By 1992, RailTex, Inc., had acquired and was operating 23 geographically separate short-line railroads (feeder lines for larger railroads) in Mexico, Canada, and primarily in the United States. Founded in 1977 with $500,000 of capital as a railcar leasing company, the company began buying and operating short-line railroads in 1984. Since 1988, revenues have increased an average of 35% per year, up to $39 million in 1992, a growth rate far outstripping that of the old, mature railroad industry as a whole. Bruce Flohr, the founder, believed the company's success was due largely to his decentralized management system and emphasis on cost controls and marketing.
Swot Analysis of "RailTex, Inc. (A)" written by Norman A. Berg, James Weber includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Railroads Railtex facing as an external strategic factors. Some of the topics covered in RailTex, Inc. (A) case study are - Strategic Management Strategies, Growth strategy, Marketing, Operations management, Organizational culture, Organizational structure, Risk management and Organizational Development.
Some of the macro environment factors that can be used to understand the RailTex, Inc. (A) casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, technology disruption, talent flight as more people leaving formal jobs,
increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of RailTex, Inc. (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in RailTex, Inc. (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Railroads Railtex, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Railroads Railtex 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 RailTex, Inc. (A) can be done for the following purposes –
1. Strategic planning using facts provided in RailTex, Inc. (A) case study
2. Improving business portfolio management of Railroads Railtex
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 Railroads Railtex
Strengths RailTex, Inc. (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Railroads Railtex in RailTex, Inc. (A) Harvard Business Review case study are -
Successful track record of launching new products
– Railroads Railtex has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Railroads Railtex has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Organizational Resilience of Railroads Railtex
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Railroads Railtex does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Railroads Railtex in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Railroads Railtex has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Low bargaining power of suppliers
– Suppliers of Railroads Railtex in the sector have low bargaining power. RailTex, Inc. (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Railroads Railtex to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Railroads Railtex is one of the most innovative firm in sector. Manager in RailTex, Inc. (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Railroads Railtex is present in almost all the verticals within the industry. This has provided firm in RailTex, Inc. (A) 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.
Learning organization
- Railroads Railtex 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 Railroads Railtex is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in RailTex, Inc. (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the RailTex, Inc. (A) 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.
High brand equity
– Railroads Railtex has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Railroads Railtex to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Organizational Development industry
– RailTex, Inc. (A) firm has clearly differentiated products in the market place. This has enabled Railroads Railtex to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Railroads Railtex to invest into research and development (R&D) and innovation.
Training and development
– Railroads Railtex has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in RailTex, Inc. (A) 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.
Weaknesses RailTex, Inc. (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of RailTex, Inc. (A) are -
Capital Spending Reduction
– Even during the low interest decade, Railroads Railtex 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the RailTex, Inc. (A) 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 Railroads Railtex has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Railroads Railtex needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Interest costs
– Compare to the competition, Railroads Railtex 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.
No frontier risks strategy
– After analyzing the HBR case study RailTex, Inc. (A), 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Railroads Railtex is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study RailTex, Inc. (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study RailTex, Inc. (A), in the dynamic environment Railroads Railtex has struggled to respond to the nimble upstart competition. Railroads Railtex has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring
– The stress on hiring functional specialists at Railroads Railtex 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.
Slow to strategic competitive environment developments
– As RailTex, Inc. (A) HBR case study mentions - Railroads Railtex takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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 Railroads Railtex supply chain. Even after few cautionary changes mentioned in the HBR case study - RailTex, Inc. (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Railroads Railtex vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Railroads Railtex has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Opportunities RailTex, Inc. (A) | 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 RailTex, Inc. (A) are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Railroads Railtex can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Organizational Development industry, but it has also influenced the consumer preferences. Railroads Railtex can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Railroads Railtex 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.
Developing new processes and practices
– Railroads Railtex can develop new processes and procedures in Organizational Development industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Organizational Development industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Railroads Railtex can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Railroads Railtex can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Low interest rates
– Even though inflation is raising its head in most developed economies, Railroads Railtex can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Railroads Railtex 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 Railroads Railtex to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Railroads Railtex in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Organizational Development segment, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Railroads Railtex is facing challenges because of the dominance of functional experts in the organization. RailTex, Inc. (A) 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.
Learning at scale
– Online learning technologies has now opened space for Railroads Railtex 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Railroads Railtex 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, RailTex, Inc. (A), 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. Railroads Railtex can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Railroads Railtex can use these opportunities to build new business models that can help the communities that Railroads Railtex operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Threats RailTex, Inc. (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study RailTex, Inc. (A) are -
Increasing wage structure of Railroads Railtex
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Railroads Railtex.
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 Railroads Railtex.
Technology acceleration in Forth Industrial Revolution
– Railroads Railtex has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Railroads Railtex 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.
High dependence on third party suppliers
– Railroads Railtex 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Railroads Railtex with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Railroads Railtex in the Organizational Development sector and impact the bottomline of the organization.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Railroads Railtex business can come under increasing regulations regarding data privacy, data security, etc.
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.
Easy access to finance
– Easy access to finance in Organizational Development field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Railroads Railtex can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Railroads Railtex needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
Environmental challenges
– Railroads Railtex needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Railroads Railtex can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
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. Railroads Railtex 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.
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.
Weighted SWOT Analysis of RailTex, Inc. (A) 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 RailTex, Inc. (A) 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 RailTex, Inc. (A) 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 RailTex, Inc. (A) 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 RailTex, Inc. (A) 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 Railroads Railtex needs to make to build a sustainable competitive advantage.