978-1259278211 Case 23 Solution Manual

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Teaching Note: Case 23 – QVC

Case Objectives

1. To apply the concepts of strategic management and demonstrate the interaction between the

components of strategic management: strategic analysis, strategic formulation, and strategic

implementation.

See the table below to determine where to use this case:

Chapter Use Key Concepts Additional Readings or

Exercises

1: Strategy

Concept

Strategic management; strategic analysis

(external and internal environment);

Exercise: Who shops on QVC,

what marketing “channel” do

Optional:

Five forces; general external

See additional information via

Case Synopsis

QVC was the leader in the home shopping market. It regularly shipped over 170 million

products annually to its customers, resulting in almost $8.8 million in sales. By its initials alone, QVC

promised that it would deliver quality, value, and convenience to its viewers. Founded by Joseph Segel in

1986, it had grown quickly to overtake rival Home Shopping Network by focusing on product

The success of QVC had been largely driven by its popular television home shopping

shows that featured a wide variety of eye-catching products, many of which were

unique to the channel. In 1995, QVC launched its own retail website to complement

QVC realized the challenges of growing its market share and was always looking for new ways to

improve its services and generate a competitive edge. In 2012 it acquired e-commerce shipping site Send

the Trend, and launched a joint venture in China. In 2013 it launched QVC Plus as a second channel in

Teaching Plan

This case can be used early in the course to demonstrate how all elements of a good strategy should be

tied together. It’s not enough just to have a good idea. Success requires correct analysis of the competitive

IN-CLASS EXERCISE

This case can start with an icebreaker. Starting from the perspective of a customer may make it easier for

students to transition to a strategic analysis.

Have any of you ever bought a product advertised on TV? If so, what did you think of the experience?

It is possible that some, if not all, students have bought something via a TV infomercial or have shopped

at either the QVC TV site or its rival, the Home Shopping Network (HSN). It may be a good idea to get

them to share their experiences. If they’ve bought both from QVC and via an infomercial, their

It’s also interesting to ask students if they see any difference between buying something via a TV

infomercial or on the QVC TV site, and buying something online, or via their mobile device. Both QVC

and HSN have e-commerce web pages, as do most of the TV infomercial pitches. Do students see any

difference between the TV shopping experience and the online or mobile one? Other online shopping

giants like Amazon and eBay don’t provide the TV channel experience. Does this put them at a

disadvantage?

What kind of shopping are people likely to do on QVC? For instance, if you knew you had to purchase a

piece of jewelry for a gift, where would you go to shop? Jewelry is one of the most profitable and largest

selling categories on QVC and other TV shopping channels. Why do you think this is?

Students may talk about planned vs. unplanned purchases. They will eventually get to impulse shopping.

Then try and get them to mention the various elements of QVC’s strategy that may encourage and support

impulse shopping. They will mention many elements, all of which are designed to get the consumer to get

excited about a product and order it right away. These will include elements such as strong pitches and

This will give the students of an idea how the elements of a good strategy are all tied to a theme or

purpose.

Would you buy something from QVC if you could do so from your mobile phone?

Students should be able to see how expanding the distribution channels for QVC’s products is one way

Let’s visit the QVC shopping channel and see what’s selling right now:

http://www.qvc.com/onair/liveshow.aspx?rewrite=no

Summary of Discussion Questions

Here is a list of the suggested discussion questions. You can decide which questions to assign, and also

Discussion Questions:

1. How did QVC grow into a successful company?

2. What strategy did QVC use, and how did it support this strategy?

3. What challenges does QVC face? How has it confronted them so far?

Discussion Questions and Responses

1. How did QVC grow into a successful company?

Referencing Chapter 1: Strategy Concept: Introduction and Analyzing Goals and Objectives

Strategy is all about the ideas, decisions, and actions that enable a firm to succeed. See Chapter 1, Exhibit

01: Strategic management consists of the analyses, decisions, and actions an organization undertakes in

order to create and sustain competitive advantages:

●strategy directs the organization toward overall goals and objectives;

●recognizes trade-offs between efficiency and effectiveness.

See Chapter 1, Exhibit 06: The primary role of the organizational leader is to articulate vision, mission,

and strategic objectives. Leaders must also be proactive, anticipate change and continually refine changes

to their strategies. What was the original vision that was “massively inspiring, overarching, and long-

term,” that represented a destination that is driven by and evokes passion? Is the original vision still

applicable given the present circumstances?

The organizational mission needs to be considered: a mission encompasses both the purpose of the

company as well as the basis for competition and competitive advantages. Organizations must respond to

multiple constituencies if they are to survive and prosper, and the mission provides a means of

Leadership must establish strategic objectives to operationalize the mission statement. That is, objectives

Joseph Segel saw an opening and capitalized on it successfully. When viewing the Home Shopping

Network in 1986, Segel noticed the poor quality of the programming and the down-market items sold on

the channel. He saw the potential to reach a vast audience and how the Home Shopping Network was

Segel had a vision of effectively reaching a wide audience with high-quality yet appealing products, and

doing so in a way that generated significant profits. This vision allowed him to establish the initial

Specific objectives that flow from this vision and mission now include expanding customer reach through

technology: first the internet, then streaming video with remote purchase via remote, and now mobile

2. What strategy did QVC use, and how did it support this strategy?

QVC needs to create a sustainable competitive advantage in the marketplace that is not only unique and

valuable but also difficult for competitors to copy or substitute. See Chapter 1, Exhibit 1.3 for a depiction

During strategy formulation, the organization addresses the issue of how to compete in a given business

In strategy implementation, depending on the type of organization structure, the leader might include key

individuals in a discussion around selecting which strategies might be best to implement at which level

The basic question strategic management tries to answer is: How can we create a sustainable competitive

advantage in the marketplace that is not only unique and valuable but also difficult for competitors to

copy or substitute?

QVC’s strategy involved doing the following:

Strategic Analysis allowed QVC to anticipate competition and other forces in its external environment.

Acquisition of rivals to get critical mass: Using its analysis of the external competitive environment, QVC

Vertical integration: Understanding the need to anticipate possible leverage placed by key product

Developing a vendor network: Understanding the need for establishing key relationships with supplier

partners, QVC’s pursued a range of partners from some of the world’s biggest companies to small

Focusing on customer service: Anticipating the many options customers had, QVC addressed customer

service issues. Customers who were reluctant to buy through a television channel were encouraged to do

Strategic Formulation involves a choice about how to compete. Until QVC’s entry into the market, the

home shopper was not well served. By offering a low-risk shopping experience and high-quality products,

Strategic Implementation means marshalling resources in such a way as to coordinate and integrate

Innovating via creative merchandising: From its inception, QVC focused on refining the implementation

of its strategy. Paying attention to merchandising, it innovated by holding live shows where a product

Integrating operations: To establish its position as the world’s preeminent virtual shopping mall, QVC

operated on a 24/7 basis. It sold a wide variety of products, using a combination of description and

Monitoring procedures and establishing controls: Having adequate stocks of products allowed QVC to

ship most products within 48 hours. Also, to take the risk out of buying a product that the customer has

not held or touched, QVC offered a 30-day money-back guarantee and no hidden fees in returning goods.

In short, QVC’s success was as a result of anticipating issues in its environment, and carefully selecting

3. What challenges does QVC face? How has it confronted them so far?

The major challenges for QVC included maintaining its market share and looking for new ways to

To increase growth and to diversify its market, QVC expanded into the U.K., Germany, Italy, Japan,

In an effort to succeed in higher margin items, QVC featured products by designers such as Marc Bouwer

Very early in the innovation adoption phase, in 1995, QVC took advantage of the explosive growth of the

Internet to launch QVC online. The website played two roles. It complemented the television channel and

While QVC still faces growth challenges, the company’s recent moves indicate that it is aware of the

NOTE – ADDITIONAL ONLNE INFORMATION:

From October 2008 here’s a report on how QVC planned to integrate its various distribution channels

(TV, Internet, phone), and promote live broadcasts of shopping events via email, direct mail, ads in TV

Guide, and teaser videos on YouTube and Facebook. QVC now sees itself as a “big media company” –

more than a broadcast company – with a multichannel outreach. QVC is “trying to be everywhere our

customers and potential customers are.” QVC’s multichannel push “is a unique strategy that nobody else

can do because we have so many different platforms where we can leverage ourselves,” says Jeff

Charney, Senior Vice President and Chief Marketing Officer at QVC. That advantage, he adds, allows the

company to adjust to the current economic conditions and change customer demands on the fly. (See

http://www.dmnews.com/Channel-surf/article/119639/ )

Here’s a story about how QVC entices customers, including a video demonstrating how to sell perfume

on TV! (The answer is you sell it using a story.…)

http://www.theatlantic.com/magazine/archive/2010/06/the-genius-of-qvc/308091/

QVC also got into social networking by adding a social-commerce channel, toGather by QVC, to

QVC.com in the fall of 2013. Copying a format from Pinterest, users could create collections of products

on the channel that others on the site can then “heart” – echoing Pinterest’s format and peer-approval

signal. See http://www.adweek.com/news/technology/social-commerce-channel-coming-qvccom-151287

What does all this say about QVC’s approach to strategic management?

OPTIONAL DISCUSSION TOPICS

If instructors wish to continue with further discussion of specific strategic elements such as external

and internal environmental analysis, generic competitive strategies, corporate strategies, and

innovation, the following instructional aids are provided:

(There are no slides to accompany this section.)

Referencing Chapter 2: Analyzing the External Environment

As part of strategic analysis, it’s necessary to engage in external scanning: surveillance of a firm’s

external environment to predict environmental changes to come, detect changes already under way, put

leaders in a proactive mode. Strategic management also involves external monitoring to track evolution of

Help students apply Porter’s Five Forces of competition to QVC by drawing a diagram on the board

similar to the following and having students fill in the details. The result of this analysis should

demonstrate to students that QVC needs to constantly be on its toes – there isn’t a lot of room for

Regarding the general external environment, QVC must consider the political/legal, economic and global,

sociocultural and demographic, and technological forces that might affect the ability of the firm to deliver

Demographic: One important thing mentioned in the case is the growth in the number of working women.

Although the firm’s current customer base does span several socioeconomic groups, it is led by young

Sociocultural: QVC has certainly noticed the trend of people embedding technology in their everyday

Suggested: Market shares and

profit margins are being

squeezed. Competing forms of

Substitutes’

Threat

Suggested: High – the brick

and mortar retail stores,

Rivalry

Very High

Buyers’ Power

Medium

Suppliers’

Power

High

Suggested: High – manufacturers

can choose to offer products

Suggested: General lack

Technological: Technology, especially the growth of the Internet and innovations such as the interaction

Global: QVC’s expansion into the U.K., Germany, Italy, and Japan appears to be going well, indicating

that the growth in Internet and mobile phone access worldwide might provide additional opportunity here.

China is the next destination. Although not in the case, British television regulators gave the go-ahead for

Here’s an interview with QVCs CEO Mike George in 2011 talking about global expansion plans:

http://www.dailyfinance.com/2011/10/05/ceos-corner-qvc-mike-george-on-the-shopping-channels-big-pl/

And here’s an update in 2013 about how QVC business in Italy has not seen a downturn because of the

Referencing Chapter 3: Analyzing the Internal Environment

To further evaluate the challenges facing QVC, it’s important to consider the concept of the resource-

based view of the firm, and the three key types of resources: tangible resources, intangible resources, and

organizational capabilities. QVC’s profile might look like this:

Tangible Resources:

Financial: QVC is a wholly owned subsidiary of Liberty Media Corporation attributed to the Liberty

Physical: QVC has distribution and call centers located throughout the U.S., and has broadcast facilities

Technological: Although there is no specific information on QVC’s technological capabilities, its ability

Organizational: QVC’s operational choices – establishing mechanisms to pay attention to quality and

customer service – appear to be one of its strengths. Although not provided in the case, instructors can

To learn about how to sell products on QVC, see http://www.qvcproductsearch.com/

Intangible Resources:

Human: QVC employs more than 17,000 people worldwide, many of whom appear to be passionate

Innovation and creativity: As evidenced by its ability to innovate in merchandising, and establish

Reputation: Once again, its success is only maintained if QVC keeps its reputation. Joseph Segel

Organizational Capabilities: QVC’s major organizational capabilities appear to be in its operations and

Referencing Chapter 5: Formulating Business-Level Strategies

The question of how to compete in a given business to attain competitive advantage requires an

assessment of the types of competitive strategies, including the three generic strategies that are used to

overcome the five forces and achieve a competitive advantage:

●Overall cost leadership

oLow-cost-position relative to a firm’s peers

●Differentiation

oCreate products and/or services that are unique and valued

●Focus strategy

oNarrow product lines, buyer segments, or targeted geographic markets

Encourage students to develop their own ideas, using information gained from the discussion of the

Cost Leadership: Although QVC certainly paid attention to pricing of its products in order to remain

Differentiation: Here is where QVC established its competitive advantage. By creating a service whereby

customers could purchase products with a guarantee of quality, value, and convenience, QVC provided a

Focus: QVC did not target any particular buyer segment or geographic market, so did not pursue a

focused strategy here. However, because of the goal of cost efficiency and profit margin maximization,

Referencing Chapter 6: Formulating Corporate-Level Strategies

Corporate strategy focuses discussion on the questions of what businesses a corporation should compete

Diversification is the process of firms expanding their operations by entering new businesses. In related

diversification, a firm enters a different business in which it can benefit from leveraging core

competencies, sharing activities, or building market power. Some possibilities include:

●Mergers and acquisitions

●Strategic alliances

Whatever the choice, it should create value for all stakeholders – employees, suppliers, distributors, and

Ideas to explore regarding growth for QVC might include diversification. Although not in the case, QVC

already has a bricks-and-mortar retail operation in several malls, including Mall of America. Brand

extensions can be a way to grow as long as the target is very clearly defined, and the program offerings

are clearly distinct from competitors’ offerings. Could there be room for a QVC reality TV show?

Referencing Chapter 12: Managing Innovation and Fostering Corporate Entrepreneurship

Innovation involves using new knowledge to transform organizational processes or create commercially

viable products and services using the latest technology, experimentation, creative insights, and

information from competitors. Sustaining innovations extend sales in an existing market, usually by

Some of the challenges of innovation involve choosing when and how to continue to innovate, the scope

of future innovation and the pace, as well as whether or not to collaborate with innovation partners. The

Before proceeding, firms must first define the scope of the innovation efforts, and must ensure that their

innovation efforts are not wasted on projects that are outside the firm’s domain of interest. In defining the

innovation scope, a firm should answer several questions:

●How much will the innovation cost?

●How likely is it to actually become commercially viable?

●How much value will it add; that is, what will it be worth if it works?

●What will be learned if it does not pan out?

Although QVC seems to have done an excellent job so far at carefully assessing the scope of its

Given all of the above, where do you think QVC’s growth opportunities lie?