Harvard Case - StubHub (A): January 2004
"StubHub (A): January 2004" Harvard business case study is written by Robert A. Burgelman, Robert Siegel, Adam Block. It deals with the challenges in the field of Strategy. The case study is 31 page(s) long and it was first published on : Mar 15, 2005
This case study solution recommends that StubHub focus on a multi-pronged growth strategy to capitalize on the burgeoning online ticket resale market. This strategy involves:
- Expanding geographically: Targeting new markets, particularly in Europe and Asia, where the online ticket resale market is still developing.
- Developing a robust mobile platform: Leveraging the increasing adoption of smartphones and tablets to provide a seamless and convenient user experience for ticket buyers and sellers.
- Investing in technology and analytics: Utilizing data-driven insights to optimize pricing, inventory management, and customer targeting.
- Building strategic partnerships: Collaborating with event organizers, venues, and other online platforms to enhance StubHub's reach and attract new customers.
- Strengthening brand awareness and customer loyalty: Investing in marketing campaigns and customer service initiatives to establish StubHub as the leading online ticket resale platform.
2. Background
StubHub, founded in 2000, was a pioneer in the online ticket resale market. The company faced rapid growth and competition from established players like eBay and Ticketmaster. The case study focuses on StubHub's decision-making in January 2004, as they considered various strategic options to navigate the evolving market landscape.
The main protagonists are Eric Baker, StubHub's CEO, and his team, who are tasked with developing a strategy to achieve sustainable growth and profitability.
3. Analysis of the Case Study
Competitive Analysis:
Porter's Five Forces: The ticket resale market was characterized by high competition from established players like eBay and Ticketmaster, as well as numerous smaller competitors. The threat of new entrants was relatively high due to the low barriers to entry. Buyer bargaining power was moderate, while seller bargaining power was low due to the fragmented nature of the market. The threat of substitutes was high, with consumers having various options for obtaining tickets, including directly from venues or through other online platforms.
Competitive Advantage: StubHub's initial competitive advantage was its focus on providing a user-friendly platform with a wide selection of tickets and a secure transaction process. However, this advantage was rapidly eroding as competitors adopted similar strategies.
SWOT Analysis:
- Strengths: Strong brand recognition, robust technology platform, efficient customer service, and a large network of sellers.
- Weaknesses: Limited international presence, dependence on a single revenue stream (ticket sales), and potential vulnerability to legal challenges.
- Opportunities: Growing demand for online ticket resale, increasing smartphone adoption, and potential for strategic partnerships.
- Threats: Intense competition, regulatory scrutiny, and potential for fraud and counterfeiting.
Business Model Analysis:
- Value Chain: StubHub's value chain involved sourcing tickets from sellers, verifying their authenticity, listing them on its platform, facilitating transactions, and providing customer support.
- Business Model Innovation: StubHub's initial business model focused on a two-sided marketplace connecting buyers and sellers. However, the company needed to innovate to maintain its competitive edge, particularly in the face of increasing competition and evolving customer preferences.
Strategic Options:
- Market Penetration: Focusing on existing markets by increasing marketing efforts and expanding product offerings. This strategy, while promising short-term gains, could face limitations due to intense competition.
- Market Development: Entering new geographical markets, particularly in Europe and Asia, where the online ticket resale market was less saturated. This strategy offered significant growth potential but required significant investment and adaptation to local regulations and cultural nuances.
- Product Development: Introducing new product features and services, such as mobile ticketing, personalized recommendations, and event-related experiences. This strategy could differentiate StubHub from competitors and cater to evolving customer preferences.
- Diversification: Expanding into related industries, such as event planning or merchandise sales. This strategy could offer diversification benefits but also required significant expertise and resource allocation.
Financial Analysis:
- Profitability: StubHub's profitability was under pressure due to intense competition and rising operating costs.
- Growth: The company needed to achieve significant growth to justify its valuation and attract further investment.
- Financial Sustainability: StubHub needed to ensure its financial sustainability by managing its cash flow and maintaining a strong balance sheet.
4. Recommendations
- Expand geographically: StubHub should prioritize expanding into new markets, particularly in Europe and Asia, where the online ticket resale market is still developing. This strategy would offer significant growth potential and reduce dependence on the mature North American market.
- Develop a robust mobile platform: The company should invest in developing a user-friendly mobile platform that provides a seamless and convenient experience for ticket buyers and sellers. This would cater to the increasing adoption of smartphones and tablets and enhance customer engagement.
- Invest in technology and analytics: StubHub should leverage data-driven insights to optimize pricing, inventory management, and customer targeting. This would allow the company to personalize offers, improve customer experience, and enhance operational efficiency.
- Build strategic partnerships: The company should explore strategic partnerships with event organizers, venues, and other online platforms to enhance its reach and attract new customers. This would allow StubHub to tap into new customer segments and reduce reliance on organic growth.
- Strengthen brand awareness and customer loyalty: StubHub should invest in marketing campaigns and customer service initiatives to establish itself as the leading online ticket resale platform. This would involve building a strong brand identity, differentiating itself from competitors, and providing exceptional customer experiences.
5. Basis of Recommendations
These recommendations align with StubHub's core competencies in technology and customer service, while also addressing the company's need for growth and diversification. They consider the external factors, such as intense competition and evolving customer preferences, and the internal factors, such as StubHub's financial resources and operational capabilities.
The recommendations are based on quantitative measures, including the potential for increased market share, revenue growth, and profitability. They also consider the potential risks, such as regulatory challenges and the need for significant investment.
6. Conclusion
StubHub faced a critical juncture in its development, requiring a strategic shift to maintain its competitive edge and achieve sustainable growth. By focusing on a multi-pronged growth strategy, including geographic expansion, mobile platform development, technology and analytics investment, strategic partnerships, and brand building, StubHub could position itself as the leading online ticket resale platform globally.
7. Discussion
Other alternatives not selected include focusing solely on market penetration or product development, or pursuing a more aggressive diversification strategy. However, these alternatives were deemed less viable due to the intense competition and the need for significant investment.
The key risks associated with the recommended strategy include the potential for regulatory challenges, the need for significant investment, and the risk of execution failure. These risks should be carefully considered and mitigated through effective planning, resource allocation, and ongoing monitoring.
8. Next Steps
StubHub should implement the recommended strategy in a phased approach, starting with the development of a robust mobile platform and the expansion into key European markets. The company should also prioritize building strategic partnerships and investing in technology and analytics.
The implementation should be closely monitored and adjusted based on market feedback and performance metrics. Key milestones include achieving a significant market share in new markets, increasing mobile platform adoption, and demonstrating positive financial performance.
By taking these steps, StubHub can capitalize on the growing online ticket resale market and achieve sustainable growth and profitability.
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Case Description
Shortly after entering business school at Stanford's Graduate School of Business, Eric Baker and Jeff Fluhr decided that they would start a business focused on the secondary market for event tickets. Explores how Baker and Fluhr launched their company, the challenges they faced, and the strategies they pursued. Provides detailed information on company operations as well as on competitors, such as eBay. Positions readers to evaluate the original premise on which the company's growth plans were based--cost-effective customer acquisition through high-profile partners--and develop an alternative strategy.
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