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 - – increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, technology disruption, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google,
increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, 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 -
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.
Organizational Resilience of Effects Models
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Effects Models does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
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.
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.
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.
Learning organization
- Effects Models 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 Effects Models is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Scale Effects, Network Effects, and Investment Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
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.
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.
Training and development
– Effects Models has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Scale Effects, Network Effects, and Investment Strategy 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.
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 -
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.
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.
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 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.
Lack of clear differentiation of Effects Models products
– To increase the profitability and margins on the products, Effects Models needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Scale Effects, Network Effects, and Investment Strategy 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 Effects Models has relatively successful track record of launching new products.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, Effects Models 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.
Need for greater diversity
– Effects Models has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Opportunities 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 -
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Effects Models is facing challenges because of the dominance of functional experts in the organization. Scale Effects, Network Effects, and Investment Strategy 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 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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Effects Models can use these opportunities to build new business models that can help the communities that Effects Models operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
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.
Learning at scale
– Online learning technologies has now opened space for Effects Models 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.
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.
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.
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.
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.
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.
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.
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 -
Stagnating economy with rate increase
– Effects Models 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.
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.
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.
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.
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.
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.
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.
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.
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.
High dependence on third party suppliers
– Effects Models 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.
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.
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.