Internal Analysis
The process of internal analysis helps in identifying and evaluating an organization’s capabilities, resources, and core competencies.
Internal Assessment
The internal assessment has three main components that are resources, value chain, and core competencies. The assessment of these components helps in determining the internal strength of the company.
Resource Based Views
The resource-based view helps an organization to analyze the tangible and intangible resources that are available at the disposal of the firm and can be used. These resources are determined to develop a competitive advantage of an organization. The main aim of the model is to analyze the internal resources that assist in developing the strategies that can lead to a sustainable competitive advantage. For the purpose of developing the resource based view for Yelp, the tangible resources of the company that is financials, physical resources, and technological resources of the company are discussed. In addition to it, some of the intangible resources like human resources, innovation and creativity, and reputation are discussed to develop resource-based view .
Tangible Resources
Tangible resources are those resources which have a physical existence. These resources are of great importance and abundance of their quality can have a huge positive impact on the company. To discuss the tangible resources of Yelp, the financial ratios of the company are discussed along with its physical and technological resources .
Financial
The financial ratios of Yelp are presented in the table below.
In order to explain the financials of the company, the ratios of three year that is 2013, 2014, and 2015 is taken. The industry analysis of the company is not available. Therefore, the industry analysis of one of its competitors ‘Trip Advisor’ is taken for comparison. The financial table of Yelp determines four main ratios that are liquidity, asset management, long-term debt paying ability, and profitability. In the liquidity ratio section, two ratios current ratio and cash ratios are provided. The condition in which the liquidity ratio of the company is high is considered to be beneficial for the company. On viewing the current ratios of the company for three years, it is noticed that the current ratio of the company is decreasing. It is not an alarming situation for the company as the value of the ratio is more than one which means that the company has a strong ability to pay off its debts. The values of the ratio more than one is a good sign, but the company must also have its concern over the decreasing trend in the ratio as it can be harmful to the company in future. Similar is the case with cash ratio, Yelp’s cash ratio are decreasing but they are above one which means the company has an ability to pay off its debts. The company needs to improve its financial activities as the trend of the analysis is not perceived to be favorable to the company. On comparing the liquidity ratio of Yelp with its competitors, it is observed that Yelp has a higher ability to pay its debts .
There are several ratios that have been calculated in the asset management. The ratios related to raw material, work-in-process, and finished goods turnover in days is not mentioned because of the nature of the business. The account receivable turnover in days of the company shows that the ratio is decreasing every year, but while comparing to its customers, the company’s performance in receiving payments from its customers is poor. Trip Advisor on an average recovers the receivables in 8.29 days whereas, Yelp recovers it in 12.44 days. The accounts payable turnover in days of the company has a fluctuating trend as it significantly increased in 2014 and dropped again in 2015. On considering the value of 2015, it is noted that Yelp takes17 days to pays of its short-term debts whereas its competitors pays it quickly in less than six days. It represents that Yelp finds it difficult to make payments to the creditors. The cash conversion cycle of the company also shows a fluctuating trend. The decrease in the cash current ratio is beneficial for the company as it depicts the overall health Yelp is good but on its comparison with the competitors it can be stated that Trip Advisor has a relatively low cash conversion cycle which proves it to be better than Yelp in this function. The fixed asset turnover of Yelp has a fluctuating trend has increased in the previous year. As the higher value of fixed asset turnover is favorable for the company, it is noted that the company has an advantage of the customer in this section .
The long-term debt paying ability includes two ratios that are a long-term debt to total capitalization and cash flow coverage ratio. The long-term debt to total capitalization of Yelp is less than its competitor. Therefore, it can be stated that Yelp is stronger financially and has an ability to pay off its debts. Cash flow coverage ratio of Yelp shows a fluctuating trend as it increased in 2014 and decreased in 2015. The value of cash flow coverage value in should be one or more than one in order to be favorable for the company. On comparison, it is noted that the value of both the selected companies is greater than one but the value of Yelp is much higher. Therefore, Yelp has more financial strength as compared to its competitors .
Physical
The core business of Yelp is online local advertising and brand advertising. In addition to it, the website of the company includes features like creating a profile, add friends that can be searched through Facebook, and chatting on inline forums. Moreover, Yelp also allows other facilities of making reservations in a restaurant. People have an option of giving reviews about different business and rate them on their products and services. The company does not have much of physical resources at its option because of the nature of the business. Therefore, limited or no physical resources is not an area of concern for the company .
Technological
Yelp is a social networking, and an audience sourced local business website. The company earns its revenues through advertisement of local business and brand advertisements that are displayed as text ads. The company uses a cost per click (CPC) model that helps them in identifying the number of clicks that have been made by the customers. With the help of this model, the company is able to direct the traffic to the websites of the brands and businesses that pay for advertisements. The advertised brands and business make payment to the company when their ad is clicked on by the customers. Search engine results page (SERP) plays an important role to function the services of the company in an effective manner. SERP is the page that is displayed to the searcher when there is an issue in doing a search. It also provides a list of other results and ads which are closest to the original search of the company. The technological model used by the company is very efficient as it helps the company to find out the amount of traffic per day. With the help of the results of the per day traffic, the company is able to estimate the number of customers that will visit the website. The CPC model helps the company to keep a record of the customers that have visited the website. The SERP model is also effective as it allows the company to find out what is searched for the customers and the things they are not able to find. The company can make effective strategies to excel their website and attract more customers to their website from the findings of these models .
Intangible Resources
Intangible resources are those resources which have no physical existence. These resources are also of great importance as they help in realizing the market worth of the company. The intangible assets of the company are its business methodologies, copyrights, goodwill, patents, and brand recognition. On the analysis of the intangible resources, the company is able to make effective strategies that can be beneficial for the company in the long run. The intangible assets of Yelp can be determined by discussing its human resources, innovation and creativity, and reputation .
Human Resources
The company has more than 3,800 employees working for them which help it to expand the business. It is reported that almost 60% of the company’s employees are sales representatives. The employees at different level have different tasks. As the company is also involved in training the small businesses to respond to their customers, therefore, some of the employees are involved in hosting classes for the owners of small businesses. The employees are also involved in organizing parties for prolific reviewers and encourage the reviewers from their messages. Some of the employees are associated in making contracts with the local businesses and brands to increase the number of vendors that pay for advertisements. The employees of the company have helped the company to grow, and it is still on the verge of expansion. The company provides its employees with different benefits which help the company to retain its employees. The employees working at Yelp are satisfied as the employee turnover rate of the company is low. Overall, the workforce of the company is very competitive and devoted towards their work. The efficient controlling of lower staff by the management is reflected in the financials of the company .
Innovation and Creativity
Innovation and creativity are very necessary for the current era as it helps in attracting more customers. Innovation always attracts people and Yelp has been innovative by providing a platform for businesses to promote themselves. The company provides an opportunity for the customers by providing a platform through which they ca give their views on different businesses. Some of the reviews provided by the customers are very creative and followed by many. As far as innovation and creativity within the organization or the business model of the company are concerned, Yelp has been able to attract a lot of customers and has expanded in different parts of the world. It has only been possible because of innovation and creativity of the team that is associated with the company. The company is creative in promoting and advertising the brands and attract the customers towards the site. The high amount of users that visits the site are proof that the company uses innovative techniques and is creative in attracting the customers towards its activities. In addition to it, the creativity of the company to attract small businesses to advertise themselves through their platform .
Reputation
The company was founded in 2004 and within the span of six years the company had a roaring revenue of $30 million. The innovation and creativity of the company have helped the company to attract many customers to their platform. It was noted that by 2010 the company had published over 4.5 million crowd-sourced reviews. Yelp maintained its standards and earned a good reputation in the market which helped the company to expand throughout Europe and Asia. From the current analysis, it is noted that the company has around $135 million monthly visitors, and it publishes nearly 95 million reviews. These statistics helps in determining the reputation of the company in the market. From the analysis of the reputation, it is observed that the company holds a reputable place in the market with millions of monthly visitors .
Value Chain Analysis
The term value chain is referred to a collection of activities which a firm performs while operating in a specific industry that helps in delivering valuable products or services in the market. The process of the value chain is divided into two categories that are primary activities and supportive activities. The primary activities in value chain analysis consist of inbound logistics, operations, outbound logistics, marketing and sales, and service . The components in the supporting activities are procurement, human resource management, technological development, and infrastructure. The analysis of value chain helps in understanding the process of value chain and the way all the activities of the organization are conducted. From the analysis of value chain, an organization can figure out the loopholes (if any) and make strategies to make this process more efficient . The value chain analysis of Yelp is provided in the provided in the table below.
Primary
The primary activities are those activities where the high value for the customers is created. It contains all the work that results in making the final product that the customer receives. The primary activities are essential because the end product that is created after the completion of these activities is important to attract the customers and will help in the growth of the organization. The primary activities of Yelp do not implement all the functions of the primary activities because of the nature of the business .
Inbound Logistics
The process of inbound movement of material from to the manufacturing plant or warehouse is called inbound logistics. The inbound logistics activities of the companies depend on upon the nature of the business. The inbound logistics can be easily discussed when a product is manufactured . As for service providers, it is difficult to elaborate the function of inbound logistics as most of the service companies do not perform such actions. Similar is the case with Yelp, as the company provides services to the customers. No physical item or software is kept in storage for the customers nor does any kind of internal movement of objects or services take place to complete the operational activities of the company. Therefore, it can be rightly claimed that the inbound logistics of Yelp is nonexistent. The only way to fit in the activities of Yelp in the category of inbound logistics is that they take information from different businesses and post it on their website.
Operations
The operational activities of a company are those activities which involve the utilization of labor, raw material, etc. to develop a product. In supply chain terms, the usage of material and labor is referred to inputs whereas, the final product is called the output. Mostly, the physical product has a high variety of operation activities that also differ from each other but in the case of the service industry, the operational activities are less . It may vary depending upon the services that are provided by the organization. Yelp does not have any physical product that it can offer to its customers, but some of the operational activities of the company include the collection of data of all the small businesses and presenting and marketing it to the customers. The company also render training services to the small business owner who helps them in dealing with the customers. The maintenance of the website is the main operational activity of Yelp as it allows the company to attract more customers. The customers of the company are satisfied with the platform it provides to them .Therefore, it can be said that the company has efficient operational activities.
Outbound Logistics
The outbound logistic is the movement of final product to the customers. The process flow of outbound logistics starts from the end of the production line and finishes till the product or service has reached to the end user. The value chain function of outbound logistics is also related to the manufacturing of the products . It is also used in the service industry to some extent. In the case of Yelp, the outbound logistics function of the company is to make their services available to the customers. Making their website available for the customers to use is a part of outbound logistics of the company. The company also has a function that allows the customers to write reviews about the small business and restaurants to make the people aware about the quality of products. Yelp has been efficient is performing its outbound logistics as the customers have given positive feedback on the website of the company and many people consider it to be a great place to socialize and express their views related to the local products they have experienced.
Marketing and Sales
Marketing and sales one of the most important features of any business as it helps the company to bring awareness to the public about the products and services that are being offered. The marketing team plays a key role in the success of any business as they help in determining the needs of the people and the type of products and services are required in the market. It helps in determining the target market of the company and ensures that the customers are satisfied with the products and services of the company that is being offered to them. Yelp has more than 3,800 employees that are working for the company to ensure that the company is able to cater the needs of the customers. At Yelp, out of the total number of employees 60% are a part of marketing and sales department. The company gives high importance to this function of the value chain as it considers it to be an important feature in the success of the company. The marketing team develops efficient strategies to attract the customers. It can be claimed that the marketing and sales strategies of the company are very effective as they have helped the company to increase the number of viewers that visit the place and also expand in different parts of the world .
Service
As all the functions of the value chain analysis are important, the function of services is also equally important. The function of services is important as it helps in developing good relations with the customers of the company even after purchasing the products and services. The reason for the success of most of the companies is its services which they offer to the customers of the company. It is the responsibility of the company to make sure that the customers of the company are able to utilize the products and services to the fullest. It is deemed to be an important factor as it helps the company to gain competitive advantage. It is observed that most of the companies have failed in being successful because they lack such functions. The final product of Yelp is the services that it provides to the customers. The services of the company are available for the customers 24/7. People can log in to their website and search for the products offered by local business owners. From the analysis, it is noted that the company provide full services to the customers and helps them take full benefits of their services. N the case of providing training to the small business owners, the company helps them to deal with the reviews of the customers and help them in developing strategies to overcome the challenges that are faced by them .
Supportive
The main role of the supportive activities is to facilitate the performance of primary activities of the company. The main elements of supportive activities are discussed below.
Procurement
The process of procurement involves purchasing of inputs like raw material, supplies, and equipment. The company does not purchase raw materials or equipment. Therefore, there are no procurement activities conducted at Yelp.
Technology Development
Technology is an important factor that can help in the growth of a company. Technological advancement supports the supply chain activities and makes the work much easier for the company. Yelp had adopted CPC model which helps the company to determine the number of customers that have viewed the website of the company. As the performance of the company is effective, it can be claimed that the company has adopted efficient technology that helps the company to grow .
Human Resource Management
Yelp has an effective human resource management as it hires qualified and experienced people to work with the organization. The company follows standardized method to recruit, hire, and train an employee so that they can perform in an efficient manner. The company provides compensation and other benefits to the customers which help them in retaining the employees.
General Administration
There are three levels of the organizational chart of Yelp. The first level is the board which includes the CEO, Chairman of the Board, and another director. The second level is of upper-level management which includes CFOs, COOs, and heads of different departments. The upper management of the company reports to the CEO. The third level of the company includes the heads of different marketing and sales departments who report to the senior vice president of marketing .
Core Competency Analysis
The core competency analysis helps the company to develop a competitive advantage in the industry that has a lasting effect. In this section organization capabilities and key success factors of Yelp are identified.
Organizational Capabilities
The organizational capabilities include specific knowledge, skills, and abilities along with VRIO analysis.
Specific Knowledge, Skills and Abilities
Specific knowledge, skills, and abilities of the company will help in determining the capabilities of the organization. The specific knowledge that Yelp has is the information of the local business within a specified region. The company has skills and abilities to train the small business owners to respond to the reviews and the steps that need to be taken for further improvement.
VRIO Analysis
VRIO is a business analysis model which is used to evaluate almost all the resources and capabilities of a company. The framework has four questions on value, rarity, imitability, and organization. From the analysis, it is observed that the company has the ability neutralize the external threat with the available resources which adds to the values of the company. The question of rarity determines that few people at Yelp control resources. The cost of imitability of the products and services of Yelp is very low, and others can easily imitate the capabilities of the form. The last question is related to the organization from which it is known that Yelp is ready and organized to capture the value in the market. The VRIO Analysis in a tabular form is provided below .
Key Success Factors
There are several key success factors at Yelp, which helps the company to expand itself in different parts of the world. Some of the important key success factors are mentioned below .
Providing an opportunity to the customers to write a review and rate the products. It has helped the company to increase the number of visitors on daily basis. The customers find it exciting and has made it a social networking site where they share each other’s views and add friends as well.
Marketing strategies of Yelp play a major role in its success. More than 50% of the company’s employees are associated with the marketing department, and they have been successful in attracting the customers. The effective marketing strategies have enabled the company to get more than 4.5 million visitors on its site in a month.
The training of small business owner has helped the company to improve its services and attract more businesses towards its site. By training more business owners, the company is able to generate more profit by marketing their products.
References
Grünig, R., & Kühn, R. (2015). The Strategy Planning Process: Analyses, Options, Projects. Berlin: Springer.
Lawrimore, E. W. (2011). The 5 Key Success Factors: A Powerful System for Total Business Success. Raleigh: Lulu.com.
Sekhar, G. V. (2009). Business Policy and Strategic Management. New Delhi: I. K. International Pvt Ltd.
Yelp Inc. (2015). Yelp Management. yelp.com: http://www.yelp.com/management
