Harvard Case - Loris
"Loris" Harvard business case study is written by Shunyuan Zhang, Das Narayandas, Stacy Straaberg, David Lane. It deals with the challenges in the field of Strategy. The case study is 19 page(s) long and it was first published on : Oct 3, 2023
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At Fern Fort University, we recommend Loris pursue a strategic expansion into new markets, focusing on product development and digital transformation to achieve sustainable growth. This strategy will leverage Loris's core competencies in product design and manufacturing while capitalizing on the potential of emerging markets and e-commerce.
2. Background
Loris is a family-owned Italian company specializing in the production of high-quality, handcrafted leather goods. The company faces challenges in maintaining profitability due to increasing competition and rising production costs. Loris is considering various options for growth, including expanding into new markets, developing new products, and investing in technology.
The main protagonists of the case study are:
- Marco Loris: The CEO of Loris, who is passionate about the company's heritage and committed to its success.
- Elena Loris: Marco's daughter, who represents the next generation of leadership and brings fresh perspectives on innovation and digitalization.
- The Loris family: The owners of the company, who are divided on the best path forward for Loris.
3. Analysis of the Case Study
To analyze Loris's situation, we will utilize a combination of frameworks:
1. SWOT Analysis:
- Strengths:
- Strong brand reputation for quality and craftsmanship.
- Experienced workforce with specialized skills.
- Strong family values and commitment to tradition.
- Weaknesses:
- Limited financial resources for significant investments.
- Dependence on traditional manufacturing processes.
- Lack of digital marketing expertise.
- Opportunities:
- Growing demand for luxury goods in emerging markets.
- Increasing popularity of online shopping and e-commerce.
- Potential for product diversification and innovation.
- Threats:
- Intense competition from mass-produced leather goods.
- Fluctuations in raw material prices.
- Economic instability in key markets.
2. Porter's Five Forces:
- Threat of new entrants: Moderate, due to high barriers to entry related to manufacturing expertise and brand building.
- Bargaining power of buyers: Moderate, as consumers have a wide range of choices but value quality and craftsmanship.
- Bargaining power of suppliers: Moderate, as Loris relies on specific raw materials but can source from multiple suppliers.
- Threat of substitutes: High, as consumers can opt for synthetic materials or other luxury goods.
- Rivalry among existing competitors: High, due to the presence of both established brands and emerging players.
3. Value Chain Analysis:
Loris's value chain is centered around its core competencies in product design and manufacturing. The company's value proposition lies in offering high-quality, handcrafted leather goods with a unique Italian heritage. However, Loris needs to improve its marketing and distribution channels to reach a wider customer base.
4. Business Model Innovation:
Loris can explore business model innovation by:
- Developing a direct-to-consumer e-commerce platform: This will allow Loris to bypass traditional retailers and reach a global audience.
- Offering personalized customization options: This will enhance the value proposition and cater to individual customer preferences.
- Exploring subscription models: This can create recurring revenue streams and build customer loyalty.
5. Strategic Planning:
Loris needs to develop a clear strategic plan that outlines its vision, mission, and objectives. This plan should include:
- Market segmentation: Identifying target customer segments and their needs.
- Product development: Creating new product lines that cater to evolving consumer preferences.
- Digital transformation: Investing in technology to enhance efficiency, customer experience, and marketing reach.
6. Core Competencies:
Loris's core competencies lie in its product design and manufacturing. The company should leverage these strengths by:
- Protecting its intellectual property: Ensuring the uniqueness and authenticity of its products.
- Investing in research and development: Continuously innovating and improving its product offerings.
- Building a strong brand identity: Communicating its heritage, craftsmanship, and values to customers.
7. Diversification:
Loris can diversify its product portfolio by:
- Expanding into new product categories: Offering accessories, footwear, or home goods made from leather.
- Developing collaborations with other brands: Creating limited-edition collections or co-branded products.
- Exploring new materials: Experimenting with sustainable and innovative materials while maintaining quality standards.
8. Globalization Strategies:
Loris can pursue globalization strategies by:
- Entering new markets: Targeting emerging markets with high growth potential for luxury goods.
- Establishing partnerships with local distributors: Building relationships with trusted partners in new markets.
- Adapting products and marketing to local preferences: Understanding cultural nuances and tailoring offerings accordingly.
9. Competitive Advantage:
Loris can achieve a sustainable competitive advantage by:
- Focusing on product differentiation: Offering unique and high-quality products that stand out from competitors.
- Building a strong brand image: Communicating its heritage, craftsmanship, and values to customers.
- Leveraging technology: Enhancing efficiency, customer experience, and marketing reach.
10. Strategic Leadership:
Marco Loris needs to demonstrate strategic leadership by:
- Embracing innovation: Encouraging experimentation and embracing new technologies.
- Building a strong team: Attracting and retaining talented individuals with diverse skills.
- Communicating the vision: Clearly articulating the company's goals and inspiring employees to achieve them.
4. Recommendations
1. Develop a Digital Transformation Strategy:
- Invest in e-commerce platform: Create a user-friendly online store with secure payment options and international shipping.
- Enhance digital marketing efforts: Utilize social media, search engine optimization, and targeted advertising to reach a wider audience.
- Implement customer relationship management (CRM) system: Capture customer data to personalize marketing campaigns and improve customer service.
2. Expand into Emerging Markets:
- Conduct thorough market research: Identify emerging markets with high growth potential for luxury goods.
- Develop partnerships with local distributors: Establish relationships with trusted partners who understand the local market.
- Adapt products and marketing to local preferences: Consider cultural sensitivities and adjust offerings accordingly.
3. Invest in Product Development:
- Explore new product categories: Expand into accessories, footwear, or home goods made from leather.
- Develop collaborations with other brands: Create limited-edition collections or co-branded products.
- Experiment with sustainable and innovative materials: Maintain quality standards while embracing environmentally friendly practices.
4. Strengthen Brand Management:
- Develop a consistent brand identity: Communicate Loris's heritage, craftsmanship, and values across all channels.
- Protect intellectual property: Ensure the uniqueness and authenticity of Loris's products.
- Build a strong online presence: Create engaging content and foster a community around the Loris brand.
5. Enhance Operational Efficiency:
- Optimize manufacturing processes: Implement lean manufacturing techniques to improve efficiency and reduce costs.
- Invest in technology: Utilize automation and robotics to enhance productivity and quality control.
- Explore outsourcing options: Outsource non-core activities to focus on core competencies.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations leverage Loris's core competencies in product design and manufacturing while aligning with its mission to create high-quality, handcrafted leather goods.
- External customers and internal clients: The recommendations address the needs of external customers by offering a wider range of products, improved online experience, and personalized services. They also consider the needs of internal clients by enhancing operational efficiency and providing opportunities for growth.
- Competitors: The recommendations aim to differentiate Loris from competitors by focusing on product differentiation, brand building, and digital transformation.
- Attractiveness: The recommendations are expected to increase revenue and profitability by expanding into new markets, developing new products, and improving operational efficiency.
6. Conclusion
Loris has a strong foundation built on quality, craftsmanship, and heritage. By embracing digital transformation, expanding into new markets, and investing in product development, Loris can achieve sustainable growth and secure its future.
7. Discussion
Alternatives:
- Maintain the status quo: This would likely lead to declining profitability as Loris struggles to compete in a changing market.
- Focus solely on cost leadership: This would require significant changes to Loris's business model and could compromise its brand image.
- Merge with a larger competitor: This could provide access to resources and markets but could also lead to loss of control and brand identity.
Risks and Key Assumptions:
- Economic instability: Global economic uncertainty could impact consumer spending on luxury goods.
- Competition: The emergence of new competitors or the growth of existing competitors could erode Loris's market share.
- Technology disruption: Rapid technological advancements could render Loris's investments obsolete or create new challenges.
Options Grid:
| Option | Pros | Cons |
|---|---|---|
| Digital Transformation | Increased reach, improved customer experience, enhanced efficiency | Significant investment, risk of technological obsolescence |
| Market Expansion | Access to new markets, growth potential | Cultural challenges, competition from local players |
| Product Development | Differentiation, increased revenue streams | Risk of cannibalization, potential for failure |
8. Next Steps
- Develop a detailed strategic plan: Outline specific objectives, timelines, and resource allocation for each recommendation.
- Create a digital transformation roadmap: Define the steps and investments required to implement the digital strategy.
- Conduct market research and due diligence: Identify target markets, potential partners, and competitive landscape.
- Secure funding: Explore financing options to support the expansion and innovation initiatives.
- Build a strong leadership team: Recruit and develop talent with expertise in digital marketing, international business, and product development.
By taking these steps, Loris can position itself for success in the evolving luxury goods market and ensure its legacy for generations to come.
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Case Description
In December 2022, Loris's executive team considered their go-to-market strategy. Loris was an artificial intelligence (AI) software startup for the customer service industry with two products on the market: 1) Agent Assist which provided customer service agents (CSAs) with empathetic, on-brand responses to text-based live chat (live chat) conversations, and 2) Insights which provided customer experience (CX) leaders with CSA performance and customer satisfaction (CSAT) data. Loris was also developing a third product: Automated Quality Assurance (AQA) which analyzed quality assurance in customers' email and live chat conversations. The Loris team faced challenges to growth with prospective clients cutting costs through laying off their CX leaders and automating customer conversations through chatbots including the recently-released ChatGPT generative AI chatbot. To increase marketplace traction in preparation for raising a Series B round, the Loris team was reevaluating two aspects of its go-to-market strategy. First was sales approach: Loris previously used a sales-led growth model with robust marketing and sales teams, but had begun experimenting with product-led growth (PLG) which focused on developing exceptional products so that word of mouth would drive quick and exponential sales. Loris's PLG efforts had little success, though, and the team wondered if they should continue with PLG, revert to sales-led growth, or pursue pay-for-performance where clients only paid for Loris products upon Loris's achieving agreed-upon revenue or cost savings. Second, was product strategy: Loris had been offering Agent Assist and Insights as a bundled suite, but was considering using one of those products or AQA as a foot-in-the-door approach to cross-sell and upsell other products. Which sales and product strategy would help Loris grow, especially given the threat from ChatGPT which both raised awareness of AI tools like Loris and served as competition to Loris?
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