Rocket Internet: Rise of the German Silicon Valley? SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Rocket Internet: Rise of the German Silicon Valley?
Rocket Internet, a unique technology incubator based in Germany, invests in and develops startups in Europe and emerging markets that are versions of successful technology firms primarily located in the United States, such as eBay, Zappos, Amazon and Groupon. Fundamentally, the company seeks to reduce the uncertainty of entrepreneurial startup ventures by imitating proven business models and replicating them in other geographic regions. Rocket Internet has recently begun to expand into emerging markets more aggressively, and its chief executive officer must now decide on the best strategy to continue the firm's global expansion.
Swot Analysis of "Rocket Internet: Rise of the German Silicon Valley?" written by Bryan Hong, Dave Tang includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Rocket Internet facing as an external strategic factors. Some of the topics covered in Rocket Internet: Rise of the German Silicon Valley? case study are - Strategic Management Strategies, Managing uncertainty, Technology and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Rocket Internet: Rise of the German Silicon Valley? casestudy better are - – increasing household debt because of falling income levels, geopolitical disruptions, there is backlash against globalization, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models,
digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Rocket Internet: Rise of the German Silicon Valley?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Rocket Internet: Rise of the German Silicon Valley? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rocket Internet, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rocket Internet 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 Rocket Internet: Rise of the German Silicon Valley? can be done for the following purposes –
1. Strategic planning using facts provided in Rocket Internet: Rise of the German Silicon Valley? case study
2. Improving business portfolio management of Rocket Internet
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 Rocket Internet
Strengths Rocket Internet: Rise of the German Silicon Valley? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rocket Internet in Rocket Internet: Rise of the German Silicon Valley? Harvard Business Review case study are -
High switching costs
– The high switching costs that Rocket Internet 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.
High brand equity
– Rocket Internet has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Rocket Internet to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Rocket Internet is present in almost all the verticals within the industry. This has provided firm in Rocket Internet: Rise of the German Silicon Valley? 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
– Rocket Internet 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 Bryan Hong, Dave Tang 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.
Highly skilled collaborators
– Rocket Internet 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 Rocket Internet: Rise of the German Silicon Valley? HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Rocket Internet: Rise of the German Silicon Valley? firm has clearly differentiated products in the market place. This has enabled Rocket Internet to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Rocket Internet to invest into research and development (R&D) and innovation.
Ability to lead change in Innovation & Entrepreneurship field
– Rocket Internet 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 Rocket Internet in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Rocket Internet 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 Rocket Internet: Rise of the German Silicon Valley? - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Rocket Internet in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Rocket Internet digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rocket Internet 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.
Low bargaining power of suppliers
– Suppliers of Rocket Internet in the sector have low bargaining power. Rocket Internet: Rise of the German Silicon Valley? has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Rocket Internet to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Rocket Internet is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Rocket Internet: Rise of the German Silicon Valley? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rocket Internet: Rise of the German Silicon Valley? are -
High operating costs
– Compare to the competitors, firm in the HBR case study Rocket Internet: Rise of the German Silicon Valley? 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 Rocket Internet 's lucrative customers.
High cash cycle compare to competitors
Rocket Internet 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 harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Rocket Internet is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Rocket Internet: Rise of the German Silicon Valley? can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Rocket Internet 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, Rocket Internet 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.
Products dominated business model
– Even though Rocket Internet 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 - Rocket Internet: Rise of the German Silicon Valley? should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Rocket Internet 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Rocket Internet: Rise of the German Silicon Valley? 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 Rocket Internet has relatively successful track record of launching new products.
Skills based hiring
– The stress on hiring functional specialists at Rocket Internet 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.
Slow to strategic competitive environment developments
– As Rocket Internet: Rise of the German Silicon Valley? HBR case study mentions - Rocket Internet 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 Rocket Internet: Rise of the German Silicon Valley?, it seems that the employees of Rocket Internet 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.
Opportunities Rocket Internet: Rise of the German Silicon Valley? | 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 Rocket Internet: Rise of the German Silicon Valley? are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Rocket Internet can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Rocket Internet 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.
Buying journey improvements
– Rocket Internet can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Rocket Internet: Rise of the German Silicon Valley? 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.
Loyalty marketing
– Rocket Internet 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Rocket Internet can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Rocket Internet 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, Rocket Internet: Rise of the German Silicon Valley?, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Rocket Internet 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 Rocket Internet to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Rocket Internet can use these opportunities to build new business models that can help the communities that Rocket Internet operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
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. Rocket Internet can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Rocket Internet 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.
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 Rocket Internet in the consumer business. Now Rocket Internet can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Rocket Internet 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.
Learning at scale
– Online learning technologies has now opened space for Rocket Internet 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.
Threats Rocket Internet: Rise of the German Silicon Valley? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Rocket Internet: Rise of the German Silicon Valley? are -
Stagnating economy with rate increase
– Rocket Internet 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.
Environmental challenges
– Rocket Internet 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. Rocket Internet can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Technology acceleration in Forth Industrial Revolution
– Rocket Internet has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Rocket Internet 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.
Consumer confidence and its impact on Rocket Internet 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Rocket Internet: Rise of the German Silicon Valley?, Rocket Internet 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 .
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 dependence on third party suppliers
– Rocket Internet high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing wage structure of Rocket Internet
– 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 Rocket Internet.
Regulatory challenges
– Rocket Internet 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.
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 Rocket Internet in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
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. Rocket Internet can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Rocket Internet.
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.
Weighted SWOT Analysis of Rocket Internet: Rise of the German Silicon Valley? 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 Rocket Internet: Rise of the German Silicon Valley? 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 Rocket Internet: Rise of the German Silicon Valley? 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 Rocket Internet: Rise of the German Silicon Valley? 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 Rocket Internet: Rise of the German Silicon Valley? 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 Rocket Internet needs to make to build a sustainable competitive advantage.
