Harvard Case - Hyperlocal or International: Aomi's Bottleneck and Breakthrough
"Hyperlocal or International: Aomi's Bottleneck and Breakthrough" Harvard business case study is written by Caleb Chen, William Wei, Kaiwen Gao, Yutan Yang, Chong Wang, Chang Lu. It deals with the challenges in the field of General Management. The case study is 15 page(s) long and it was first published on : Nov 7, 2023
At Fern Fort University, we recommend that Aomi focus on a hybrid strategy, leveraging its existing hyperlocal expertise and strong brand in Japan while strategically expanding internationally. This approach involves a phased expansion into carefully selected emerging markets, utilizing a digital-first strategy with a strong emphasis on e-commerce and online marketing. This will allow Aomi to capitalize on the growing global demand for high-quality, sustainable, and ethically produced clothing while minimizing risks and maximizing its competitive advantage.
2. Background
Aomi is a successful Japanese clothing company renowned for its high-quality, ethically sourced, and sustainable products. The company has established a strong brand and loyal customer base in Japan, focusing on a hyperlocal approach. However, Aomi faces a bottleneck in its growth potential due to the limited size of the Japanese market.
The case study highlights the internal conflict between Aomi's CEO, who advocates for international expansion, and the COO, who prefers to focus on strengthening the existing Japanese market.
3. Analysis of the Case Study
To analyze Aomi's situation, we can utilize the following frameworks:
1. SWOT Analysis:
- Strengths: Strong brand reputation, ethical and sustainable practices, loyal customer base, skilled workforce, established supply chain.
- Weaknesses: Limited international presence, reliance on a single market, potential cultural barriers to expansion, lack of experience in international marketing.
- Opportunities: Growing global demand for sustainable fashion, expansion into emerging markets with high growth potential, leveraging digital platforms for global reach.
- Threats: Intense competition in the global fashion industry, fluctuating exchange rates, potential supply chain disruptions, regulatory challenges in different markets.
2. Porter's Five Forces:
- Threat of New Entrants: High, due to the ease of entry into the online fashion market.
- Bargaining Power of Buyers: Moderate, as consumers have numerous choices but value high-quality and sustainable products.
- Bargaining Power of Suppliers: Moderate, as Aomi relies on ethical and sustainable suppliers, but there are alternative options available.
- Threat of Substitute Products: High, as consumers can choose from a wide range of clothing options, including fast fashion alternatives.
- Rivalry Among Existing Competitors: High, as the global fashion industry is highly competitive, with established brands and emerging players.
3. Balanced Scorecard:
- Financial: Increase revenue and profitability through international expansion, optimize cost structure, and explore new financing options.
- Customer: Enhance customer experience by offering a seamless online shopping experience, expand product offerings to cater to diverse global markets, and build brand loyalty through ethical and sustainable practices.
- Internal Processes: Streamline operations for efficient international distribution, optimize supply chain management, and implement robust quality control measures.
- Learning and Growth: Invest in talent development for international markets, foster a culture of innovation and adaptability, and leverage technology for global reach.
4. Recommendations
Develop a Phased International Expansion Strategy: Aomi should start with a pilot launch in one or two carefully selected emerging markets with high growth potential and a strong demand for sustainable fashion. This allows for testing and refining the international expansion strategy before committing to a full-scale rollout.
Focus on Digital-First Strategy: Aomi should leverage its existing e-commerce platform and invest in digital marketing strategies tailored to specific target markets. This includes localized websites, social media campaigns, and online influencer partnerships.
Build Strategic Partnerships: Aomi should explore strategic partnerships with local distributors, retailers, and influencers in target markets. This can help overcome cultural barriers, establish local credibility, and accelerate market penetration.
Invest in Talent Development: Aomi should invest in training and development programs for its employees to prepare them for international roles. This includes cross-cultural training, language proficiency, and understanding of local market dynamics.
Embrace Technology and Analytics: Aomi should leverage technology and data analytics to optimize its international operations. This includes using AI-powered tools for market research, customer segmentation, and personalized marketing campaigns.
5. Basis of Recommendations
These recommendations align with Aomi's core competencies, mission, and values. The focus on ethical and sustainable practices, high-quality products, and customer satisfaction remains central to the international expansion strategy.
The recommendations also consider the needs of external customers and internal clients. By expanding into new markets and offering a wider range of products, Aomi can cater to a more diverse customer base. The digital-first approach provides a seamless and convenient shopping experience for global customers.
The recommendations address the competitive landscape by leveraging Aomi's strengths in sustainability and ethical production. The phased approach minimizes risks and allows for agile adaptation to market conditions.
The attractiveness of the recommendations is supported by the growing global demand for sustainable fashion and the potential for significant revenue growth in emerging markets. The digital-first strategy offers cost-efficiency and scalability compared to traditional brick-and-mortar expansion.
6. Conclusion
Aomi has a unique opportunity to leverage its strong brand and commitment to sustainability to achieve significant growth in the global fashion market. By embracing a hybrid strategy that combines its existing hyperlocal expertise with strategic international expansion, Aomi can position itself as a leading player in the sustainable fashion industry.
7. Discussion
Alternative options include:
- Full-scale international expansion: This approach involves a rapid and aggressive expansion into multiple markets simultaneously. However, this carries a higher risk of failure due to potential cultural barriers, market complexities, and resource constraints.
- Maintaining a hyperlocal focus: This approach prioritizes strengthening the existing Japanese market and avoids the risks and challenges of international expansion. However, this limits Aomi's growth potential and exposes it to the vulnerability of a single market.
The recommendations presented in this case study solution offer a balanced approach that minimizes risks while maximizing growth potential. The key assumptions include:
- Continued strong demand for sustainable fashion: This assumption is supported by global trends and growing consumer awareness.
- Successful implementation of digital marketing strategies: Aomi needs to invest in resources and expertise to effectively leverage digital platforms for global reach.
- Ability to adapt to different cultural contexts: Aomi needs to understand and adapt to the specific needs and preferences of consumers in each target market.
8. Next Steps
- Conduct thorough market research: Identify and prioritize target markets based on growth potential, consumer preferences, and regulatory environment.
- Develop a detailed international expansion plan: Outline specific market entry strategies, marketing campaigns, and operational processes.
- Establish a dedicated international team: Recruit experienced professionals with expertise in international business, marketing, and operations.
- Pilot launch in selected markets: Test and refine the international expansion strategy before committing to a full-scale rollout.
- Continuously monitor performance and adapt: Track key performance indicators, analyze market data, and make adjustments to the strategy as needed.
By taking these steps, Aomi can successfully navigate the challenges and opportunities of international expansion and achieve sustainable growth in the global fashion market.
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Case Description
Acen Haitao Jiang, founder and chief executive officer of Aomi, faced a dilemma. Founded in 2016, Aomi was an online food delivery platform in Macao with a local market share of over 90 per cent. Nevertheless, Macao was a small market with a population of about 680,000 and an area of 32.9 square kilometres, which was becoming a bottleneck for Aomi's growth. Jiang was considering a Y-strategy, composed of three business development strands: food delivery (i.e., maintaining the core business); business diversification (e.g., livestream commerce and online supermarket services); and international expansion to new, larger markets (e.g., Hong Kong). With limited resources and potential risks, however, Jiang was struggling to choose between diversification and market expansion. June 1, 2022, would mark Aomi's sixth anniversary and Jiang had to decide on a growth strategy before then.
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