Case Study Description of Internet-Based Entrepreneurial Finance: Lessons from Germany
The Internet-based crowdinvesting market in Europe has developed significantly since its start in 2007 and has become an alternative source of finance for entrepreneurs to sell securities through the Internet to small investors. This market evidences a great variety in platform design and contract forms used by crowdinvesting platforms. By analyzing more detailed, hand-collected data on the complete set of successful and unsuccessful crowdinvesting campaigns run in Germany, this article tests whether different platform and contractual mechanisms affect crowd participation. The results show that crowd participation is largest when the minimum ticket size is small, the crowd is pooled in a financial vehicle, and the crowd is offered investments in the form of profit-participating loans. Moreover, the very same mechanisms increase the chances of achieving successful campaigns and raising a larger amount.
Swot Analysis of "Internet-Based Entrepreneurial Finance: Lessons from Germany" written by Lars Hornuf, Armin Schwienbacher includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Crowdinvesting Crowd facing as an external strategic factors. Some of the topics covered in Internet-Based Entrepreneurial Finance: Lessons from Germany case study are - Strategic Management Strategies, Innovation, Internet, Venture capital and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Internet-Based Entrepreneurial Finance: Lessons from Germany casestudy better are - – challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China,
increasing household debt because of falling income levels, technology disruption, etc
Introduction to SWOT Analysis of Internet-Based Entrepreneurial Finance: Lessons from Germany
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Internet-Based Entrepreneurial Finance: Lessons from Germany case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Crowdinvesting Crowd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Crowdinvesting Crowd 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 Internet-Based Entrepreneurial Finance: Lessons from Germany can be done for the following purposes –
1. Strategic planning using facts provided in Internet-Based Entrepreneurial Finance: Lessons from Germany case study
2. Improving business portfolio management of Crowdinvesting Crowd
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 Crowdinvesting Crowd
Strengths Internet-Based Entrepreneurial Finance: Lessons from Germany | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Crowdinvesting Crowd in Internet-Based Entrepreneurial Finance: Lessons from Germany Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Crowdinvesting Crowd 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.
Ability to lead change in Innovation & Entrepreneurship field
– Crowdinvesting Crowd 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 Crowdinvesting Crowd in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Internet-Based Entrepreneurial Finance: Lessons from Germany firm has clearly differentiated products in the market place. This has enabled Crowdinvesting Crowd to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Crowdinvesting Crowd to invest into research and development (R&D) and innovation.
Organizational Resilience of Crowdinvesting Crowd
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Crowdinvesting Crowd does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Crowdinvesting Crowd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Crowdinvesting Crowd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Crowdinvesting Crowd 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 Lars Hornuf, Armin Schwienbacher 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.
Learning organization
- Crowdinvesting Crowd 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 Crowdinvesting Crowd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Internet-Based Entrepreneurial Finance: Lessons from Germany Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Crowdinvesting Crowd digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Crowdinvesting Crowd 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.
High switching costs
– The high switching costs that Crowdinvesting Crowd 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.
Innovation driven organization
– Crowdinvesting Crowd is one of the most innovative firm in sector. Manager in Internet-Based Entrepreneurial Finance: Lessons from Germany Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Crowdinvesting Crowd is one of the leading recruiters in the industry. Managers in the Internet-Based Entrepreneurial Finance: Lessons from Germany are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Crowdinvesting Crowd 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 Internet-Based Entrepreneurial Finance: Lessons from Germany - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Internet-Based Entrepreneurial Finance: Lessons from Germany | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Internet-Based Entrepreneurial Finance: Lessons from Germany are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Crowdinvesting Crowd is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Internet-Based Entrepreneurial Finance: Lessons from Germany can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Crowdinvesting Crowd has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Aligning sales with marketing
– It come across in the case study Internet-Based Entrepreneurial Finance: Lessons from Germany 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 Internet-Based Entrepreneurial Finance: Lessons from Germany can leverage the sales team experience to cultivate customer relationships as Crowdinvesting Crowd is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Internet-Based Entrepreneurial Finance: Lessons from Germany HBR case study mentions - Crowdinvesting Crowd 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 Crowdinvesting Crowd is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Crowdinvesting Crowd needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Crowdinvesting Crowd to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Crowdinvesting Crowd 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Internet-Based Entrepreneurial Finance: Lessons from Germany, it seems that the employees of Crowdinvesting Crowd 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 cash cycle compare to competitors
Crowdinvesting Crowd 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, Crowdinvesting Crowd 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.
No frontier risks strategy
– After analyzing the HBR case study Internet-Based Entrepreneurial Finance: Lessons from Germany, 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.
Lack of clear differentiation of Crowdinvesting Crowd products
– To increase the profitability and margins on the products, Crowdinvesting Crowd needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Internet-Based Entrepreneurial Finance: Lessons from Germany | 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 Internet-Based Entrepreneurial Finance: Lessons from Germany are -
Loyalty marketing
– Crowdinvesting Crowd 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.
Manufacturing automation
– Crowdinvesting Crowd can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
Building a culture of innovation
– managers at Crowdinvesting Crowd 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 Innovation & Entrepreneurship segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Crowdinvesting Crowd is facing challenges because of the dominance of functional experts in the organization. Internet-Based Entrepreneurial Finance: Lessons from Germany 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Crowdinvesting Crowd can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Crowdinvesting Crowd to increase its market reach. Crowdinvesting Crowd 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Crowdinvesting Crowd 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 Crowdinvesting Crowd to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Crowdinvesting Crowd can use these opportunities to build new business models that can help the communities that Crowdinvesting Crowd operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
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 Crowdinvesting Crowd 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.
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. Crowdinvesting Crowd 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. Crowdinvesting Crowd 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.
Creating value in data economy
– The success of analytics program of Crowdinvesting Crowd has opened avenues for new revenue streams for the organization in the industry. This can help Crowdinvesting Crowd to build a more holistic ecosystem as suggested in the Internet-Based Entrepreneurial Finance: Lessons from Germany case study. Crowdinvesting Crowd can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Crowdinvesting Crowd can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Crowdinvesting Crowd 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.
Threats Internet-Based Entrepreneurial Finance: Lessons from Germany External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Internet-Based Entrepreneurial Finance: Lessons from Germany are -
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 Crowdinvesting Crowd.
Shortening product life cycle
– it is one of the major threat that Crowdinvesting Crowd is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Crowdinvesting Crowd 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.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Crowdinvesting Crowd can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Environmental challenges
– Crowdinvesting Crowd 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. Crowdinvesting Crowd can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Crowdinvesting Crowd with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Crowdinvesting Crowd 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 Internet-Based Entrepreneurial Finance: Lessons from Germany .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Internet-Based Entrepreneurial Finance: Lessons from Germany, Crowdinvesting Crowd may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
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. Crowdinvesting Crowd needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Crowdinvesting Crowd has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Crowdinvesting Crowd 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.
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 Crowdinvesting Crowd in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Consumer confidence and its impact on Crowdinvesting Crowd 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.
Weighted SWOT Analysis of Internet-Based Entrepreneurial Finance: Lessons from Germany 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 Internet-Based Entrepreneurial Finance: Lessons from Germany 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 Internet-Based Entrepreneurial Finance: Lessons from Germany 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 Internet-Based Entrepreneurial Finance: Lessons from Germany 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 Internet-Based Entrepreneurial Finance: Lessons from Germany 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 Crowdinvesting Crowd needs to make to build a sustainable competitive advantage.
