Covers the history of Hermes, a large telecommunications and network equipment company, as it grows from a single business firm to a diversified firm from 1980-95. Examines the use of entrepreneurial subsidiaries for product development and fast growth. Other issues include the challenges of managing ambidextrous organizations and the problems a CEO faces in keeping control of fast growing divisions. A rewritten version of an earlier case.
Swot Analysis of "Hermes Systems" written by Michael L. Tushman, Daniel B. Radov includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hermes Ambidextrous facing as an external strategic factors. Some of the topics covered in Hermes Systems case study are - Strategic Management Strategies, Innovation, Leadership, Organizational culture, Organizational structure, Risk management and Organizational Development.
Some of the macro environment factors that can be used to understand the Hermes Systems casestudy better are - – increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , increasing commodity prices, digital marketing is dominated by two big players Facebook and Google,
technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hermes Systems case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hermes Ambidextrous, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hermes Ambidextrous operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Hermes Systems can be done for the following purposes –
1. Strategic planning using facts provided in Hermes Systems case study
2. Improving business portfolio management of Hermes Ambidextrous
3. Assessing feasibility of the new initiative in Organizational Development field.
4. Making a Organizational Development topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hermes Ambidextrous
Strengths Hermes Systems | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hermes Ambidextrous in Hermes Systems Harvard Business Review case study are -
Diverse revenue streams
– Hermes Ambidextrous is present in almost all the verticals within the industry. This has provided firm in Hermes Systems case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Low bargaining power of suppliers
– Suppliers of Hermes Ambidextrous in the sector have low bargaining power. Hermes Systems has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hermes Ambidextrous to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Hermes Ambidextrous has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Hermes Systems - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Hermes Ambidextrous has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Hermes Systems Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– Hermes Ambidextrous has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hermes Ambidextrous to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Hermes Systems Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to lead change in Organizational Development field
– Hermes Ambidextrous is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Hermes Ambidextrous in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Hermes Ambidextrous is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Hermes Ambidextrous is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Michael L. Tushman, Daniel B. Radov can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Hermes Ambidextrous digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hermes Ambidextrous has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Learning organization
- Hermes Ambidextrous is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Hermes Ambidextrous is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Hermes Systems Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Organizational Development industry
– Hermes Systems firm has clearly differentiated products in the market place. This has enabled Hermes Ambidextrous to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Hermes Ambidextrous to invest into research and development (R&D) and innovation.
Weaknesses Hermes Systems | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hermes Systems are -
High operating costs
– Compare to the competitors, firm in the HBR case study Hermes Systems has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hermes Ambidextrous 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Hermes Ambidextrous has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Hermes Ambidextrous supply chain. Even after few cautionary changes mentioned in the HBR case study - Hermes Systems, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hermes Ambidextrous vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Hermes Systems HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Hermes Ambidextrous has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Hermes Systems, it seems that the employees of Hermes Ambidextrous don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hermes Ambidextrous is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Hermes Systems can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Hermes Ambidextrous has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Hermes Systems should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– It come across in the case study Hermes Systems that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Hermes Systems can leverage the sales team experience to cultivate customer relationships as Hermes Ambidextrous is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study Hermes Systems, it seems that company is thinking about the frontier risks that can impact Organizational Development strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Interest costs
– Compare to the competition, Hermes Ambidextrous has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Capital Spending Reduction
– Even during the low interest decade, Hermes Ambidextrous has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Opportunities Hermes Systems | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Hermes Systems are -
Creating value in data economy
– The success of analytics program of Hermes Ambidextrous has opened avenues for new revenue streams for the organization in the industry. This can help Hermes Ambidextrous to build a more holistic ecosystem as suggested in the Hermes Systems case study. Hermes Ambidextrous can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Hermes Ambidextrous can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Loyalty marketing
– Hermes Ambidextrous has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hermes Ambidextrous to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Hermes Ambidextrous to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Hermes Ambidextrous to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hermes Ambidextrous is facing challenges because of the dominance of functional experts in the organization. Hermes Systems case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– Hermes Ambidextrous can use the latest technology developments to improve its manufacturing and designing process in Organizational Development segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hermes Ambidextrous can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Hermes Systems, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Hermes Ambidextrous can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Hermes Ambidextrous to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Better consumer reach
– The expansion of the 5G network will help Hermes Ambidextrous to increase its market reach. Hermes Ambidextrous will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hermes Ambidextrous can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hermes Ambidextrous in the consumer business. Now Hermes Ambidextrous can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Hermes Systems External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hermes Systems are -
High dependence on third party suppliers
– Hermes Ambidextrous high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Shortening product life cycle
– it is one of the major threat that Hermes Ambidextrous is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hermes Ambidextrous can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Hermes Systems .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Hermes Ambidextrous will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Hermes Ambidextrous needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Hermes Ambidextrous.
Stagnating economy with rate increase
– Hermes Ambidextrous can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology acceleration in Forth Industrial Revolution
– Hermes Ambidextrous has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Hermes Ambidextrous needs to keep up with the evolution of technology in the Organizational Development sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Consumer confidence and its impact on Hermes Ambidextrous demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Regulatory challenges
– Hermes Ambidextrous needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Organizational Development industry regulations.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Hermes Ambidextrous in the Organizational Development sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Hermes Systems Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Hermes Systems needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Hermes Systems is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Hermes Systems is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Hermes Systems is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Hermes Ambidextrous needs to make to build a sustainable competitive advantage.
