Case Study Description of Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama
Despite widespread news of the incarceration of Gome Electronics' CEO, Huang Guangyu, Bain Capital felt they carefully undertook due diligence before making a significant investment in the company. The venture capital firm was confident that it and the current management could work together to revamp the fortunes of China's leading electronic retailer. However, it did not anticipate the power Huang had behind bars. As the majority shareholder, Huang has managed to manipulate shareholder meetings and current management decisions and structure. Was this typical of an investment in China or did Bain Capital just find itself in a unique situation? What can future managers learn from this situation about corporate governance and ethical rules of business in China?
Swot Analysis of "Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama" written by William C. Kirby, Tracy Yuen Manty includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Huang Gome facing as an external strategic factors. Some of the topics covered in Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama case study are - Strategic Management Strategies, Ethics, Regulation, Risk management and Global Business.
Some of the macro environment factors that can be used to understand the Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama casestudy better are - – increasing transportation and logistics costs, geopolitical disruptions, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies,
supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Huang Gome, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Huang Gome 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 Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama can be done for the following purposes –
1. Strategic planning using facts provided in Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama case study
2. Improving business portfolio management of Huang Gome
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Huang Gome
Strengths Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Huang Gome in Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama Harvard Business Review case study are -
Diverse revenue streams
– Huang Gome is present in almost all the verticals within the industry. This has provided firm in Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama 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.
Analytics focus
– Huang Gome 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 William C. Kirby, Tracy Yuen Manty 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.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Huang Gome digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Huang Gome 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.
Strong track record of project management
– Huang Gome 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 Huang Gome in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Huang Gome
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Huang Gome does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Huang Gome 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 Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Global Business industry
– Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama firm has clearly differentiated products in the market place. This has enabled Huang Gome to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Huang Gome to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Huang Gome 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.
Successful track record of launching new products
– Huang Gome has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Huang Gome 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.
Highly skilled collaborators
– Huang Gome 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 Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama 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.
Weaknesses Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama are -
Capital Spending Reduction
– Even during the low interest decade, Huang Gome 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 cash cycle compare to competitors
Huang Gome 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 Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama, in the dynamic environment Huang Gome has struggled to respond to the nimble upstart competition. Huang Gome has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama 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 Huang Gome 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama 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 Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama can leverage the sales team experience to cultivate customer relationships as Huang Gome is planning to shift buying processes online.
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 Huang Gome supply chain. Even after few cautionary changes mentioned in the HBR case study - Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Huang Gome vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Huang Gome products
– To increase the profitability and margins on the products, Huang Gome needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama, it seems that the employees of Huang Gome 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 Huang Gome 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.
Products dominated business model
– Even though Huang Gome 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 - Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama HBR case study mentions - Huang Gome takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama | 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 Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Huang Gome 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. Huang Gome 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Huang Gome can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Huang Gome can use these opportunities to build new business models that can help the communities that Huang Gome operates in. Secondly it can use opportunities from government spending in Global Business 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 Huang Gome 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Huang Gome 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 Huang Gome to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Huang Gome can develop new processes and procedures in Global Business 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.
Learning at scale
– Online learning technologies has now opened space for Huang Gome 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.
Creating value in data economy
– The success of analytics program of Huang Gome has opened avenues for new revenue streams for the organization in the industry. This can help Huang Gome to build a more holistic ecosystem as suggested in the Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama case study. Huang Gome 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, Huang Gome 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.
Better consumer reach
– The expansion of the 5G network will help Huang Gome to increase its market reach. Huang Gome 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.
Using analytics as competitive advantage
– Huang Gome 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 Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Huang Gome to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Huang Gome 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.
Building a culture of innovation
– managers at Huang Gome 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 Global Business segment.
Threats Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama are -
Stagnating economy with rate increase
– Huang Gome 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 Huang Gome in the Global Business industry. The Global Business 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.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Huang Gome can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Huang Gome 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. Huang Gome can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Huang Gome with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Huang Gome 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 Global Business industry regulations.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Consumer confidence and its impact on Huang Gome 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.
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. Huang Gome 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 Huang Gome in the Global Business sector and impact the bottomline of the organization.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Huang Gome business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Huang Gome has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Huang Gome needs to keep up with the evolution of technology in the Global Business 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 Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama 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 Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama 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 Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama 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 Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama 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 Boardroom Battle Behind Bars: Gome Electrical Appliances Holdings -- A Corporate Governance Drama 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 Huang Gome needs to make to build a sustainable competitive advantage.
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