Redfin, a technology-powered residential real estate brokerage, was founded in 2002 with the intention of using technology to disrupt the real estate industry. Over the next 15 years, Redfin made several changes to its business model. Initially, the company provided less support than a traditional real estate brokerage but helped home buyers and sellers save more money. Over time, in response to customer feedback, Redfin increased the level of customer service it provided while decreasing the amount customers saved, instead relying on its unique online tools to differentiate itself from other real estate brokerages. In July 2017, Redfin went public at a $1.73 billion valuation. Now, in late 2017, CEO Glenn Kelman had to decide what Redfin's top strategic priority should be. Redfin could try to increase its market share, which was currently less than 2% even in the company's top markets, or it could focus on balancing costs and improving its bottom line.
Swot Analysis of "Redfin" written by Marco Di Maggio, Julia Kelley includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Redfin Estate facing as an external strategic factors. Some of the topics covered in Redfin case study are - Strategic Management Strategies, Decision making, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Redfin casestudy better are - – cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, increasing transportation and logistics costs, there is backlash against globalization, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%,
challanges to central banks by blockchain based private currencies, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Redfin case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Redfin Estate, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Redfin Estate 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 Redfin can be done for the following purposes –
1. Strategic planning using facts provided in Redfin case study
2. Improving business portfolio management of Redfin Estate
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Redfin Estate
Strengths Redfin | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Redfin Estate in Redfin Harvard Business Review case study are -
Effective Research and Development (R&D)
– Redfin Estate 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 Redfin - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Redfin Estate 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 Marco Di Maggio, Julia Kelley 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.
Ability to lead change in Finance & Accounting field
– Redfin Estate 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 Redfin Estate in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Redfin Estate 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.
Diverse revenue streams
– Redfin Estate is present in almost all the verticals within the industry. This has provided firm in Redfin 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.
Cross disciplinary teams
– Horizontal connected teams at the Redfin Estate 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.
Strong track record of project management
– Redfin Estate is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Finance & Accounting industry
– Redfin firm has clearly differentiated products in the market place. This has enabled Redfin Estate to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Redfin Estate to invest into research and development (R&D) and innovation.
Innovation driven organization
– Redfin Estate is one of the most innovative firm in sector. Manager in Redfin Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Redfin Estate in the sector have low bargaining power. Redfin has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Redfin Estate to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Redfin Estate
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Redfin Estate does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Redfin Estate has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Redfin Estate to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Redfin | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Redfin are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Redfin HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Redfin Estate has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Redfin HBR case study mentions - Redfin Estate 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Redfin, it seems that the employees of Redfin Estate 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.
Skills based hiring
– The stress on hiring functional specialists at Redfin Estate has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Redfin, is just above the industry average. Redfin Estate 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 operating costs
– Compare to the competitors, firm in the HBR case study Redfin 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 Redfin Estate 's lucrative customers.
High cash cycle compare to competitors
Redfin Estate 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Redfin, in the dynamic environment Redfin Estate has struggled to respond to the nimble upstart competition. Redfin Estate has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Redfin Estate 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.
Interest costs
– Compare to the competition, Redfin Estate 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.
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 Redfin Estate supply chain. Even after few cautionary changes mentioned in the HBR case study - Redfin, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Redfin Estate vulnerable to further global disruptions in South East Asia.
Opportunities Redfin | 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 Redfin are -
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. Redfin Estate can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Redfin Estate can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Redfin Estate 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. Redfin Estate 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Redfin Estate 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
– Redfin Estate can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Redfin Estate is facing challenges because of the dominance of functional experts in the organization. Redfin 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Redfin Estate in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Developing new processes and practices
– Redfin Estate can develop new processes and procedures in Finance & Accounting 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.
Creating value in data economy
– The success of analytics program of Redfin Estate has opened avenues for new revenue streams for the organization in the industry. This can help Redfin Estate to build a more holistic ecosystem as suggested in the Redfin case study. Redfin Estate can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Redfin Estate 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.
Loyalty marketing
– Redfin Estate 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.
Using analytics as competitive advantage
– Redfin Estate 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 Redfin - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Redfin Estate to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Redfin Estate to increase its market reach. Redfin Estate 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.
Threats Redfin External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Redfin are -
Technology acceleration in Forth Industrial Revolution
– Redfin Estate has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Redfin Estate needs to keep up with the evolution of technology in the Finance & Accounting 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.
Regulatory challenges
– Redfin Estate 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 Finance & Accounting industry regulations.
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. Redfin Estate 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 Redfin Estate in the Finance & Accounting sector and impact the bottomline of the organization.
Consumer confidence and its impact on Redfin Estate 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 Redfin Estate is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Redfin Estate in the Finance & Accounting industry. The Finance & Accounting 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.
Environmental challenges
– Redfin Estate 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. Redfin Estate can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing wage structure of Redfin Estate
– 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 Redfin Estate.
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. Redfin Estate needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Redfin Estate 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Redfin Estate can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Redfin 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 Redfin 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 Redfin 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 Redfin 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 Redfin 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 Redfin Estate needs to make to build a sustainable competitive advantage.
