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, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%,
banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, 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 -
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
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 -
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 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 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Fingerhut's Price Strategy 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 Fingerhut Fingerhut's has relatively successful track record of launching new products.
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.
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.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Fingerhut Fingerhut's 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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Fingerhut Fingerhut's can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Fingerhut Fingerhut's can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
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 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.
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.
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.
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.
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.
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.
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.
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 .
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.
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.
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.
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.
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.