Blue ocean strategy • Successful companies build their competitive advantage by redefining their product offering through value innovation • Creating a new market space • Blue ocean - Wide open market space where a company can chart its own course 4 Blue ocean strategy • To redefine its market and create a new business-level strategy, a company must: • • • • Eliminate factors that rivals take for granted, and reduce costs Reduce certain factors below industry standards, and lower costs Raise certain factors above industry standards, and increase value Create factors that rivals do not offer, and increase value 5 delta 7 8 • Show • https://www.cirquedusoleil.com/beatles-love three characteristics of a good strategy • focus • divergence • compelling tagline • “the speed of a plane at the price of a car – whenever you need it.” Chapter 3: Six paths to reconstruct market boundaries path 1. look across alternative industries • Alternatives include products or services that have different functions and forms but the same purpose. • Find a blue ocean – a new market space – by offerings that are different from – and more appealing than - alternative industries. Uber • Rent a car • Hire a taxi • Public transportation path 2: look across strategic groups within industries • a strategic group - a group of companies within an industry that pursue a similar strategy; • find a blue ocean – a market space – between various strategic groups. path 3: look across the chain of buyers • chain of buyers – parties who are involved in the buying decision • Purchasers • college of business IT • Users • Influencers • doctors and professors Youtube chain of buyers • viewers • content providers • purchasers path 4: look across complementary products and service offerings • value innovation in complementary products and services • Reduce cost and create new values • Think about what happens before, during, and after products are used. path 5: look across functional or emotional appeal to buyers • Functional or rational appeal • Focus on prices and functions; utility • Emotional appeal • Resort to feelings Jobs on apple computers • ..\..\..\Video_Materials\Steve_Jobs\Apple Confidential Steve Jobs on 'Think Different' Internal Meeting Sept 23, 1997.mp4 path 6: look across time • seize the external trends that affect their businesses over time. Market segmentation • Decision of a company to group customers based on important differences in their needs to gain a competitive advantage. • Standardization strategy - Producing a standardized product for the average customer, ignoring different segments. • Segmentation strategy - Producing different offerings for different segments, serving many segments or the entire market. • Focus strategy - Serving a limited number of segments or just one segment. 52 Comparison of Market segmentation approaches Standardization strategy • Associated with lower costs than a segmented strategy • Attempts to attain economies of scale through high sales volume Segmentation strategy Focus strategy • Involves customization of product offerings, which drive up costs as: • achieving economies of scale is difficult. • production and delivery costs tend to be high. • Have a higher cost structure as: • new product features and functions need to be added. • attaining economies of scale is difficult. 53 Running head: SQUARE INC ANALYSIS 1 Square Inc Institution Affiliation Instructor’s Name Student’s Name Course Code Date SQUARE INC ANALYSIS 2 Internal Analysis- Square Inc. Squire Inc. Business model Square Inc. has continued to gain operations ground across the United States markets beating most of its competitors in the markets. In 2013, the company launched the Peer-to-peer (P2P) payment service called Cash App. The launch of this App was part of its growth in the technology industry as it allowed customers to use their smartphones to make payment, pay bills, transfer money to relatives or friends at the comfort of their homes or wherever they may be. Companies and individuals can download the app and install them freely on their iOS or Android devices (Marcus, 2013). Thus, once the credit card is linked to the App, users can begin to send or receive money for other users. When the company launched the Cash card in May 2017, the transfer of money facilitated users to transfer money directly as the Square cash moved money in and Out the users, Debit Card directly compared to its competitors who used to keep some money in a service providers account. Therefore, millions of users began using the app; it attracted many people to grow, embrace its services and encouraged the firm to diversify its operation in various methods. Besides, the company launched the Cash Card, which users could use to pay retailers using the money in their Cash App, where it operates as a Visa Card linked to the Cash App account (Moosberg, 2018). In Jan 2019, the company has launched Square Card free debit card for business, that opened doors for extensive service provision, trading, and operations in the industry hence customers trust the system due to the improved services. In the United States Square has quickly grown in the market-beating some of the competitors that have dominated the industry for years. PayPal Inc largely dominates the U.S SQUARE INC ANALYSIS 3 fintech industry. Facebook Inc., Apple Inc., and Amazon.com Inc., each of these companies have launched their P2P services in the last decade to attract as many customers as possible. Consequently, the firm has expanded its business model to include, business analytics, employee management and scheduling of payment process. In the last financial year, the company reported $431 million in revenue growth, which indicated an increase of 68% from the previous year. However, the company does not report separate earnings from its Cash App; therefore, it makes it difficult for the public to know how much the App generates. The Cash App has 33.5millin cumulative downloads surpassing Venmo in August 2018 (Moosberg, 2018). How does the firm Make Money Besides, many questions asked on how the company earns from its services since the transfer and reception of money are free. The Cash App is free to download, send, requests or receive money, but the App charges business or companies 2.5% transaction that use it to transact operations. At the same time, the app has some extended services that customers can opt to use at a small fee. Square makes money from Cash App by charging the businesses utilizing the App a specific amount. For individuals opting for expanded services, they are charged 1.5% transaction fee, so that the process expedites the deposits process to have the money transferred immediately into their bank accounts instead of waiting for established free process. The company charges 3% transaction fee for personal payments for Credits card. Internal Analysis The company has gained attraction in domestic operations due to the strategies that have been established by the management. For the last few years, it has been in operation; revenue generation has continued to grow. Square Inc. Strengths and weaknesses provide current issues SQUARE INC ANALYSIS 4 affecting the firm in the market. By continually reviewing its internal analysis the company has maintained a prominent position in the market. Strengths of Square Company The Company has numerous strengths that help it to thrive in the market place; the firm can protect its market share, relate with customers and grow its operations within the set standards. Some of the strengths areSuperb market Performance- the company has invested funds marketing its services; this has given the company an opportunity to expand is activities from money transfer, to employee management, business analytics, and engagement plans. Managers have created a platform that has allowed workers to develop and innovate new applications to enable the firm to continue venturing into the market and diversify its resources. Due to the efforts put by the company, it has been able to build a new revenue stream and has diversified potential economic cycle risks. Therefore, superb market performance allows the firm to integrate and engage customers to gather more information about the improvements that they would want the company to make to serve them better. Strong Dealer Community- the company has built a strong customer relationship and community empowerment programs by creating a culture where distributors and dealers are not only focused on product sales but on training customers on the best investment plans through community development programs. Salespeople are equipped with adequate resources to help customers on how to extract maximum benefits out of the products. Strong Brand Portfolio- if the company wants to launch new product categories, it can rely on its current brand portfolio due to the investments that have been put. The SWOT analysis SQUARE INC ANALYSIS 5 provides adequate information for one to understand that Square Inc. has invested in building a strong brand in the market. Therefore, this brand can create customer loyalty in the event the firm introduces a new App in the market. Consequently, the strategic plan focuses on expanding the firm to other foreign markets where there is technology advancement. Successful record of accomplishment of innovation- Square Inc. has created a reputation of launching products that have continued to serve the market where users have incurred less cost and are encouraged to grow their business operations. Cash App, Debit Card and Business Debits cards are some of the products the firm has launched, which have successfully improved market. Consequently, the business analytical programs have been used to strengthen and diversify resources and manage the industry in new dimensions to continue building and establishing the market strategies to meet the market demand. Strong distribution network- the company has built a reliable and robust distribution network that can reach its customers and target market more efficiently and conveniently. With more than 30 million downloads of Cash App, the firm is ranked number one in the fintech industry apps Downloads where every user is allowed to download and use freely. Transactions made and carried out within a short period to ensure that parties and individuals can continue gaining and raising the market standards. Integrating firms through merger and acquisition-The firm has targeted to build a reliable supply chain by acquiring multiple technology companies which have helped in streamlining its operations and managing the costs. Furthermore, the company has a reliable supplier’s base that ensures raw materials are delivered on time to avoid supply chain bottlenecks. SQUARE INC ANALYSIS 6 Good capital returns- the company is rated one of the best in the industry at launching new products and executing new projects that generate good returns on capital expenditure. These new revenue streams contribute to the firm’s continuous service delivery and market growth. Weaknesses of Square Inc Using SWOT analysis, a company can improve its shortcomings. Therefore, Square Inc. management has control over it and can make decisions towards adjustments where operations or issues are not working as expected. These are areas where a company can improve by making decision and strategies using its available strengths to make improvements. Some of the weaknesses in this company includeHigh daily inventories compared to competitors- the company has invested more capital in making new investments on regular inventories, which are more likely to influence the firm’s long-term strategies and goals. The fact that competition is growing, and demands for mobile money transfer is rising; it has become a significant issue of concern where companies fail to develop and invest in broad and new areas to meet the demand in the market. The large gap in produces sold by the company- the firm has failed to bridge the gap between its various services and product sold in the market. This clear strategy is risky as competitors can gain a foothold in the market. Failure to cover and streamline the market, it creates a vulnerable approach in the success and growth of the company (Edwards, 2015). Lost small market share- The firm has failed to tackle the threat on new entrants, this has led to some of its customers shifting to new companies to try their new products. The SQUARE INC ANALYSIS 7 management has entirely focused on the development of new products hence losing focuses on small competitors. The company has a high attrition rate compared to its competitors- the firm spends more resources in training and developing its employees increasing the overall expenditure of the company. Such strategies require the firm to employ qualified personnel who understand the basic concepts of the financial markets and the operations of the Fintech industry. According to the financial reports, the firm spent $7 million on internal training in the last quarter of 2018. Lastly, there is a limited success outside the core business- The firm has faced many challenges in moving its products to other segments due to its present culture. At the same time, the company needs more investment in the new technologies given the scale of expansion and different geographical operations in the target markets. Square Inc. needs to put more funds into adopting new and modernized technology to integrate and rise across the board. Blue Ocean Strategy- Competitor analysis Successful companies build their brand and product success by redefining their product and offering through valuation innovation strategy to gain a competitive advantage in the market. Square Inc. has established a reliable and robust approach that has benefited and improved company growth to satisfy and enhance the product and company growth. Blue Oceans provides a wide-open market where a company can chart its course. Therefore, it can redefine its strategy using this approach by first eliminating factors that are taken for granted by rivals in the market and reduce costs. PayPal Inc. one of the pioneers in the fintech industry has created a blueprint that has enabled the company to operate in the international market smoothly. The payment SQUARE INC ANALYSIS 8 strategies eliminated unnecessary trade barriers and the time taken to send and receive payments (Kim, 2014). Secondly, the firm reduces certain factors that are below the fintech industry standards; Blue Ocean Strategy allows the firm to have a comprehensive view of the market operations. The firm reduces costs and raises certain factors above the industry to gain value. Lastly, the strategy allows the firm to create elements not offered by rival companies and increase benefits in all of its products. Square Inc. market is very competitive due to evolving, changing market operations, and economic standards. Most of the competitors range from well-established vendors to small and new entrants. Each of these groups threatens the firm in the financial market because a slight mistake can cause the entire market share to collapse. Further, the firm competed with the traditional acquiring process and payment service providers in the point-of-sales services market (Kim, 2014). Many of the competitors’ offers payment services that are tailored to a particular organization or business which require sellers to use multiple software, hardware and payment s channels to gain access to the services. The company market share is to 68% as of 2018, indicating continued growth in the industry. In the United States, Square faces competition from PayPal, Intuit Go Payment, PhoneSwipe, Flint and GopaGo among others. Besides, in the international market, the company faces competition from iZettle from Sweden Chipcard readers, Payleven- Germany, and Ezetap in India. These companies have invested in blue ocean strategies, where strategy focuses on creating uncontested market space, make competition irrelevant by reducing the operation cost and gaining vast market share. In addition, they break the value-cost trade-off in the market. SQUARE INC ANALYSIS 9 The firm reconstructs the market boundaries by looking across alternative industries- that are products or services that have different functions and forms but the same purpose. Square Inc. employee’s management and business analytic programs targets to attract more companies into using the firm’s software and Apps. Again, the firm can find a blue ocean market space between various strategic groups. The strategic Canvas of Curves indicates price, amenities available services in the market that need changes and advancements. Conclusion Square Inc. operations have continually been increasing and expanding market share across the globe. The company has invested in training and development programs to see to it that its workers are fully equipped to meet market needs and requirements. Every segment provides useful resources and strategies on the available technology to raise the capital. Cash App, downloads have been superb making the company number in the market with 68% revenue growth as of 2018. Consequently, the firm has invested in employee management and business analytical services sector where companies get consultation services about market changes. However, the competition in the market has been stiff, since new entrants have threatened market share; again, the introduction of a new application, services and payment system has created a growing need for quick and improved services in the market. Therefore, some of the major competitors like, PayPal Inc. Ezetap, Intuit go Payment and PhoneSwipe continue to introduce new service by utilizing the blue ocean Strategy (Puschmann, 2017). SQUARE INC ANALYSIS 10 Reference Easterby-Smith, M., Araujo, L., & Burgoyne, J. (Eds.). (1999). Organizational learning and the learning organization: Developments in theory and practice. Sage. Edwards, T. J. (2015). U.S. Patent No. 9,105,026. Washington, DC: U.S. Patent and Trademark Office. Kim, W. C., & Mauborgne, R. (2014). Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press. Marcus, D. A., Ferguson, H., Metral, M. E., & Schulz, E. (2013). U.S. Patent No. 8,500,010. Washington, DC: U.S. Patent and Trademark Office. Moosberg, W. (2018). The Money is in the Email. All things D. Published Oct, 15. Puschmann, T. (2017). Fintech. Business & Information Systems Engineering, 59(1), 69-76. https://finance.yahoo.com/
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