Harvard Case - Rakuten
"Rakuten" Harvard business case study is written by F. Warren McFarlan, Andrew McAfee, Thomas R. Eisenmann. It deals with the challenges in the field of Strategy. The case study is 22 page(s) long and it was first published on : Oct 5, 2004
At Fern Fort University, we recommend Rakuten pursue a multi-pronged growth strategy focused on leveraging its existing strengths in e-commerce, technology, and data analytics to expand into new markets and verticals. This strategy will involve a combination of organic growth, strategic acquisitions, and strategic partnerships to achieve sustainable growth and establish a dominant position in the global digital marketplace.
2. Background
Rakuten, a Japanese e-commerce giant, has established itself as a leading player in the global online marketplace. The company's success is attributed to its unique business model, which combines e-commerce with loyalty programs, financial services, and a diverse portfolio of businesses. However, facing increasing competition and evolving consumer preferences, Rakuten needs to adapt and innovate to maintain its growth trajectory.
The case study focuses on Rakuten's decision to acquire Viber, a popular messaging app, as part of its strategy to expand into the mobile communication market. This acquisition highlights Rakuten's ambition to diversify its business portfolio and capitalize on the growing mobile internet market.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong brand recognition and customer loyalty: Rakuten has established a strong brand reputation and enjoys high customer loyalty, particularly in Japan.
- Robust e-commerce platform: Rakuten's platform offers a wide range of products and services, attracting a diverse customer base.
- Advanced technology and data analytics capabilities: Rakuten has invested heavily in technology and data analytics, enabling it to personalize customer experiences and optimize operations.
- Global reach and diverse business portfolio: Rakuten operates in multiple countries and has diversified its business portfolio beyond e-commerce.
Weaknesses:
- Dependence on Japan market: Rakuten's revenue is heavily concentrated in the Japanese market, making it vulnerable to economic fluctuations.
- Competition from established players: Rakuten faces intense competition from global giants like Amazon and Alibaba.
- Integration challenges: Acquiring and integrating new businesses can be complex and time-consuming.
Opportunities:
- Expanding into new markets: Rakuten can leverage its existing infrastructure and expertise to expand into emerging markets with high growth potential.
- Developing new products and services: Rakuten can explore new opportunities in areas like mobile payments, fintech, and digital content.
- Strategic partnerships: Collaborating with other companies can provide access to new markets, technologies, and customer segments.
Threats:
- Economic downturn: A global economic slowdown could negatively impact consumer spending and Rakuten's revenue.
- Regulatory changes: Changes in government regulations could impact Rakuten's business operations.
- Cybersecurity threats: Rakuten needs to invest in robust cybersecurity measures to protect its data and systems.
Porter's Five Forces:
- Threat of new entrants: The e-commerce industry is characterized by low barriers to entry, making it susceptible to new entrants.
- Bargaining power of buyers: Consumers have a wide range of choices and can easily switch between platforms, giving them significant bargaining power.
- Bargaining power of suppliers: Rakuten's suppliers have limited bargaining power due to the large number of suppliers in the market.
- Threat of substitute products: Consumers can choose from a variety of alternative products and services, including physical stores and other online marketplaces.
- Rivalry among existing competitors: The e-commerce industry is highly competitive, with numerous established players vying for market share.
Value Chain Analysis:
Rakuten's value chain consists of the following activities:
- Inbound logistics: Sourcing products from suppliers and managing inventory.
- Operations: Processing orders, packaging, and shipping products.
- Outbound logistics: Delivering products to customers.
- Marketing and sales: Promoting products and services and generating sales.
- Customer service: Providing support to customers.
- Technology development: Investing in technology and data analytics to improve operations and customer experience.
Business Model Innovation:
Rakuten has successfully innovated its business model by:
- Leveraging loyalty programs: Rakuten Super Points incentivize customer loyalty and drive repeat purchases.
- Expanding into financial services: Rakuten Bank and Rakuten Securities offer financial services to customers.
- Building a diverse portfolio: Rakuten has acquired businesses in various sectors, including mobile communications, travel, and entertainment.
Corporate Governance:
Rakuten has a strong corporate governance structure, with a focus on transparency, accountability, and ethical business practices. The company has a board of directors that oversees the company's operations and ensures compliance with legal and regulatory requirements.
4. Recommendations
1. Expand into New Markets:
- Focus on emerging markets: Target high-growth markets like Southeast Asia, Latin America, and Africa, where e-commerce penetration is increasing rapidly.
- Adapt to local preferences: Tailor products and services to meet the specific needs and preferences of each market.
- Leverage strategic partnerships: Partner with local businesses and companies to gain access to local expertise and customer networks.
2. Diversify Business Portfolio:
- Acquire strategic businesses: Identify companies operating in complementary sectors like fintech, logistics, and digital content.
- Develop new products and services: Invest in research and development to create innovative products and services that meet evolving consumer needs.
- Explore new business models: Experiment with subscription models, marketplace platforms, and other innovative business models.
3. Enhance Technology and Analytics:
- Invest in AI and machine learning: Utilize AI and machine learning to personalize customer experiences, optimize operations, and gain insights from data.
- Improve data security: Strengthen cybersecurity measures to protect customer data and maintain trust.
- Develop a robust IT infrastructure: Ensure a scalable and reliable IT infrastructure to support growth and expansion.
4. Strengthen Brand and Marketing:
- Develop a global brand strategy: Create a consistent brand message and identity across all markets.
- Invest in digital marketing: Utilize social media, search engine optimization, and other digital channels to reach target audiences.
- Partner with influencers: Collaborate with influencers and celebrities to promote products and services.
5. Foster a Culture of Innovation:
- Encourage experimentation: Create a culture that embraces experimentation and risk-taking.
- Empower employees: Give employees the freedom to explore new ideas and contribute to innovation.
- Invest in employee development: Provide training and development opportunities to enhance employee skills and knowledge.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with Rakuten's core competencies in e-commerce, technology, and data analytics, and support its mission to create a global marketplace that empowers businesses and consumers.
- External customers and internal clients: The recommendations address the needs of both external customers, who are seeking a wider range of products and services, and internal clients, who are looking for opportunities to grow and contribute to the company's success.
- Competitors: The recommendations consider the competitive landscape and aim to differentiate Rakuten from its competitors by offering unique products and services, expanding into new markets, and leveraging its technological capabilities.
- Attractiveness ' quantitative measures if applicable (e.g., NPV, ROI, break-even, payback): The recommendations are expected to generate positive returns on investment, but specific financial projections will need to be developed based on detailed market research and financial modeling.
- Assumptions: The recommendations are based on the assumption that the global e-commerce market will continue to grow, that Rakuten can successfully integrate acquired businesses, and that the company can adapt to changing consumer preferences and technological advancements.
6. Conclusion
Rakuten is well-positioned to achieve sustainable growth by leveraging its existing strengths and adapting to the evolving digital landscape. By pursuing a multi-pronged growth strategy, the company can expand into new markets, diversify its business portfolio, and enhance its technological capabilities. This will enable Rakuten to maintain its competitive advantage and establish a dominant position in the global digital marketplace.
7. Discussion
Alternatives not selected:
- Focusing solely on organic growth: This approach would be slower and less aggressive, potentially limiting Rakuten's ability to compete with larger players.
- Exiting non-core businesses: This could be a risky strategy, as it could alienate customers and reduce revenue.
- Merging with a competitor: This could be a complex and challenging process, with potential regulatory hurdles and integration difficulties.
Risks and key assumptions:
- Integration challenges: Acquiring and integrating new businesses can be complex and time-consuming.
- Competition: The e-commerce industry is highly competitive, and Rakuten needs to constantly innovate to stay ahead.
- Regulatory changes: Changes in government regulations could impact Rakuten's business operations.
- Economic downturn: A global economic slowdown could negatively impact consumer spending and Rakuten's revenue.
8. Next Steps
- Conduct thorough market research: Identify potential markets, target customer segments, and competitive landscape.
- Develop financial projections: Estimate the cost and potential return on investment for each growth initiative.
- Identify and evaluate acquisition targets: Analyze potential acquisition targets based on strategic fit, financial performance, and integration potential.
- Build strategic partnerships: Establish partnerships with key players in target markets and sectors.
- Invest in technology and talent: Develop a robust IT infrastructure and attract top talent to support growth and innovation.
- Monitor progress and adapt strategies: Regularly review progress and make adjustments to the growth strategy as needed.
By taking these steps, Rakuten can effectively implement its growth strategy and achieve its long-term objectives.
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Case Description
Rakuten, a native Japanese, e-commerce start-up and highly successful company, is expanding into new categories and new countries. It must figure out how to continue its trajectory of growth and profitability. A rewritten version of an earlier case.
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