Case Study Description of Overstock.com and Worldstock
In mid-2006, Overstock.com faced a daunting set of business challenges. Founded in 1999 as an online "closeout" retailer, the $800 million company had more than 15 million unique visitors a month, 10 million life-to-date customers, and greater than 500,000 active SKUs in roughly 20 product categories. However, while it had come within one half of a percent, the firm had yet to realize an annual profit. Moreover, the tremendous growth that had enabled the company to become on online shopping giant appeared to be slowing at an alarming rate. At least partly as a result of the challenges facing the core business, Worldstocki??the company's socially responsible initiativei??was also in jeopardy. Started by CEO Patrick Byrne in 2001, the division leveraged the firm's infrastructure to market handicrafts produced by third world artisans to the mainstream U.S. retail market via a designated portal on the Overstock.com website. However, working with third world artisans turned out to be significantly more expensive than originally anticipated. By mid-2006, Worldstock's "self-sustaining" model for economic development was projected to contribute nearly $1 million to the company's losses that year. Although most managers were cautious about criticizing the CEO's "pet project," a few felt the company had to address (what they saw as) the negative the impact that Worldstock was having on Overstock's financial performance. As a result, all those committed to the Worldstock model, from CEO Byrne to Division Manager Angela Ramirez, faced the thorny questions about how to balance these new fiscal imperatives with the group's philanthropic and social objectives. While no one wanted to openly acknowledge it, some stakeholders wondered if Worldstock might eventually be shut down or spun off if the situation did not improve.
Swot Analysis of "Overstock.com and Worldstock" written by James A. Phills, Lyn Denend includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Worldstock Overstock.com facing as an external strategic factors. Some of the topics covered in Overstock.com and Worldstock case study are - Strategic Management Strategies, Innovation, Internet, Social enterprise, Strategic planning and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Overstock.com and Worldstock casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, increasing government debt because of Covid-19 spendings, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, increasing transportation and logistics costs,
there is backlash against globalization, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Overstock.com and Worldstock
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Overstock.com and Worldstock case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Worldstock Overstock.com, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Worldstock Overstock.com 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 Overstock.com and Worldstock can be done for the following purposes –
1. Strategic planning using facts provided in Overstock.com and Worldstock case study
2. Improving business portfolio management of Worldstock Overstock.com
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Worldstock Overstock.com
Strengths Overstock.com and Worldstock | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Worldstock Overstock.com in Overstock.com and Worldstock Harvard Business Review case study are -
Sustainable margins compare to other players in Leadership & Managing People industry
– Overstock.com and Worldstock firm has clearly differentiated products in the market place. This has enabled Worldstock Overstock.com to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Worldstock Overstock.com to invest into research and development (R&D) and innovation.
Analytics focus
– Worldstock Overstock.com 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 James A. Phills, Lyn Denend 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.
Training and development
– Worldstock Overstock.com has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Overstock.com and Worldstock 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.
Highly skilled collaborators
– Worldstock Overstock.com 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 Overstock.com and Worldstock HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Worldstock Overstock.com is present in almost all the verticals within the industry. This has provided firm in Overstock.com and Worldstock 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.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Worldstock Overstock.com digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Worldstock Overstock.com 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 switching costs
– The high switching costs that Worldstock Overstock.com 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.
Organizational Resilience of Worldstock Overstock.com
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Worldstock Overstock.com does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Overstock.com and Worldstock Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to recruit top talent
– Worldstock Overstock.com is one of the leading recruiters in the industry. Managers in the Overstock.com and Worldstock are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Worldstock Overstock.com has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Worldstock Overstock.com to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Worldstock Overstock.com 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 Worldstock Overstock.com is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Overstock.com and Worldstock Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Overstock.com and Worldstock | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Overstock.com and Worldstock are -
High operating costs
– Compare to the competitors, firm in the HBR case study Overstock.com and Worldstock 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 Worldstock Overstock.com 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Worldstock Overstock.com 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.
No frontier risks strategy
– After analyzing the HBR case study Overstock.com and Worldstock, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Overstock.com and Worldstock, it seems that the employees of Worldstock Overstock.com 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.
Lack of clear differentiation of Worldstock Overstock.com products
– To increase the profitability and margins on the products, Worldstock Overstock.com needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Overstock.com and Worldstock, is just above the industry average. Worldstock Overstock.com 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.
Interest costs
– Compare to the competition, Worldstock Overstock.com 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 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 Worldstock Overstock.com supply chain. Even after few cautionary changes mentioned in the HBR case study - Overstock.com and Worldstock, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Worldstock Overstock.com vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Worldstock Overstock.com 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.
High bargaining power of channel partners
– Because of the regulatory requirements, James A. Phills, Lyn Denend suggests that, Worldstock Overstock.com 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.
High cash cycle compare to competitors
Worldstock Overstock.com 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.
Opportunities Overstock.com and Worldstock | 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 Overstock.com and Worldstock are -
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. Worldstock Overstock.com 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 Worldstock Overstock.com to increase its market reach. Worldstock Overstock.com 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.
Loyalty marketing
– Worldstock Overstock.com 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.
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 Worldstock Overstock.com in the consumer business. Now Worldstock Overstock.com can target international markets with far fewer capital restrictions requirements than the existing system.
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 Worldstock Overstock.com 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Worldstock Overstock.com in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Developing new processes and practices
– Worldstock Overstock.com can develop new processes and procedures in Leadership & Managing People 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Worldstock Overstock.com is facing challenges because of the dominance of functional experts in the organization. Overstock.com and Worldstock 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Worldstock Overstock.com 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, Overstock.com and Worldstock, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Worldstock Overstock.com has opened avenues for new revenue streams for the organization in the industry. This can help Worldstock Overstock.com to build a more holistic ecosystem as suggested in the Overstock.com and Worldstock case study. Worldstock Overstock.com can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Worldstock Overstock.com 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Worldstock Overstock.com 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. Worldstock Overstock.com 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.
Building a culture of innovation
– managers at Worldstock Overstock.com 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 Leadership & Managing People segment.
Threats Overstock.com and Worldstock External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Overstock.com and Worldstock are -
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 Worldstock Overstock.com business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Worldstock Overstock.com 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. Worldstock Overstock.com can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Worldstock Overstock.com 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 Overstock.com and Worldstock .
Regulatory challenges
– Worldstock Overstock.com 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 Leadership & Managing People industry regulations.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Worldstock Overstock.com can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Worldstock Overstock.com.
Technology acceleration in Forth Industrial Revolution
– Worldstock Overstock.com has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Worldstock Overstock.com needs to keep up with the evolution of technology in the Leadership & Managing People 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Worldstock Overstock.com with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Worldstock Overstock.com in the Leadership & Managing People sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Worldstock Overstock.com 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.
Shortening product life cycle
– it is one of the major threat that Worldstock Overstock.com is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Worldstock Overstock.com 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.
Weighted SWOT Analysis of Overstock.com and Worldstock 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 Overstock.com and Worldstock 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 Overstock.com and Worldstock 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 Overstock.com and Worldstock 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 Overstock.com and Worldstock 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 Worldstock Overstock.com needs to make to build a sustainable competitive advantage.