Rocket Internet (RKET) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Catalog & Mail Order)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Rocket Internet (Germany)
Based on various researches at Oak Spring University , Rocket Internet is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, technology disruption, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation,
there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Rocket Internet can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rocket Internet, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rocket Internet 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 Rocket Internet can be done for the following purposes –
1. Strategic planning of Rocket Internet
2. Improving business portfolio management of Rocket Internet
3. Assessing feasibility of the new initiative in Germany
4. Making a Retail (Catalog & Mail Order) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Rocket Internet
Strengths of Rocket Internet | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rocket Internet are -
Analytics focus
– Rocket Internet 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 Retail (Catalog & Mail Order) industry. The technology infrastructure of Germany is also helping 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
– Rocket Internet has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Highly skilled collaborators
– Rocket Internet has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Catalog & Mail Order) industry. Secondly the value chain collaborators of Rocket Internet have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Retail (Catalog & Mail Order) industry
– Rocket Internet has clearly differentiated products in the market place. This has enabled Rocket Internet to fetch slight price premium compare to the competitors in the Retail (Catalog & Mail Order) industry. The sustainable margins have also helped Rocket Internet to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Rocket Internet has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Rocket Internet 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.
Diverse revenue streams
– Rocket Internet is present in almost all the verticals within the Retail (Catalog & Mail Order) industry. This has provided Rocket Internet 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.
Organizational Resilience of Rocket Internet
– The covid-19 pandemic has put organizational resilience at the centre of everthing Rocket Internet does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Retail (Catalog & Mail Order) industry
- digital transformation varies from industry to industry. For Rocket Internet digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rocket Internet 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.
Operational resilience
– The operational resilience strategy of Rocket Internet comprises – understanding the underlying the factors in the Retail (Catalog & Mail Order) 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.
High brand equity
– Rocket Internet has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Rocket Internet to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Rocket Internet 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 Rocket Internet is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Rocket Internet emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Rocket Internet has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Rocket Internet staying ahead in the Retail (Catalog & Mail Order) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of Rocket Internet | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rocket Internet are -
Aligning sales with marketing
– From the outside it seems that Rocket Internet needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Catalog & Mail Order) industry have deep experience in developing customer relationships. Marketing department at Rocket Internet can leverage the sales team experience to cultivate customer relationships as Rocket Internet is planning to shift buying processes online.
High dependence on Rocket Internet ‘s star products
– The top 2 products and services of Rocket Internet still accounts for major business revenue. This dependence on star products in Retail (Catalog & Mail Order) industry has resulted into insufficient focus on developing new products, even though Rocket Internet has relatively successful track record of launching new products.
Lack of clear differentiation of Rocket Internet products
– To increase the profitability and margins on the products, Rocket Internet needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative at Rocket Internet, in the dynamic environment of Retail (Catalog & Mail Order) industry it has struggled to respond to the nimble upstart competition. Rocket Internet has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee of Rocket Internet is just above the Retail (Catalog & Mail Order) industry average. It 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.
Slow to strategic competitive environment developments
– As Rocket Internet is one of the leading players in the Retail (Catalog & Mail Order) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Catalog & Mail Order) industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Rocket Internet has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Catalog & Mail Order) industry over the last five years. Rocket Internet 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.
Interest costs
– Compare to the competition, Rocket Internet 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 Rocket Internet supply chain. Even after few cautionary changes, Rocket Internet is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Rocket Internet vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, Rocket Internet has high operating costs in the Retail (Catalog & Mail Order) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Rocket Internet lucrative customers.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Rocket Internet is slow explore the new channels of communication. These new channels of communication can help Rocket Internet to provide better information regarding Retail (Catalog & Mail Order) products and services. It can also build an online community to further reach out to potential customers.
Rocket Internet Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Rocket Internet are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Rocket Internet 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.
Leveraging digital technologies
– Rocket Internet 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Rocket Internet 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 Rocket Internet 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 Rocket Internet has opened avenues for new revenue streams for the organization in Retail (Catalog & Mail Order) industry. This can help Rocket Internet to build a more holistic ecosystem for Rocket Internet products in the Retail (Catalog & Mail Order) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Rocket Internet 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 Rocket Internet to hire the very best people irrespective of their geographical location.
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. Rocket Internet can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Rocket Internet has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Catalog & Mail Order) sector. This continuous investment in analytics has enabled Rocket Internet to build a competitive advantage using analytics. The analytics driven competitive advantage can help Rocket Internet to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Rocket Internet 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 Retail (Catalog & Mail Order) industry.
Buying journey improvements
– Rocket Internet can improve the customer journey of consumers in the Retail (Catalog & Mail Order) industry by using analytics and artificial intelligence. It 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.
Manufacturing automation
– Rocket Internet can use the latest technology developments to improve its manufacturing and designing process in Retail (Catalog & Mail Order) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Learning at scale
– Online learning technologies has now opened space for Rocket Internet 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.
Developing new processes and practices
– Rocket Internet can develop new processes and procedures in Retail (Catalog & Mail Order) 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 in Retail (Catalog & Mail Order) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Rocket Internet in the Retail (Catalog & Mail Order) industry. Now Rocket Internet can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Rocket Internet External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Rocket Internet 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 Rocket Internet in the Retail (Catalog & Mail Order) sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Rocket Internet may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Catalog & Mail Order) 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. Rocket Internet 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Rocket Internet 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 Rocket Internet prominent markets.
Easy access to finance
– Easy access to finance in Retail (Catalog & Mail Order) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Rocket Internet can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Rocket Internet 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.
Technology acceleration in Forth Industrial Revolution
– Rocket Internet has witnessed rapid integration of technology during Covid-19 in the Retail (Catalog & Mail Order) industry. As one of the leading players in the industry, Rocket Internet needs to keep up with the evolution of technology in the Retail (Catalog & Mail Order) 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.
Regulatory challenges
– Rocket Internet 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 Retail (Catalog & Mail Order) industry regulations.
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. Rocket Internet needs to understand the core reasons impacting the Retail (Catalog & Mail Order) industry. This will help it in building a better workplace.
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 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Catalog & Mail Order) industry are lowering. It can presents Rocket Internet with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Catalog & Mail Order) sector.
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 Rocket Internet business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Rocket Internet Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Rocket Internet 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 Rocket Internet 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 Rocket Internet 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 Rocket Internet 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 Rocket Internet needs to make to build a sustainable competitive advantage.