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 transportation and logistics costs, increasing commodity prices, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China,
there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Effects Models are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
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.
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.
High switching costs
– The high switching costs that Effects Models has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
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.
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.
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.
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.
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 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.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Scale Effects, Network Effects, and Investment Strategy, is just above the industry average. Effects Models 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.
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.
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.
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.
Low market penetration in new markets
– Outside its home market of Effects Models, firm in the HBR case study Scale Effects, Network Effects, and Investment Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Scale Effects, Network Effects, and Investment Strategy has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Effects Models 's lucrative customers.
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 -
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.
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.
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.
Leveraging digital technologies
– Effects Models can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Effects Models can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Scale Effects, Network Effects, and Investment Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Effects Models can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Effects Models can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
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.
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.
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.
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 -
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.
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 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.
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.
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.
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.
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 Effects Models.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Scale Effects, Network Effects, and Investment Strategy, Effects Models may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
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.
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.
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.
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.