Case Study Description of The Virtual Market: "Mom-and-Pop" Shops Reborn
In 2013, two entrepreneurs launched the Virtual Market in Mexico City with a mission to transform small traditional retailers (the so-called "mom-and-pop" shops) into competitive market players. The family-owned shops were strongly embedded in the society, culture, and economy of Mexico and Latin America, producing 50 per cent of the region's retail sales and 15 per cent of Mexico's true gross domestic product. However, economic growth had increased consumers' earnings, leading to previously low-income consumers gaining financial status. The traditional shops were unable to compete with the new demands for cashless payment methods, wider ranges of products and services, and lower prices. To remedy the situation, the Virtual Market gained the trust of the shop owners and worked to improve their financial, technological, and business literacy. By 2017, the Virtual Market had successfully worked with 10,000 shops but had still not attained break-even. Was its business model sustainable in the long term? Could it be replicated in other countries and with other cultures? How could it scale up and secure profits? Jasenko Ljubica and Miguel Montoya are affiliated with Instituto Tecnologico y de Estudios Superiores de Monterrey (ITESM).
Swot Analysis of "The Virtual Market: "Mom-and-Pop" Shops Reborn" written by Jasenko Ljubica, Miguel Montoya includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Shops Virtual facing as an external strategic factors. Some of the topics covered in The Virtual Market: "Mom-and-Pop" Shops Reborn case study are - Strategic Management Strategies, Emerging markets, Innovation and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the The Virtual Market: "Mom-and-Pop" Shops Reborn casestudy better are - – there is backlash against globalization, wage bills are increasing, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy,
geopolitical disruptions, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of The Virtual Market: "Mom-and-Pop" Shops Reborn
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The Virtual Market: "Mom-and-Pop" Shops Reborn case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Shops Virtual, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Shops Virtual 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 The Virtual Market: "Mom-and-Pop" Shops Reborn can be done for the following purposes –
1. Strategic planning using facts provided in The Virtual Market: "Mom-and-Pop" Shops Reborn case study
2. Improving business portfolio management of Shops Virtual
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 Shops Virtual
Strengths The Virtual Market: "Mom-and-Pop" Shops Reborn | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Shops Virtual in The Virtual Market: "Mom-and-Pop" Shops Reborn Harvard Business Review case study are -
Highly skilled collaborators
– Shops Virtual 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 The Virtual Market: "Mom-and-Pop" Shops Reborn HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Shops Virtual 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 Shops Virtual is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The Virtual Market: "Mom-and-Pop" Shops Reborn Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the The Virtual Market: "Mom-and-Pop" Shops Reborn 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.
Superior customer experience
– The customer experience strategy of Shops Virtual in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Shops Virtual has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Shops Virtual to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Shops Virtual 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.
Ability to recruit top talent
– Shops Virtual is one of the leading recruiters in the industry. Managers in the The Virtual Market: "Mom-and-Pop" Shops Reborn are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Shops Virtual has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Shops Virtual 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.
Analytics focus
– Shops Virtual 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 Jasenko Ljubica, Miguel Montoya 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.
Effective Research and Development (R&D)
– Shops Virtual 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 The Virtual Market: "Mom-and-Pop" Shops Reborn - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Shops Virtual is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Shops Virtual
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Shops Virtual does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses The Virtual Market: "Mom-and-Pop" Shops Reborn | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Virtual Market: "Mom-and-Pop" Shops Reborn are -
Need for greater diversity
– Shops Virtual 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.
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 Shops Virtual supply chain. Even after few cautionary changes mentioned in the HBR case study - The Virtual Market: "Mom-and-Pop" Shops Reborn, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Shops Virtual vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Jasenko Ljubica, Miguel Montoya suggests that, Shops Virtual 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study The Virtual Market: "Mom-and-Pop" Shops Reborn, it seems that the employees of Shops Virtual 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.
No frontier risks strategy
– After analyzing the HBR case study The Virtual Market: "Mom-and-Pop" Shops Reborn, 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, Shops Virtual has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Low market penetration in new markets
– Outside its home market of Shops Virtual, firm in the HBR case study The Virtual Market: "Mom-and-Pop" Shops Reborn needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study The Virtual Market: "Mom-and-Pop" Shops Reborn 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 Shops Virtual 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The Virtual Market: "Mom-and-Pop" Shops Reborn, is just above the industry average. Shops Virtual 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 decision making process
– As mentioned earlier in the report, Shops Virtual 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. Shops Virtual 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 cash cycle compare to competitors
Shops Virtual 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.
Opportunities The Virtual Market: "Mom-and-Pop" Shops Reborn | 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 The Virtual Market: "Mom-and-Pop" Shops Reborn are -
Better consumer reach
– The expansion of the 5G network will help Shops Virtual to increase its market reach. Shops Virtual 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Shops Virtual can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Shops Virtual 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.
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. Shops Virtual 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. Shops Virtual 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.
Learning at scale
– Online learning technologies has now opened space for Shops Virtual 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.
Developing new processes and practices
– Shops Virtual 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Shops Virtual can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, The Virtual Market: "Mom-and-Pop" Shops Reborn, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Shops Virtual 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
– Shops Virtual 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.
Buying journey improvements
– Shops Virtual can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The Virtual Market: "Mom-and-Pop" Shops Reborn 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Shops Virtual 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 Shops Virtual to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Shops Virtual has opened avenues for new revenue streams for the organization in the industry. This can help Shops Virtual to build a more holistic ecosystem as suggested in the The Virtual Market: "Mom-and-Pop" Shops Reborn case study. Shops Virtual can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Shops Virtual 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.
Threats The Virtual Market: "Mom-and-Pop" Shops Reborn External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The Virtual Market: "Mom-and-Pop" Shops Reborn are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Shops Virtual with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Shops Virtual 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. Shops Virtual can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study The Virtual Market: "Mom-and-Pop" Shops Reborn, Shops Virtual 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 dependence on third party suppliers
– Shops Virtual high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing wage structure of Shops Virtual
– 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 Shops Virtual.
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. Shops Virtual 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.
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.
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 Shops Virtual.
Consumer confidence and its impact on Shops Virtual 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.
Shortening product life cycle
– it is one of the major threat that Shops Virtual is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Shops Virtual 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.
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. Shops Virtual 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
– Shops Virtual has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Shops Virtual 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.
Weighted SWOT Analysis of The Virtual Market: "Mom-and-Pop" Shops Reborn 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 The Virtual Market: "Mom-and-Pop" Shops Reborn 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 The Virtual Market: "Mom-and-Pop" Shops Reborn 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 The Virtual Market: "Mom-and-Pop" Shops Reborn 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 The Virtual Market: "Mom-and-Pop" Shops Reborn 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 Shops Virtual needs to make to build a sustainable competitive advantage.