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 - – technology disruption, increasing commodity prices, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels,
challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, 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.
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.
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.
Highly skilled collaborators
– Fingerhut Fingerhut's 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 Fingerhut's Price Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
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.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Fingerhut's Price Strategy firm has clearly differentiated products in the market place. This has enabled Fingerhut Fingerhut's to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Fingerhut Fingerhut's to invest into research and development (R&D) 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.
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.
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 -
Interest costs
– Compare to the competition, Fingerhut Fingerhut's 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.
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.
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.
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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Fingerhut Fingerhut's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Fingerhut's Price Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Fingerhut Fingerhut's 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 - Fingerhut's Price Strategy should strive to include more intangible value offerings along with its core products and services.
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 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.
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 -
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.
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.
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.
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.
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.
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.
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 Fingerhut Fingerhut's in the consumer business. Now Fingerhut Fingerhut's can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Fingerhut Fingerhut's to increase its market reach. Fingerhut Fingerhut's 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.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
Regulatory challenges
– Fingerhut Fingerhut's 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fingerhut Fingerhut's in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.
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.
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.
