As they prepare to graduate from Harvard Business School, the co-founders of greeting card company startup Lovepop need capital to cover the company's operating costs and must choose between two seed financing offers. One offer is from an angel group and the other from a startup accelerator. Having bootstrapped the company's operations since its founding a year and a half earlier, the founders must weigh the differences in valuation and pros and cons of the accelerator program to determine which option is appropriate for Lovepop at this stage. In addition to addressing the challenges of early-stage fundraising, the case details the terms, offerings, and operations of startup accelerators.
Authors :: Robert F. White, Ramana Nanda, Olivia Hull
Swot Analysis of "Lovepop" written by Robert F. White, Ramana Nanda, Olivia Hull includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lovepop Startup facing as an external strategic factors. Some of the topics covered in Lovepop case study are - Strategic Management Strategies, Financial management, Growth strategy, Venture capital and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Lovepop casestudy better are - – there is backlash against globalization, talent flight as more people leaving formal jobs, wage bills are increasing, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, central banks are concerned over increasing inflation,
competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lovepop case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lovepop Startup, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lovepop Startup 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 Lovepop can be done for the following purposes –
1. Strategic planning using facts provided in Lovepop case study
2. Improving business portfolio management of Lovepop Startup
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lovepop Startup
Strengths Lovepop | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lovepop Startup in Lovepop Harvard Business Review case study are -
Ability to lead change in Innovation & Entrepreneurship field
– Lovepop Startup 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 Lovepop Startup in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Lovepop Startup
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lovepop Startup does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Lovepop Startup is one of the most innovative firm in sector. Manager in Lovepop Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Lovepop firm has clearly differentiated products in the market place. This has enabled Lovepop Startup to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Lovepop Startup to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Lovepop Startup in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Lovepop Startup is present in almost all the verticals within the industry. This has provided firm in Lovepop case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High brand equity
– Lovepop Startup has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lovepop Startup to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Lovepop Startup 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.
Analytics focus
– Lovepop Startup 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 Robert F. White, Ramana Nanda, Olivia Hull 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.
High switching costs
– The high switching costs that Lovepop Startup 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.
Low bargaining power of suppliers
– Suppliers of Lovepop Startup in the sector have low bargaining power. Lovepop has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lovepop Startup to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Lovepop Startup digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lovepop Startup 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.
Weaknesses Lovepop | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lovepop are -
Aligning sales with marketing
– It come across in the case study Lovepop 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 Lovepop can leverage the sales team experience to cultivate customer relationships as Lovepop Startup is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Lovepop, it seems that the employees of Lovepop Startup 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.
Slow decision making process
– As mentioned earlier in the report, Lovepop Startup 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. Lovepop Startup 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 operating costs
– Compare to the competitors, firm in the HBR case study Lovepop 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 Lovepop Startup 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Lovepop, is just above the industry average. Lovepop Startup 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.
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 Lovepop Startup supply chain. Even after few cautionary changes mentioned in the HBR case study - Lovepop, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lovepop Startup vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Lovepop, in the dynamic environment Lovepop Startup has struggled to respond to the nimble upstart competition. Lovepop Startup has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Lovepop Startup 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.
No frontier risks strategy
– After analyzing the HBR case study Lovepop, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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.
Increasing silos among functional specialists
– The organizational structure of Lovepop Startup is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Lovepop Startup needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lovepop Startup to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Lovepop HBR case study mentions - Lovepop Startup 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.
Opportunities Lovepop | 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 Lovepop are -
Leveraging digital technologies
– Lovepop Startup 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.
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 Lovepop Startup in the consumer business. Now Lovepop Startup can target international markets with far fewer capital restrictions requirements than the existing system.
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. Lovepop Startup can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lovepop Startup 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.
Learning at scale
– Online learning technologies has now opened space for Lovepop Startup 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lovepop Startup can use these opportunities to build new business models that can help the communities that Lovepop Startup operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lovepop Startup in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Developing new processes and practices
– Lovepop Startup can develop new processes and procedures in Innovation & Entrepreneurship 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lovepop Startup 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. Lovepop Startup 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.
Buying journey improvements
– Lovepop Startup can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Lovepop 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.
Using analytics as competitive advantage
– Lovepop Startup 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 Lovepop - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lovepop Startup to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Lovepop Startup 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lovepop Startup can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Lovepop External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lovepop are -
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. Lovepop Startup needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lovepop Startup 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 Lovepop .
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 Lovepop Startup.
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. Lovepop Startup 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.
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 Lovepop Startup in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Lovepop Startup has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Lovepop Startup needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
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 Lovepop Startup business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Lovepop Startup is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Lovepop Startup 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.
Increasing wage structure of Lovepop Startup
– 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 Lovepop Startup.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lovepop Startup in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lovepop Startup with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Lovepop Startup 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.
Weighted SWOT Analysis of Lovepop 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 Lovepop 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 Lovepop 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 Lovepop 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 Lovepop 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 Lovepop Startup needs to make to build a sustainable competitive advantage.
