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 - – increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, there is backlash against globalization, increasing commodity prices, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions,
increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
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.
Successful track record of launching new products
– Crowdinvesting Crowd has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Crowdinvesting Crowd 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.
Operational resilience
– The operational resilience strategy in the Internet-Based Entrepreneurial Finance: Lessons from Germany 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.
Strong track record of project management
– Crowdinvesting Crowd is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Crowdinvesting Crowd in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
Highly skilled collaborators
– Crowdinvesting Crowd 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 Internet-Based Entrepreneurial Finance: Lessons from Germany HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
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 decision making process
– As mentioned earlier in the report, Crowdinvesting Crowd 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. Crowdinvesting Crowd 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.
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.
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.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Internet-Based Entrepreneurial Finance: Lessons from Germany 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 Crowdinvesting Crowd 's lucrative 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Internet-Based Entrepreneurial Finance: Lessons from Germany, in the dynamic environment Crowdinvesting Crowd has struggled to respond to the nimble upstart competition. Crowdinvesting Crowd has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Crowdinvesting Crowd supply chain. Even after few cautionary changes mentioned in the HBR case study - Internet-Based Entrepreneurial Finance: Lessons from Germany, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Crowdinvesting Crowd vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Crowdinvesting Crowd has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Internet-Based Entrepreneurial Finance: Lessons from Germany should strive to include more intangible value offerings along with its core products and services.
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.
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 -
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Crowdinvesting Crowd 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.
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. Crowdinvesting Crowd can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
Using analytics as competitive advantage
– Crowdinvesting Crowd 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 Internet-Based Entrepreneurial Finance: Lessons from Germany - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Crowdinvesting Crowd to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Crowdinvesting Crowd 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Crowdinvesting Crowd 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.
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 Crowdinvesting Crowd in the consumer business. Now Crowdinvesting Crowd can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Learning at scale
– Online learning technologies has now opened space for Crowdinvesting Crowd 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.
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 -
Regulatory challenges
– Crowdinvesting Crowd 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 Innovation & Entrepreneurship industry regulations.
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.
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.
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 .
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.
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.
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.
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.
Stagnating economy with rate increase
– Crowdinvesting Crowd 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Crowdinvesting Crowd 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.
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 .
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.
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.
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.