to the competition, Matches Airbnb 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study The On-Demand Economy, it seems that the employees of Matches Airbnb 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Cynthia A. Montgomery, James Weber, Elizabeth Anne Watkins suggests that, Matches Airbnb 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.
No frontier risks strategy
– After analyzing the HBR case study The On-Demand Economy, 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.
Aligning sales with marketing
– It come across in the case study The On-Demand Economy 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 The On-Demand Economy can leverage the sales team experience to cultivate customer relationships as Matches Airbnb is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Matches Airbnb 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the The On-Demand Economy 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 Matches Airbnb has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Matches Airbnb, firm in the HBR case study The On-Demand Economy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at Matches Airbnb 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Matches Airbnb is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study The On-Demand Economy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The On-Demand Economy, is just above the industry average. Matches Airbnb needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Opportunities The On-Demand Economy | 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 The On-Demand Economy are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Matches Airbnb 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, The On-Demand Economy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Matches Airbnb 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Matches Airbnb 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 Matches Airbnb to hire the very best people irrespective of their geographical location.
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. Matches Airbnb 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. Matches Airbnb 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.
Developing new processes and practices
– Matches Airbnb 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Matches Airbnb can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Matches Airbnb to increase its market reach. Matches Airbnb 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.
Buying journey improvements
– Matches Airbnb can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The On-Demand Economy 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Matches Airbnb can use these opportunities to build new business models that can help the communities that Matches Airbnb operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Matches Airbnb 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.
Building a culture of innovation
– managers at Matches Airbnb 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Matches Airbnb is facing challenges because of the dominance of functional experts in the organization. The On-Demand Economy 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.
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 Matches Airbnb 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.
Threats The On-Demand Economy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The On-Demand Economy are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Matches Airbnb 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 The On-Demand Economy .
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 Matches Airbnb.
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 Matches Airbnb in the Strategy & Execution sector and impact the bottomline of the organization.
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. Matches Airbnb 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.
High dependence on third party suppliers
– Matches Airbnb 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.
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.
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. Matches Airbnb needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Consumer confidence and its impact on Matches Airbnb 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.
Environmental challenges
– Matches Airbnb 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. Matches Airbnb 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 Matches Airbnb 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.
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 Matches Airbnb business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Matches Airbnb 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.
Weighted SWOT Analysis of The On-Demand Economy 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 The On-Demand Economy 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 The On-Demand Economy 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 The On-Demand Economy 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 The On-Demand Economy 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 Matches Airbnb needs to make to build a sustainable competitive advantage.
