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 - – there is backlash against globalization, increasing transportation and logistics costs, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies,
banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, 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 -
Superior customer experience
– The customer experience strategy of Fingerhut Fingerhut's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Fingerhut Fingerhut's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fingerhut Fingerhut's 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
– 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.
Ability to recruit top talent
– Fingerhut Fingerhut's is one of the leading recruiters in the industry. Managers in the Fingerhut's Price Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Analytics focus
– Fingerhut Fingerhut's 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 R. Edward Freeman, Patricia H Werhane,, Gretchen A. Kalsow, Jenny Mead 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.
Cross disciplinary teams
– Horizontal connected teams at the Fingerhut Fingerhut's are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
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.
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 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.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Fingerhut's Price Strategy, it seems that the employees of Fingerhut Fingerhut's 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.
Capital Spending Reduction
– Even during the low interest decade, Fingerhut Fingerhut's 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.
Increasing silos among functional specialists
– The organizational structure of Fingerhut Fingerhut's is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Fingerhut Fingerhut's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fingerhut Fingerhut's to focus more on services rather than just following the product oriented approach.
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.
Lack of clear differentiation of Fingerhut Fingerhut's products
– To increase the profitability and margins on the products, Fingerhut Fingerhut's needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
High bargaining power of channel partners
– Because of the regulatory requirements, R. Edward Freeman, Patricia H Werhane,, Gretchen A. Kalsow, Jenny Mead suggests that, Fingerhut Fingerhut's is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
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 -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fingerhut Fingerhut's 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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Fingerhut Fingerhut's 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.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fingerhut Fingerhut's 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 Fingerhut Fingerhut's to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Fingerhut Fingerhut's 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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fingerhut Fingerhut's 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, Fingerhut's Price Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 -
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. Fingerhut Fingerhut's needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Fingerhut Fingerhut's 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.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Fingerhut Fingerhut's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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 .
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.
Environmental challenges
– Fingerhut Fingerhut's 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. Fingerhut Fingerhut's can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
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.
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.
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.
