Rocket Internet is one of the leading internet firms in Europe with its headquarters being in Berlin. The Company was established in 2007 by Samwer brothers (Kohler & Baumann, 2016, p.45). Rocket Internet deals with building online startups as well as owning shareholding in different models of businesses involved in internet retailing. Rocket internet also offers space to starting companies at the headquarters by providing support, IT, access to investors as well as marketing services. Currently, the company has over 28,000 employees in its global network of companies operating in more than 100 entities in 112 countries (Kohler & Baumann, 2016, p.39). Strategically, Rocket Internet strives to become the largest internet platform in the world. In spite of high competition from competitors like Alibaba of China, Rocket Internet had shown the ability to utilize growing opportunities in the globally emerging markets by adequately using advertisement techniques (Eckard et al., 2015).
The resources and capabilities of Rocket Internet
The company has a greater capability to utilize the online marketing tool to reach out and attract more consumers and thus increase their revenue collection. It is apparent that the company continues to mimic the online marketing techniques evident in firms such as Amazon and Zappos. As a result, there has been a significant increment in the annual sales' revenue; the revenue for 2014 was 2.5 billion and 94 million profit. Technological advancement has played an important role in the business sustainability realization in the current world. It is evident that the company is in line and updated with the trends in online marketing and this shows that it has a greater capacity to expand and remain in the industry for a longer period. Advancement in technology promotes the industry of advertising by the growing use of the internet when marketing products to clients. The use of the internet helps in accessing clients from different parts of the world (Turban et al., 2018, p.370). Rocket Internet is utilizing technology to improve its advertising department by the use of the internet.
Moreover, Rocket Internet adequately utilizes technology to adverse its service of building online startups using ads. The firm also has a website where it displays its services to clients. Also, the company has accounts in social media platforms like Facebook and Twitter where it advertises its service to customers from different parts of the world (Kohler & Baumann, 2016, p.32). In spite of the advantages of technology, it also negatively affects the Rocket Internet through technological obsolescence. Reliance on internet and technology requires frequent updating of the website to reduce the threat of technological obsolescence.
The company has technical expertise with the required skills and competence in computer and information management. Human resource plays an important role in determining the success of a company. It is evident that the company has a high entrepreneurial spirit driven by personal drive rather than high academic grades. The motivated employees can promote innovation and creativity in the company enhancing its ability to compete in the market industry. With the strong financial base, the company can venture into various innovative activities and invest in various parts of the world. The company has a strong financial backup from their main investor globally. Therefore, the company is not restrained in terms of capital structure and human resource requirement; it can easily engage in developmental projects including the global mobile task force of entrepreneurial talents internationally.
Threshold, distinctive and dynamic resources and capabilities
The company also has opportunities to expand its product to the market and achieve its maximum threshold. The first opportunity is the need for e-commerce because of advancement in technology and globalization. Most of the businesses are shifting to internet business, a situation that offers Rocket Internet an opportunity to expand its online startups business (Kohler & Baumann, 2016, p.30). Furthermore, e-commerce development is low in some regions like Africa which creates a new market for the organization. The other opportunity for the company is the presence of customers. Companies are readily adopting online retailing services as a way of accessing global markets. Also, the company has opportunities to expand its scope of operation through the ten new acquisitions made yearly from different parts of the world (Kohler & Baumann, 2016, p.33). Presence of ambitious entrepreneurs to invest in online retailing opens an opportunity for Rocket Internet to execute its business objectives at the global level. In 2011, the company launched Lazada in Southeast Asia because the presence of online entrepreneurs in the region created an investment opportunity. Currently, Lazada is one of the dominating internet businesses in the region with over 12,500 seller partners (Kohler & Baumann, 2016, p.37).
On the other hand, the company experiences stiff competition from equally strong playser
The Return on Investment (ROI) is an important profitability ratio used to determine the efficiency and effectiveness in the operation of a company. The value of ROI may be influenced by various factors including the economic issues, financial and resource management in the company and the leadership process among others. Incidences of financial recession can affect ROI value negatively and a company may not earn much return from what they invested. Based on the information provided in the case, the company has a high ROI value and this means that it is highly profitable (Turban et al., 2018, p.388). Rocket Internet fetched high ROI in 2016 during the financial recession in Germany because of its high investment in various advertising techniques that ranges from social media platforms to Television. In as much as high tax may be one of the factors influencing ROI value for the company, it is still able to economize on other areas of expenditure and realize a high profit value. In 2015, the company spent approximately $800 million which indicates high expenditures on tax (Kohler & Baumann, 2016, p.41). The economies of scale leverages the high costs spend on taxes and other regulatory requirements thus leaving the company with a high profit margin.
The role of Samwer Brothers
The company was founded by the Samwer brothers and they are the major decision-makers in the business. The three founders developed strategic approach in the management of the company and ensuring that it growth and expand to its current state. The three are execution entrepreneurs and not pioneering entrepreneurs and this means that they have a defined mode and approach of management and handling of the business. They are secretive about their management approaches and as Marc stated, they don't like speaking about their investment since their track records encourage people to develop competing sites. A change in the leadership and management of the company would result to the change in the performance depending on the incoming leaders' experiences. In this case, the three brothers have mastered the industry and the market dynamics as well as challenges involved in the business operation; therefore, they are able to make appropriate and informed decisions. In case the three leaves, the company's profitability may be reduced and affect the ROI value negatively.
Global Force and Advertising Industry
The case is all about the global advertising industry and the associated significant strategic dilemma following the increase in the consumer spending in the developing nations, pressure from the major advertisers and the technological development. The advertising industry is one of the most competitive sectors in the business arena. Porter provides five forces that will be used in the analysis of the strengths and suitability of a firm venturing in the industry as discussed below.
The Threat of the New Entry
There are no limitations and barriers to the market entry in the industry and this shows that there is a high threat of new entry. For instance, competition exist in the industry considering that advertising agencies exist in all sizes and they include one or two individual's boutique, small and medium sized agencies and large independent multinational. There are no structural and legal barriers to the market entry in the industry. For example, the mid-sized companies compete by providing value-added services with an in-depth recognition of the specific market segments. However, the company is advantaged in that they have long-term contracts with advertising companies and clients will use the same advertiser (Turban et al., 2018, p.377). The advertising space is expensive and limited leading to difficulties for new players to access space. Also, the establishment of a market hold is not easy for newcomers because large companies have long-term engagements with well-established advertising companies and with many clients. For instance, in 2007 during the establishment of Rocket Internet, it was difficult to penetrate to famous and well-established advertising companies because huge Companies like Amazon had bonded with advertisers (Kohler & Baumann, 2016, p.37).
Power of Suppliers
The power of suppliers is high considering that there are various advertising firms in the industry competing for the available suppliers. Since the demand exceeds the supply, suppliers increase the price of the product as well. Some suppliers who are having high reach charge at high cost causing high expenditure for the advertising firms. Also, seasonal campaigns cause pressure on suppliers, a situation that causes suppliers to charge higher prices. The other reason causing supplier power is the less workforce having information and knowledge about online startup entrepreneurship. Suppliers used in the advertising industry are mainly entertainment channels, OOH advertising as well as public ad spaces. In most cases, product concentration is high with readiness to pay higher for the available premium spaces.
Power of Buyers
The bargaining power of buyers is high because of the rising number of players in the industry of advertising and thus they have the freedom to choose their preferred advertising agent. Buyers seek information and demand high-quality product (Eckard et al., 2015). Buyers choose agencies with good experience in business, and they seek long-term relationships with companies. Buyers can cause companies to change the pattern of the campaign, a situation that can lead to low pricing of products (Moriarty et al., 2014). The costs of switching from Rocket Internet to other products are high. There minimal chances for the buyer's backward integration. Also, consumers of Global Advertising are sensitive to price, and this means that the company has to offer reduced prices to retain and attract more consumers.
The Threat of Substitutes
The number of substitutes in the advertising industry is high which includes the use of TV, print media, radio as well as OOH. Currently, the available substitutes are very popular among consumers than in the past. One of the main substitutes is the shift to digital media from print media as seen in the past two decades. Therefore, the consumers can easily shift to use the best and efficient advertising channels ranging from the conventional prints, T.V shows to the social media platforms. With the development of internet and online search advertising, new breed f interactive digital media have emerged such as the AKQA and they offer similar services in the industry.
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