Sabeer Bhatia, cofounder and CEO of Hotmail, is making efforts to finance and grow this business, which is based on free Web-based e-mail. Describes early, successful efforts at raising several rounds of venture capital and presents choices around a next stage of financing.
Swot Analysis of "Hotmail" written by Michael J. Roberts, Shripriya Mahesh includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hotmail Sabeer facing as an external strategic factors. Some of the topics covered in Hotmail case study are - Strategic Management Strategies, Business history, Financial management, Internet, Operations management, Venture capital and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Hotmail casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, geopolitical disruptions, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation,
technology disruption, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hotmail case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hotmail Sabeer, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hotmail Sabeer 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 Hotmail can be done for the following purposes –
1. Strategic planning using facts provided in Hotmail case study
2. Improving business portfolio management of Hotmail Sabeer
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 Hotmail Sabeer
Strengths Hotmail | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hotmail Sabeer in Hotmail Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Hotmail Sabeer in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Hotmail Sabeer 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 Michael J. Roberts, Shripriya Mahesh 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.
High brand equity
– Hotmail Sabeer has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hotmail Sabeer to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Hotmail Sabeer digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hotmail Sabeer 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.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Hotmail firm has clearly differentiated products in the market place. This has enabled Hotmail Sabeer to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Hotmail Sabeer to invest into research and development (R&D) and innovation.
Training and development
– Hotmail Sabeer has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Hotmail Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Hotmail Sabeer in the sector have low bargaining power. Hotmail has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hotmail Sabeer to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Hotmail Sabeer has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Innovation driven organization
– Hotmail Sabeer is one of the most innovative firm in sector. Manager in Hotmail Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Effective Research and Development (R&D)
– Hotmail Sabeer 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 Hotmail - 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
– Hotmail Sabeer 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 Hotmail Sabeer
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Hotmail Sabeer does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Hotmail | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hotmail are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Hotmail 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 Hotmail Sabeer has relatively successful track record of launching new products.
High cash cycle compare to competitors
Hotmail Sabeer 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.
Low market penetration in new markets
– Outside its home market of Hotmail Sabeer, firm in the HBR case study Hotmail needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Hotmail Sabeer 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Hotmail Sabeer 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hotmail Sabeer is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Hotmail can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Hotmail Sabeer 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.
Increasing silos among functional specialists
– The organizational structure of Hotmail Sabeer is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Hotmail Sabeer needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hotmail Sabeer to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Hotmail Sabeer 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 - Hotmail should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Hotmail, in the dynamic environment Hotmail Sabeer has struggled to respond to the nimble upstart competition. Hotmail Sabeer has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Hotmail, is just above the industry average. Hotmail Sabeer 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.
Opportunities Hotmail | 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 Hotmail are -
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. Hotmail Sabeer 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. Hotmail Sabeer 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.
Manufacturing automation
– Hotmail Sabeer 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.
Buying journey improvements
– Hotmail Sabeer can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Hotmail 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.
Using analytics as competitive advantage
– Hotmail Sabeer 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 Hotmail - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hotmail Sabeer to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Hotmail Sabeer 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hotmail Sabeer can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hotmail Sabeer is facing challenges because of the dominance of functional experts in the organization. Hotmail 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.
Loyalty marketing
– Hotmail Sabeer 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.
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 Hotmail Sabeer in the consumer business. Now Hotmail Sabeer can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Hotmail Sabeer 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hotmail Sabeer can use these opportunities to build new business models that can help the communities that Hotmail Sabeer operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Leveraging digital technologies
– Hotmail Sabeer 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.
Better consumer reach
– The expansion of the 5G network will help Hotmail Sabeer to increase its market reach. Hotmail Sabeer 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 Hotmail External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hotmail are -
Stagnating economy with rate increase
– Hotmail Sabeer 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.
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. Hotmail Sabeer needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
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 Hotmail Sabeer.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Hotmail Sabeer with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Hotmail Sabeer in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Increasing wage structure of Hotmail Sabeer
– 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 Hotmail Sabeer.
Regulatory challenges
– Hotmail Sabeer 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.
Consumer confidence and its impact on Hotmail Sabeer 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hotmail Sabeer 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 Hotmail, Hotmail Sabeer 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 .
Environmental challenges
– Hotmail Sabeer 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. Hotmail Sabeer can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Shortening product life cycle
– it is one of the major threat that Hotmail Sabeer is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hotmail Sabeer 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 Hotmail .
Weighted SWOT Analysis of Hotmail 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 Hotmail 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 Hotmail 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 Hotmail 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 Hotmail 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 Hotmail Sabeer needs to make to build a sustainable competitive advantage.
