Chronicles the founding and growth of Hotmail Corp., the leading provider of free e-mail services to consumers. The focus is on its financing history, starting with its first-round negotiations with the venture capital firm, Draper Fisher Jurvestson, and finishing with its consideration of a fifth round of financing only a year and a half later. The first round was a relatively quick negotiation to give the company seed capital of just over $300,000. The second round was a contentious one that examined the relationship between entrepreneurs and their VC investors. The third and fourth rounds of investing were structured as contingency financings. Finally, the fifth round of financing showed a number of options that the managers must consider, including an investment from Kleiner Perkins, strategic financing, and an acquisition offer from Microsoft. To add to the complications, Hotmail was running out of money and needed a short-term solution (possibly bridge financing) to complete these negotiations. The case examines each alternative and asks the reader to rate them.
Swot Analysis of "Hotmail Corp." written by Chuck Holloway, Pratap Mukherjee includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hotmail Round facing as an external strategic factors. Some of the topics covered in Hotmail Corp. case study are - Strategic Management Strategies, Growth strategy, Internet, Mergers & acquisitions and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Hotmail Corp. casestudy better are - – challanges to central banks by blockchain based private currencies, increasing commodity prices, wage bills are increasing, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion,
banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hotmail Corp. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hotmail Round, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hotmail Round 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 Corp. can be done for the following purposes –
1. Strategic planning using facts provided in Hotmail Corp. case study
2. Improving business portfolio management of Hotmail Round
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 Round
Strengths Hotmail Corp. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hotmail Round in Hotmail Corp. Harvard Business Review case study are -
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Hotmail Corp. firm has clearly differentiated products in the market place. This has enabled Hotmail Round to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Hotmail Round to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Hotmail Round 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 Corp. - 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
– Hotmail Round 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 Chuck Holloway, Pratap Mukherjee 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.
Training and development
– Hotmail Round has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Hotmail Corp. 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.
Strong track record of project management
– Hotmail Round is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Hotmail Round is one of the leading recruiters in the industry. Managers in the Hotmail Corp. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Hotmail Round digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hotmail Round 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.
High brand equity
– Hotmail Round has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hotmail Round to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Hotmail Round has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hotmail Round 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.
Low bargaining power of suppliers
– Suppliers of Hotmail Round in the sector have low bargaining power. Hotmail Corp. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hotmail Round to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Innovation & Entrepreneurship field
– Hotmail Round 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 Hotmail Round in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Hotmail Round 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 Hotmail Corp. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Hotmail Corp. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hotmail Corp. are -
Aligning sales with marketing
– It come across in the case study Hotmail Corp. 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 Hotmail Corp. can leverage the sales team experience to cultivate customer relationships as Hotmail Round is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Hotmail Round 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Hotmail Corp. 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 Hotmail Round 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Hotmail Round 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.
No frontier risks strategy
– After analyzing the HBR case study Hotmail Corp., 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Hotmail Corp., it seems that the employees of Hotmail Round 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Hotmail Corp., is just above the industry average. Hotmail Round 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Hotmail Corp. 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 Round has relatively successful track record of launching new products.
High cash cycle compare to competitors
Hotmail Round 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.
Slow to strategic competitive environment developments
– As Hotmail Corp. HBR case study mentions - Hotmail Round 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.
Lack of clear differentiation of Hotmail Round products
– To increase the profitability and margins on the products, Hotmail Round needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Hotmail Corp. | 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 Corp. are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hotmail Round 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hotmail Round 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, Hotmail Corp., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Hotmail Round can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Round 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 Round 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.
Better consumer reach
– The expansion of the 5G network will help Hotmail Round to increase its market reach. Hotmail Round 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.
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 Round can use these opportunities to build new business models that can help the communities that Hotmail Round operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Buying journey improvements
– Hotmail Round can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Hotmail Corp. 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.
Building a culture of innovation
– managers at Hotmail Round can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Innovation & Entrepreneurship segment.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hotmail Round 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.
Leveraging digital technologies
– Hotmail Round 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.
Learning at scale
– Online learning technologies has now opened space for Hotmail Round 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.
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 Round in the consumer business. Now Hotmail Round can target international markets with far fewer capital restrictions requirements than the existing system.
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 Round 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.
Threats Hotmail Corp. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hotmail Corp. are -
High dependence on third party suppliers
– Hotmail Round high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hotmail Round 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 Corp. .
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 Round in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Hotmail Round has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Hotmail Round 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.
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 Round needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
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.
Shortening product life cycle
– it is one of the major threat that Hotmail Round is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hotmail Round can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Environmental challenges
– Hotmail Round 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 Round can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
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 Hotmail Round business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Hotmail Round 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.
Increasing wage structure of Hotmail Round
– 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 Round.
Weighted SWOT Analysis of Hotmail Corp. 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 Corp. 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 Corp. 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 Corp. 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 Corp. 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 Round needs to make to build a sustainable competitive advantage.
