Case Study Description of Fingerhut's Price Strategy
Fingerhut, based in Minnetonka, Minnesota, is a direct-marketing company that sells a smorgasbord of consumer goods through an array of specially targeted catalogs. In November 1996, an article in the Star Tribune, a major Minneapolis newspaper, drew attention to a class-action lawsuit pending against Fingerhut that suggests the firm made its profits by exploiting the poor. Several civil rights groups rallied around the suit and submitted amicus curiae in favor of the litigation. The case illustrates issues in ethics and management communication. Discussions focus on the constituencies. Is Fingerhut exploiting its customers or providing them with an affordable method of obtaining valued consumer goods on credit? Do retailers have a duty to offer products at reasonable prices? Are the high interest rates reasonable given the risk? What are the options: pawn shops, rent-to-own? What is the profile of the typical Fingerhut customer? Discussions also focus on the issues communicating to the constituencies. How much damage will the lawsuit do to Fingerhut's image as an ethical, socially conscious company? What communication strategies can the firm employ? Should it react to the lawsuit? What should it tell its employees?
Authors :: R. Edward Freeman, Patricia H Werhane,, Gretchen A. Kalsow, Jenny Mead
Swot Analysis of "Fingerhut's Price Strategy" written by R. Edward Freeman, Patricia H Werhane,, Gretchen A. Kalsow, Jenny Mead includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Fingerhut Fingerhut's facing as an external strategic factors. Some of the topics covered in Fingerhut's Price Strategy case study are - Strategic Management Strategies, Crisis management, Ethics and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Fingerhut's Price Strategy casestudy better are - – supply chains are disrupted by pandemic , technology disruption, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%,
talent flight as more people leaving formal jobs, increasing commodity prices, etc
Introduction to SWOT Analysis of Fingerhut's Price Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Fingerhut's Price Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fingerhut Fingerhut's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fingerhut Fingerhut's 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 Fingerhut's Price Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Fingerhut's Price Strategy case study
2. Improving business portfolio management of Fingerhut Fingerhut's
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 Fingerhut Fingerhut's
Strengths Fingerhut's Price Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fingerhut Fingerhut's in Fingerhut's Price Strategy Harvard Business Review case study are -
Organizational Resilience of Fingerhut Fingerhut's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Fingerhut Fingerhut's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Fingerhut Fingerhut's is present in almost all the verticals within the industry. This has provided firm in Fingerhut's Price Strategy 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.
Strong track record of project management
– Fingerhut Fingerhut's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Fingerhut Fingerhut's is one of the most innovative firm in sector. Manager in Fingerhut's Price Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Innovation & Entrepreneurship field
– Fingerhut Fingerhut's 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 Fingerhut Fingerhut's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Fingerhut Fingerhut's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fingerhut Fingerhut's 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.
Learning organization
- Fingerhut Fingerhut's is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Fingerhut Fingerhut's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Fingerhut's Price Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Fingerhut Fingerhut's 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.
Effective Research and Development (R&D)
– Fingerhut Fingerhut's 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 Fingerhut's Price Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Fingerhut Fingerhut's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Fingerhut Fingerhut's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Fingerhut Fingerhut's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Fingerhut's Price Strategy 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 Fingerhut Fingerhut's in the sector have low bargaining power. Fingerhut's Price Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fingerhut Fingerhut's to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Fingerhut's Price Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fingerhut's Price Strategy are -
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 Fingerhut Fingerhut's supply chain. Even after few cautionary changes mentioned in the HBR case study - Fingerhut's Price Strategy, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Fingerhut Fingerhut's vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Fingerhut Fingerhut's has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Fingerhut's Price Strategy, in the dynamic environment Fingerhut Fingerhut's has struggled to respond to the nimble upstart competition. Fingerhut Fingerhut's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study Fingerhut's Price Strategy 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 Fingerhut's Price Strategy can leverage the sales team experience to cultivate customer relationships as Fingerhut Fingerhut's is planning to shift buying processes online.
High operating costs
– Compare to the competitors, firm in the HBR case study Fingerhut's Price Strategy 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 Fingerhut Fingerhut's 's lucrative customers.
High cash cycle compare to competitors
Fingerhut Fingerhut's 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.
Skills based hiring
– The stress on hiring functional specialists at Fingerhut Fingerhut's 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 decision making process
– As mentioned earlier in the report, Fingerhut Fingerhut's has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Fingerhut Fingerhut's even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Low market penetration in new markets
– Outside its home market of Fingerhut Fingerhut's, firm in the HBR case study Fingerhut's Price Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Fingerhut's Price Strategy HBR case study mentions - Fingerhut Fingerhut's 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Fingerhut's Price Strategy, is just above the industry average. Fingerhut Fingerhut's 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 Fingerhut's Price Strategy | 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 Fingerhut's Price Strategy are -
Using analytics as competitive advantage
– Fingerhut Fingerhut's 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 Fingerhut's Price Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fingerhut Fingerhut's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Fingerhut Fingerhut's can use these opportunities to build new business models that can help the communities that Fingerhut Fingerhut's operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Fingerhut Fingerhut's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Fingerhut Fingerhut's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Fingerhut Fingerhut's is facing challenges because of the dominance of functional experts in the organization. Fingerhut's Price Strategy 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.
Leveraging digital technologies
– Fingerhut Fingerhut's 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.
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 Fingerhut Fingerhut's 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.
Creating value in data economy
– The success of analytics program of Fingerhut Fingerhut's has opened avenues for new revenue streams for the organization in the industry. This can help Fingerhut Fingerhut's to build a more holistic ecosystem as suggested in the Fingerhut's Price Strategy case study. Fingerhut Fingerhut's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Fingerhut Fingerhut's can develop new processes and procedures in Innovation & Entrepreneurship 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Fingerhut Fingerhut's can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Loyalty marketing
– Fingerhut Fingerhut's 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.
Buying journey improvements
– Fingerhut Fingerhut's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Fingerhut's Price Strategy 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.
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. Fingerhut Fingerhut's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Fingerhut's Price Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Fingerhut's Price Strategy are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fingerhut Fingerhut's 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 Fingerhut's Price Strategy .
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 Fingerhut Fingerhut's in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
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 Fingerhut Fingerhut's is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Fingerhut Fingerhut's.
Increasing wage structure of Fingerhut Fingerhut's
– 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 Fingerhut Fingerhut's.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Fingerhut's Price Strategy, Fingerhut Fingerhut's 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 .
Consumer confidence and its impact on Fingerhut Fingerhut's 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.
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. Fingerhut Fingerhut's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Fingerhut Fingerhut's has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Fingerhut Fingerhut's 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.
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. Fingerhut Fingerhut's 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.
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 Fingerhut Fingerhut's business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Fingerhut Fingerhut's 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.
Weighted SWOT Analysis of Fingerhut's Price Strategy 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 Fingerhut's Price Strategy 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 Fingerhut's Price Strategy 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 Fingerhut's Price Strategy 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 Fingerhut's Price Strategy 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 Fingerhut Fingerhut's needs to make to build a sustainable competitive advantage.