Case Study Description of Gome--King of China's Electrical Appliance Retail Chain
The chairman of Gome Ltd, a well known appliance retail chain, congratulated his management team for their excellent performance over the past year. For three consecutive years, Gome had been ranked the largest electrical appliance retail chain in China, and the second largest overall retail chain. Claiming to be the only true national player, Gome achieved total sales of RMB23.9 billion in 2004, and in 2005 doubled its number of stores to 426. The company's four-year plan is to capture 10-15% of the market share nationally. Gome would need to double the number of stores in the coming three years, and more importantly, work out a strategy to fend off its local and global competitors.
Swot Analysis of "Gome--King of China's Electrical Appliance Retail Chain" written by Shigefumi Makino, Anthony Fong includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Gome Appliance facing as an external strategic factors. Some of the topics covered in Gome--King of China's Electrical Appliance Retail Chain case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Gome--King of China's Electrical Appliance Retail Chain casestudy better are - – wage bills are increasing, increasing energy prices, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, technology disruption,
increasing commodity prices, there is backlash against globalization, etc
Introduction to SWOT Analysis of Gome--King of China's Electrical Appliance Retail Chain
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Gome--King of China's Electrical Appliance Retail Chain case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Gome Appliance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Gome Appliance 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--King of China's Electrical Appliance Retail Chain can be done for the following purposes –
1. Strategic planning using facts provided in Gome--King of China's Electrical Appliance Retail Chain case study
2. Improving business portfolio management of Gome Appliance
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 Gome Appliance
Strengths Gome--King of China's Electrical Appliance Retail Chain | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gome Appliance in Gome--King of China's Electrical Appliance Retail Chain Harvard Business Review case study are -
Sustainable margins compare to other players in Strategy & Execution industry
– Gome--King of China's Electrical Appliance Retail Chain firm has clearly differentiated products in the market place. This has enabled Gome Appliance to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Gome Appliance to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Gome Appliance has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Gome Appliance 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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Gome Appliance digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Gome Appliance has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Ability to lead change in Strategy & Execution field
– Gome Appliance 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 Appliance in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Gome Appliance is one of the most innovative firm in sector. Manager in Gome--King of China's Electrical Appliance Retail Chain Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the Gome--King of China's Electrical Appliance Retail Chain 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 Gome Appliance
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Gome Appliance does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Gome Appliance 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--King of China's Electrical Appliance Retail Chain HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Gome Appliance in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management
– Gome Appliance is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Gome Appliance in the sector have low bargaining power. Gome--King of China's Electrical Appliance Retail Chain has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Gome Appliance to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Gome Appliance 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.
Weaknesses Gome--King of China's Electrical Appliance Retail Chain | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Gome--King of China's Electrical Appliance Retail Chain are -
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 Appliance supply chain. Even after few cautionary changes mentioned in the HBR case study - Gome--King of China's Electrical Appliance Retail Chain, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Gome Appliance vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Shigefumi Makino, Anthony Fong suggests that, Gome Appliance 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.
Skills based hiring
– The stress on hiring functional specialists at Gome Appliance 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.
Capital Spending Reduction
– Even during the low interest decade, Gome Appliance 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
– Gome Appliance 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Gome--King of China's Electrical Appliance Retail Chain, it seems that the employees of Gome Appliance 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 operating costs
– Compare to the competitors, firm in the HBR case study Gome--King of China's Electrical Appliance Retail Chain 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 Appliance 's lucrative customers.
High cash cycle compare to competitors
Gome Appliance 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Gome--King of China's Electrical Appliance Retail Chain, is just above the industry average. Gome Appliance 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 strategic competitive environment developments
– As Gome--King of China's Electrical Appliance Retail Chain HBR case study mentions - Gome Appliance takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Increasing silos among functional specialists
– The organizational structure of Gome Appliance is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Gome Appliance needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Gome Appliance to focus more on services rather than just following the product oriented approach.
Opportunities Gome--King of China's Electrical Appliance Retail Chain | 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--King of China's Electrical Appliance Retail Chain are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Gome Appliance 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 Appliance to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Gome Appliance has opened avenues for new revenue streams for the organization in the industry. This can help Gome Appliance to build a more holistic ecosystem as suggested in the Gome--King of China's Electrical Appliance Retail Chain case study. Gome Appliance can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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 Gome Appliance 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.
Better consumer reach
– The expansion of the 5G network will help Gome Appliance to increase its market reach. Gome Appliance 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.
Learning at scale
– Online learning technologies has now opened space for Gome Appliance 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Gome Appliance 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Gome Appliance can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Gome Appliance 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.
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 Appliance can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Gome Appliance in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Gome Appliance 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--King of China's Electrical Appliance Retail Chain - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Gome Appliance to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Gome Appliance 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Gome Appliance is facing challenges because of the dominance of functional experts in the organization. Gome--King of China's Electrical Appliance Retail Chain 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.
Threats Gome--King of China's Electrical Appliance Retail Chain External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Gome--King of China's Electrical Appliance Retail Chain are -
Technology acceleration in Forth Industrial Revolution
– Gome Appliance has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Gome Appliance 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.
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.
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. Gome Appliance can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Gome Appliance 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.
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 Gome Appliance 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. Gome Appliance 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.
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 Appliance business can come under increasing regulations regarding data privacy, data security, etc.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Gome Appliance 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
– Gome Appliance 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Gome Appliance 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 Gome--King of China's Electrical Appliance Retail Chain .
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. Gome Appliance needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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--King of China's Electrical Appliance Retail Chain, Gome Appliance 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 .
Weighted SWOT Analysis of Gome--King of China's Electrical Appliance Retail Chain 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--King of China's Electrical Appliance Retail Chain 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--King of China's Electrical Appliance Retail Chain 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--King of China's Electrical Appliance Retail Chain 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--King of China's Electrical Appliance Retail Chain 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 Appliance needs to make to build a sustainable competitive advantage.
