Harvard Case - Rakuten: To Stay or Not To Stay In The UK?
"Rakuten: To Stay or Not To Stay In The UK?" Harvard business case study is written by Naoto Nadayama, Arto Lindblom. It deals with the challenges in the field of Strategy. The case study is 13 page(s) long and it was first published on : Feb 20, 2020
At Fern Fort University, we recommend that Rakuten remain in the UK market, but with a strategic shift towards focusing on its core competencies in e-commerce and leveraging its global network to enhance its UK operations. This strategy involves re-evaluating its current business model, optimizing its operations, and adapting its marketing approach to cater to the specific needs of the UK market.
2. Background
Rakuten, a Japanese e-commerce giant, entered the UK market in 2010 through the acquisition of Play.com, a popular online retailer. However, the UK market has proven challenging, with Rakuten facing intense competition from established players like Amazon and eBay. The case study highlights Rakuten's struggle to achieve profitability in the UK, leading to a decision point: should they stay or exit the market'
The main protagonists of the case study are Hiroshi Mikitani, Rakuten's founder and CEO, and the UK management team responsible for navigating the company's strategy in a challenging market.
3. Analysis of the Case Study
Industry Analysis: The UK e-commerce market is highly competitive, characterized by established players with strong brand recognition and economies of scale. Porter's Five Forces analysis reveals:
- Threat of new entrants: High, due to low barriers to entry and the availability of online platforms.
- Bargaining power of buyers: High, due to the availability of numerous alternatives and price comparison websites.
- Bargaining power of suppliers: Low, as there are numerous suppliers for e-commerce products.
- Threat of substitutes: High, as consumers can choose to purchase goods from physical stores or other online platforms.
- Rivalry among existing competitors: Very high, with intense competition from established players like Amazon and eBay.
SWOT Analysis:
Strengths:
- Global brand recognition: Rakuten's strong brand recognition in Japan and other markets can be leveraged in the UK.
- Extensive product catalog: Rakuten offers a wide range of products, catering to diverse customer needs.
- Loyalty program (Rakuten Super Points): Provides a valuable incentive for customers and drives repeat purchases.
- Technology and analytics expertise: Rakuten possesses advanced technology and data analytics capabilities.
Weaknesses:
- Lack of UK market knowledge: Rakuten struggled to understand the specific needs and preferences of UK consumers.
- Limited brand awareness in the UK: Rakuten's brand recognition is lower compared to its competitors.
- High operating costs: The UK market has high operating costs, impacting profitability.
- Complex organizational structure: Rakuten's complex organizational structure hindered effective decision-making and communication.
Opportunities:
- Growing mobile commerce market: The UK mobile commerce market offers significant growth potential.
- Increased focus on customer experience: Consumers are increasingly demanding personalized and seamless shopping experiences.
- Leveraging global partnerships: Rakuten can leverage its global network to source products and expand its reach.
- Developing innovative business models: Rakuten can explore new business models like subscription services or personalized recommendations.
Threats:
- Intense competition from established players: Amazon and eBay continue to dominate the UK market.
- Economic uncertainty: The UK economy faces uncertainties, impacting consumer spending.
- Regulatory changes: Changes in regulations could impact e-commerce operations.
- Cybersecurity threats: The increasing threat of cyberattacks poses a risk to online businesses.
Value Chain Analysis:
Rakuten's value chain in the UK needs to be optimized to improve efficiency and profitability. This includes:
- Inbound logistics: Optimizing supply chain management to reduce costs and improve delivery times.
- Operations: Streamlining operations to improve efficiency and reduce waste.
- Outbound logistics: Enhancing delivery services to provide a seamless customer experience.
- Marketing and sales: Adapting marketing strategies to target the specific needs of UK consumers.
- Customer service: Providing excellent customer service to build brand loyalty.
Business Model Innovation:
Rakuten needs to innovate its business model to compete effectively in the UK market. This could involve:
- Developing a localized product offering: Tailoring products and services to the specific needs of UK consumers.
- Expanding into new market segments: Targeting niche markets with specialized products and services.
- Leveraging technology to enhance customer experience: Implementing AI-powered recommendations and personalized shopping experiences.
- Exploring new revenue streams: Offering value-added services like subscription boxes or personalized styling consultations.
4. Recommendations
Focus on Core Competencies: Rakuten should focus on its core competencies in e-commerce, leveraging its global network and technology expertise to enhance its UK operations. This involves streamlining its product portfolio, focusing on categories where it has a competitive advantage, and leveraging its global sourcing network to offer competitive prices.
Optimize Operations: Rakuten needs to optimize its operations to improve efficiency and reduce costs. This includes:
- Streamlining its supply chain: Implementing efficient logistics processes to reduce delivery times and costs.
- Optimizing its warehouse network: Consolidating warehouses and leveraging technology to improve inventory management.
- Investing in technology: Implementing AI-powered tools to automate tasks and improve efficiency.
Adapt Marketing Approach: Rakuten needs to adapt its marketing approach to resonate with UK consumers. This involves:
- Developing a localized marketing strategy: Understanding the specific needs and preferences of UK consumers and tailoring marketing messages accordingly.
- Leveraging social media and digital marketing: Utilizing social media platforms and digital marketing channels to reach target audiences.
- Building partnerships with local influencers: Collaborating with UK-based influencers to increase brand awareness and credibility.
Enhance Customer Experience: Rakuten needs to provide a seamless and personalized customer experience to build brand loyalty. This involves:
- Improving website usability: Ensuring a user-friendly website that is easy to navigate and provides a positive shopping experience.
- Offering excellent customer service: Providing responsive and helpful customer support to resolve issues quickly and efficiently.
- Personalizing the shopping experience: Utilizing data analytics to provide personalized product recommendations and promotions.
5. Basis of Recommendations
These recommendations align with Rakuten's core competencies in e-commerce and its global network. They also consider the specific needs of the UK market, including the competitive landscape, consumer preferences, and regulatory environment.
The recommendations are based on the following assumptions:
- The UK e-commerce market will continue to grow, offering significant potential for Rakuten.
- Rakuten can leverage its global network and technology expertise to gain a competitive advantage in the UK market.
- Consumers are increasingly demanding personalized and seamless shopping experiences.
- Rakuten can adapt its marketing approach to resonate with UK consumers.
6. Conclusion
Rakuten has the potential to succeed in the UK market by focusing on its core competencies, optimizing its operations, and adapting its marketing approach. By implementing the recommendations outlined above, Rakuten can improve its profitability, enhance customer satisfaction, and build a strong brand presence in the UK.
7. Discussion
Other alternatives not selected include:
- Exiting the UK market: This would minimize losses but would also result in the loss of a potentially valuable market.
- Maintaining the current strategy: This would likely lead to continued losses and a decline in market share.
The risks associated with the recommended strategy include:
- Competition from established players: Rakuten will continue to face intense competition from Amazon and eBay.
- Economic uncertainty: The UK economy faces uncertainties, which could impact consumer spending.
- Regulatory changes: Changes in regulations could impact e-commerce operations.
The key assumptions underlying the recommendations are:
- The UK e-commerce market will continue to grow.
- Rakuten can leverage its global network and technology expertise to gain a competitive advantage.
- Consumers are increasingly demanding personalized and seamless shopping experiences.
- Rakuten can adapt its marketing approach to resonate with UK consumers.
8. Next Steps
Rakuten should implement the following steps to execute the recommended strategy:
- Develop a detailed implementation plan: outlining specific actions, timelines, and responsible parties.
- Allocate resources: securing the necessary budget and personnel to support the implementation.
- Monitor progress and make adjustments: regularly tracking progress and making adjustments as needed.
- Communicate effectively: ensuring clear communication with all stakeholders throughout the process.
By taking these steps, Rakuten can increase its chances of success in the UK market and achieve its long-term growth objectives.
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Case Description
In 2016, Rakuten, the largest e-commerce company in Japan, was at the crossroads of its UK operations. After 2008, Rakuten had accelerated internationalization, mainly by acquiring local e-commerce companies. In the foreign markets, Rakuten leveraged its e-commerce platform model, with which it had achieved huge success in the Japanese e-commerce market in the 2000s. In 2011, it acquired UK-based e-commerce company, Play.com. At that time, Play.com faced challenges in the local e-commerce market because of strong competitors, especially Amazon and eBay. Rakuten tried to boost the competitive advantage by adopting its e-commerce model. However, attracting local users and merchants in the UK market proved difficult for Rakuten. Should Rakuten continue its European expansion program? What should the company do in the UK market and with Play.com in particular? Should Rakuten stay in the United Kingdom?
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