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1. According to Housenbold, success is to "figure out what you're good at, figure out where you can make money, and focus". How is his remark related to strategic management?
“Figure out what you’re good at” can be interpreted as finding core competence of company and use them to gain competitive advantage.
“Figure out where you can make money” can be interpreted as selecting the customers and finding customers need.
“focus” can be interpreted as choosing one of three approaches to market segmentation which include no market, high market and focused market.
2. What industry is Shutterfly competing in? Use the five forces model tobriefly analyze this industry.
Shutterfly is competing in photograph-derived manufacture, photo sharing industry.
New entrants: In my opinion, there are high barriers to entry photograph-derived manufacture, photo sharing industry, making the threat of new entrants low. The first reason is brand loyalty. Just like our case, Shutterfly launched on 1999, after years of persistent effort, company gained lots of loyalty customers, which made customers almost impossible to switch brand.The second reason is high capital requirements, photograph-derived manufacture requires huge investment on purchasing printing machine and building factory.
Bargaining power of suppliers: In my opinion, the bargaining power of suppliers are low. The major suppliers for photograph-derived manufacture, photo sharing industry is paper mill, printing company and design company. I do believe that there days a number companies are available.
Bargaining power of buyers: In my opinion, the bargaining power of buyers arelow to middle. As a consumer, we don’t have any bargaining power unless we purchase large quality, but average consumer would not purchase large quality, so bargaining power for average consumer is low. But when companies purchase larger quality such as company’s calendars they do have some bargaining power. The switching costs is very low, because consumer has plenty of option available to choose. Therefore, the bargaining power of buyers is low to middle.
Threat of substitute products: In my opinion, threat of substitute products is high. Because with the development of technology, computers are capable of doing many works, for example photo editing and printing. Younger generation are able to use personal computer to edit image and print at home. In addition, they prefer to keep images in computer or smartphone rather than printing it out because they think this is more convenient.
Intensity of rivalry among competitors: In my opinion, the intensity of rivalry among competitors is middle. The first reason is consumer switching costs are low. The second reason is products are undifferentiated, although Shutterfly has more than 60 million combinations, other company is easy to copy.
3. Define Shutterfly's generic business-level strategy. Who is the targeted customer? What customer need does the company satisfy? How does the company use its competencies to satisfy the need?
In my opinion, Shutterfly's generic business-level strategy is focused differentiation. Unlike other competitors, in order to keep great quality of image with good resolution, Shutterfly never downsample or compress images,and not only that, Shutterfly does not force customer to delete their images, because they are considered images as the memories. Shutterfly also provides variety of combinations. High quality perfect customer service is also another core advantage of Shutterfly. Because Shutterfly has their own manufacturing, it allows company greatly decrease the cost and increase the profit margins. All these factors are company’s differentiation. Because Shutterfly is only targeting small segment of customers who are willing to pay more money for high quality product and perfect customer service, so based on the company’s competitive advantage and competitive scope, Shutterfly is using focused differentiation.
Shutterfly is targeting females as their targeted customer. These females are 25 to 55 years old, and they are the one responsible for capturing and sharing and telling the stories.Shutterfly's customerswant to document all the memorable moments with high quantity in some form such as photo, card, calendars and so on. In order to satisfy customer need, Shutterfly provides over 60 million combinations of fonts, layouts backgrounds, designs and book size with high quality no compress images for customers choose. Moreover, Shutterfly has a 100% satisfaction guarantee and phone number as well as live chat plus email for customer services.
4. What challenges do you think Shutterfly currently has? What recommendations do you have?
The first challenge to Shutterfly is the threat of substitute products. Along with the development of society and modern science and technology, digital camera has replaced hipstamatic, a growing number of people are preferring electronics photo album, because this approach is more convenient. So only maintain the same type of product or innovate new style is not enough, I recommend Shutterfly to develop electronica photo album and other related products, because digital era is the wave of the future.
The second challenge to Shutterfly is from the other competitors. Although Shautterfly provides more than 60 million combinations, this advantage is very easy to imitate, they can direct copy your new combination from the Shutterfly website. So in order to keep this core advantages, Shutterfly need to claim a patent on its new combination.
The third challenge to Shutterfly is its product prices are high. According to the case, Shutterfly’s price was 14% above average industry price, because they used cardboard packaging. Although using cardboard packaging are better than using paper, the cost will be passed on to consumers. In my opinion, under the premise of the packaging is strong enough to withstand rough handling, Shutterfly should use regular paper instead of cardboard for packaging, the cost can be reduced by this method.