Alloy.com Harvard Case Solution & Analysis

Alloy.com Case Study Solution

Decision about AOL Offer

As the Diamond was offering Alloy for the last years to jointly open a teen shopping area, because he believed in the huge revenue potential of such project. Decision regarding offer doesn’t depends on its effect on IPO as, Alloy can generate enough cash without even accepting the offer, so the major point of concern is that, whether $2 million cost is worth investing with AOL or Alloy can find even more attractive opportunity, which would help the company grow its revenues and grow its customer base in the long-run. As with $2 million, Alloy can build even more than 4 million catalogues, which has the potential to grow the customer base by increasing registrations of Alloy along with more revenues and site visits. Moreover, that amount can also be used for Television promotions, which might help the company in forming a strong brand image in the market. On the other hand not accepting the deal has certain costs associated with it, as the AOL’s site is major of traffic to its website. More importantly, if the competitor allied with the AOL, it would affect the business of Alloy in the long-run and also might affect the share price of the company. Given the increasing importance of online users and future growth potential, Alloy would need a strong partner to increase positive word of mouth and customer reach in the future. Therefore Alloy should accept the offer of the AOL, this would increase the customer base and also provide diversification in to teen market, giving it a benefit to know about the preferences of the new generation.

 

Long-term Business Strategy of Alloy

As the Generation Y is the one which is very different from its predecessors in terms of both preferences and decision making. The new generation will be relying more on peer pressure to make decision, they will be more diverse and give safety, security and durability more consideration. More than 50% of Generation Y will like to take their decisions by themselves and like to spend their money on extreme sporting events, concerts, hiking’s etc. So in anticipation of such future generation, the Alloy should focus more on web markings and improve their online services.

The long term Strategy of the Alloy should be to increase its customer base, revenue base and decrease the operating expense because of which the company is going through an increase in loss from the year 1997 to 1999. To accomplish this strategy of increasing revenue and decreasing operating cost is to sign a deal with the AOL which is significant source of traffic for Alloy’s website. One of the advantage of signing deal with the AOL is that, Alloy will get competitive advantage over its competitors by acquiring online teen store at AOL. This deal is also expected to boost the share price of the Alloy. The deal with the AOL will also help Alloy to decrease the operating expenses such as marketing and selling expenses which can be reduced because huge traffic can be generated through AOL without expensing on marketing and selling activities. Although the company should adopt marketing tactics according to the preference of generation Y which is considered to be the largest customer segment for the Alloy according to the categories of product the offered. Hence the long term strategy should be concluded to changing marketing tactics according to generation Y preference including AOL deal and Alloy should consider to operate operating expense efficiently.

Positioning Statement

Alloy.com is offering an online platform for the teenagers to find their favourite apparel and accessories with customer friendly website. We value your money and time, so along with providing interaction platform and interesting activities, we also believe in providing optimal quality to our valued customers. In addition, we provide both own-labelled and teen brands like Vans, Diesel, and O’Neill etc. Moreover, we also provide facilities of sponsorship and advertising to our valued customers............

 

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