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case study startegic management

QUESTIONS :

(1) As compared with other civil servant examination training organizations, what is the core competitiveness of Fenbi?

(2) What competitive strategy has Fenbi taken to successfully and quickly seize the online civil servant examination training market? Explain the reasons for such strategies?

(3) What changes occurred to the internal and external environment and core competitiveness of Fenbi, confronted with its competitors?

Case 5: Competitive Strategy of FENBI (A platform for civil servant examination training) Key words: Porter's Five Forces Model, business resource and competency analysis, focus and differentiation strategies Purpose: This case is intended to strengthen the students' understanding and application of strategy tools such as macro environment analysis, resources analysis, core competitiveness analysis and Porter's Five Forces model, and help the students to understand the basic form and conditions of application of the competitive strategy. Case: One day in 2011, Li Yong, the Head of Portal Business Unit of Netease was in bad mood because he did not find a training platform for preschool English education for his child. In such an era featuring rapid development of Internet, students cannot find suitable teachers through the network, and teachers cannot find students in demand. In such a market, there is a disconnection between demand and supply. These situations made sensitive Li discover business opportunities. He carried out in-depth research and comprehensive evaluation on the online education market and realized that this market was lack of a platform that could interconnect the teachers and the students. Then he founded the Fenbi.com, a platform allowing for interaction between teachers and students. However, it failed soon. Li believed that the main causes for the failure of Fenbi.com included: poor user experience, lacking of clearly defined target market, and less experienced entrepreneurial team. Through survey, they found that the students were more active when the teacher assigned exercises online. So the entrepreneurial team got an idea of developing an examination questions bank and turned the business center to a learning tool. In February 2013, this examination questions bank named YUAN was officially launched. In April 2013, the entrepreneurial team gathered again to carefully analyze the possibility of extending into the relevant market fields. Their first target was the primary and secondary education market because the existing online questions bank for primary and secondary education were not satisfactory and many fundamental questions were not solved. On the other hand, not only the parents of primary and middle school students were unsatisfied with online learning, but also the students who were used to the traditional way of education felt hard to accept online examination questions bank. Despite of this, the YUAN exam questions bank attracted lots of users because of its outstanding ability of rapidly improving the users' performance and the low price (RMB25/month). The question bank model was highly reproducible. The entrepreneurial team replicated this model to the various vocational examination markets. As the workload of maintaining the examination question bank was rather heavy, Li's team had no time to develop the vocational examination training market and they were considering whether to abandon this market. But the field survey showed that vocational examination users were highly active, so they decided not to abandon this market. Zhang Xiaolong was a senior teacher of Huatu with experience in administrative aptitude test. In October 2013, he resigned from Huatu and joined the YUAN question bank. Li attached great importance to him and assigned him as the head of the civil servant examination department. Li also assigned several technical experts to assist Zhang and gave him sufficient authority and trust. Li's entrepreneurial team put its focus on the in-depth development of YUAN question bank. They spent a lot of time and energy on the primary and middle school education question bank and made technological innovations. As a result, they developed a function named Xiao Yuan Search - users can search questions by taking photos, which effectively improved the competitiveness of the company. YUAN question bank had richer, more comprehensive content and more accurate answers than similar products on the market. The company made efforts to promote it and invited celebrities to promote it. YUAN question bank was highly praised by users. Li's entrepreneurial team also kept iterative updates based on user feedback. For example, they provided the homework evaluation and ranking module for the YUAN question bank. Although Yuan question bank had good response in the market, Li's entrepreneurial team never forgot their original intention of establishing a platform. They launched the sub-product "YUAN Tutor", an online education platform by which the teachers may provide one-to-one tutoring for the students in the way of line stream. In this way, the teachers and the students can be more closely connected. Such a platform with high quality and low price quickly attracted a large number of students and teachers, but it also brought negative effects such as "bloated salary" for teachers. Then the education management authorities issued regulations that prohibited in- service teachers from conducting online tutoring for the students of primary and secondary schools. This policy led to the failure of YUAN Tutor. In November 2013, Zhang Xiaolong took over the task and began to provide online training of civil servant examination on the platform. From 2013 to June 2014, the operating revenue from civil servant examination training reached RMB5 million, of which that from the various training classes was RMB 0.5-0.6 million. Onerous training classes and high requirements on quality lead to heavy workload. In 2014, the number of civil servant examination training members of Fenbi was reduced to three from five, in which case, Zhang's team only held one training class. What types of training classes should be held? It was always the concern of Zhang's team. Based on the users' demands, Zhang finally chose to provide a systematic class. Then the next issue was pricing. At that time, the price of offline civil servant exam training was relatively expensive. Zhang believed that its online training class must be outstanding to beat the offline civil servant exam training competitors. Zhang had lots of fans, but it was not enough for the company to develop further. The price of its online training must be much lower than the market price. As the price of Huatu was about RMB 2,000 yuan, Zhang's team set its price to RMB680, a balanced cost price. Is the price attracting? Zhang was very nervous about it because if it was two high and exceeded the users' expectation, the users were reluctant to pay, and if it was two low, the users might look down upon the quality. Finally, the systematic class realized high sales because of its high cost performance. In 2015, the sales of the civil servant examination training systematic class of Fenbi maintained a rapid growth. Then some members of the team proposed that since the gross profit of the systematic class was considerable, could the members hold other classes in their idle time to get more profit? Some users also left message on Weibo that they hoped Fenbi could provide sprint class and Q&A class. Therefore, Zhang launched sprint classes of RMB90, which was sold separately but offered to the users of the systematic class for free. In the first half of 2015, Fenbi offered 10000 sprint classes with an operating income of RMB1 million, of which the profit reached more than RMB0.9 million, net of the remuneration for teachers, RMB 80000. The sprint class increased the profit, but in the long run, some problems also arose. For example, Zhang found that the sales of the systematic class declined, and probability of failing the exam also increased because some users only participated in the sprint class. It affected the reputation of Fenbi. Furthermore, the service process for the sprint class was not as good as the systematic class. Considering these reasons, Zhang's team resolutely gave up the sprint class. From then on, Zhang's team focused on the systematic class. They spent all of their energy and resources on the main objective and actively improved the products according to the feedback of users. In 2015 and 2016, Fenbi achieved satisfactory performance in the civil servant exam training market. Someone suggested Zhang to increase the price of the systematic class, but Zhang refused. Instead, he continued to focus on the continual optimization of products. In 2017, the costs of the systematic class kept rising, and Zhang's team decided to increase the price. At the inception, they only provided online education services, but later the students requested them to provide printed teaching materials for the online education classes they offered. Zhang's team decided to publish books of the teaching materials. They chose the best paper and even additional additives to protect the eyesight of students, and in order to enhance the style of the books, they choose the straight stitching binding method. Besides, they engaged a special design studio to carry out the design of cover and the layout of text to improve the visual comfort of users. All these improvement work inevitably led to an increase in cost, and price of RMB 680 for the systematic class was insufficient to cover the cost. Zhang's team decided to increase by RMB200. At that time, Zhang was afraid that the price increase would affect sales. Fortunately, that did not affect the enthusiasm of the students significantly, because Fenbi had won good reputation relying on its perfect services to the users in the past three years. In 2017, the operating revenue in two months exceeded RMB100 million, and the number of fixed users exceeded 300000. Fenbi seized the civil servant exam training market and took lead in the online civil servant exam training market. On August 22, 2017, Zhang Xiaolong was made a trending topic on the Internet because it was reported that pornography was found in Xiaoyuan Search. Through investigation in the backend of the YUAN questions bank, it was found that the IP address of the pornographic account on the platform was possibly the office address of the CEO of Baidu Homework Help. Zhang Xiaolong directly blamed Baidu Homework Help and Baidu in his Weibo, and later Baidu filed a lawsuit against Zhang Xiaolong on the grounds of insulting and slandering. Taking this opportunity, Zhang Xiaolong promoted the brand of Fenbi, and turned the situation around for the better. Fenbi did not suffer from any adverse effects due to the "war" with Baidu Homework Help. Fenbi had never stopped thinking about how to maintain the competitiveness of its product? Instead of copying other operation modes, the team believed that education itself needed to be iteratively updated, especially for Fenbi that offered services in the later stages. Fenbi made innovations in the following aspects: (1) Iteration of employees. For the famous teachers who advocated personality, Fenbi invited them to join the team and improved their teamwork skills. Even for other supporting positions, Fenbi also attached great importance in the recruiting. For example the customer service employees are mostly fresh graduates. Fenbi provided work skills training for newcomers and required the employees to think independently. For example, Fenbi required the customer service department to draft a report every year to summarize the issues reflected by the users in the year and propose their solutions. Furthermore, Fenbi offered higher salary than other companies in the industry. (2) Product evolution. The books directly used by the users are constantly updated. Fenbi is willing to share with consumers. At present, high product barriers have been established for the books of Fenbi. For example, through the App, the most important part in the product evolution, the users can import the job list they have applied for into the platform to view the rankings. (3) Service upgrade. Initially Fenbi offered learning materials after the students paid the tuition, later Fenbi established a QQ communication group in which the head teacher would send the relevant exam materials to the students. However, the users were not active. In order to improve the enthusiasm of users, Fenbi took a series of measures such as knowledge evaluation and exam before entering the QQ group, and making audios and videos of boring text materials, etc. These updates are all based on user feedback. Fenbi completed its own iteration and update to provide meticulous and thoughtful services to the students. Instead of expensive advertising, Fenbi spent a lot on product research and development to serve core users. It was well recognized by the users. In 2018, the number of applicants for the national civil servant examination reached a record high but the pass rate decreased year by year. Competition became fiercer and the civil servant examination training market had a bright future. Applicants preferred to select online training because it could not only protect their personal privacy, but also save the time for commuting, especially for the applicants in the third- and fourth-tier cities and the front-line civil servants who are preparing for the exam, who are ignored by offline civil servant examination institutions. Fenbi can meet the needs of them. At the inception, Fenbi made efforts to attract attention and build its brand by means of the question bank and intelligent modification system. After that, it conducted online live streaming, book sale, and offline interview classes. Under the extensive participation of technicians, the team conducted in-depth research on the examination questions, evaluated the students learning level by Al technology, and based on this, designed personalized questions and providing students with one-to-one Q&A class. The team actively collected feedback to update the question bank, and invited famous teachers to join the team to obtain professional analysis of exam questions. At the same time, it also provided simulated exam environment based on the real exam questions, increased the time limit for exam and intelligent correction to get true experience. Then the team opened up different learning materials such as question banks, materials, videos, and provided standardized courses and content to complete the channelization transformation. The profit of Fenbi, although not high, was maintained at a relatively reasonable level. Fenbi continued to add content, products and services. The software version was updated more than 20 times a year, and details such as background services, class teachers, and teaching assistants were also continuously optimized. All of these have driven Fenbi to gradually become the leader of the online civil servant examination training market. The huge online civil servant examination training market attracted numerous copycats. They offered RMB590 systematic class, as compared with Fenbi's systematic class of RMB680. But they have gradually disappeared over time. Zhang Xiaolong said that RMB680 was a price determined through repeated verification while allowed for a certain corporate profit. The competitor who offered a price of lower than RMB680 was unlikely to remain profitable. Zhang's team believed that their real competitor was piracy, not other online civil servant examination training institutions. In order to compete with the terrible pirates, Fenbi allowed its course to be played repeatedly. In addition, Fenbi offered more books and workbooks, online Q&A, and allowed the users to change the play speed of course, pause the play, and take notes on the interface. Through continuous optimization of its products, Fenbi improved the product barrier to a level that is unattainable for the pirates. From 2015 to 2017, the education live stream industry emerged and the number of registered users of the online platforms increased significantly. In particular, the cumulative number of registered users of Zhonggong increased from 352,000 in 2015 to 2.574 million in 2017, and that of Huatu increased from 958,000 in 2015 to 2.603 million in 2017. Huatu invested to acquire 30% shares of an online civil servant examination training company. In 2018, Zhonggong was listed on the A-share market and Huatu proposed to be listed on Hong Kong Main Board in the form of H shares and 60% of the raised funds was planned to be used for offline business expansion and network construction. The leaders of civil servant examination training industry have embarked on the road of the capital investment and entered the network market with high capital strength. It is uncertain whether Fenbi could maintain its position in the online civil servant examination training market. The success of Fenbi in the training and education industry is inseparable from the Internet, artificial intelligence and big data technologies. These technologies brought great benefits to Fenbi, but also for this reason, it attracted many potential competitors. What a competitive strategy should Fenbi develop in the face of these visible and potential competitors? The core team had made intense discussions. Some executives believed that the rapid rise of Fenbi in just a few years showed that focusing on core products and core users was a practical and feasible route that was proved proper by the market. Although some competitors may copy the model of Fenbi, Fenbi could expand its advantages together with the competitors as long as it insisted on the existing model. It was expected that in the coming years, the civil servant examination training market would continue to maintain a steady upward trend, and the strategy of focusing on core products and continuously optimizing services would not only enable Fenbi to maintain steady growth, but also avoid many potential risks. However, other executives believed that as compared with offline civil servant examination training organizations, the advantage of Fenbi was that it was based on the platform, and a company could only maintain sustainable development by giving full play to its own advantages. Fenbi had made considerable success in the civil servant examination training market, but this market is only a relatively niche market in the entire training market. Fenbi will lose development opportunities if it is self- satisfied. In the long run, Fenbi should, while retaining the existing operation mode, turn its focus of business from the civil servant examination training to other vocational examination training, ultimately realizing overall development. However, abandoning a safe route and turning to a relatively unfamiliar field will also bring great risks