Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Organizational Development
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund
In 2005, Relational Investors, a registered investment advisor, launched a proxy contest to gain two seats on the board of directors of Sovereign Bancorp. Relational accused Sovereign of operational mismanagement and poor corporate governance, representing a breach in fiduciary responsibility by the company's board of directors. Relational claimed that a board reconstitution was in the best interest of investors. Subsequently, Sovereign entered into a controversial three-way deal with Banco Santander Central Hispano of Spain, which thwarted Relational's efforts by diluting its ownership position and by giving Santander board seats and veto power over the removal of Sovereign's CEO. Discusses the tactics used by Relational Investors to attempt to derail the Santander deal and the tactics used by Sovereign Bancorp to defend it.
Swot Analysis of "Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund" written by David F. Larcker, Brian Tayan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Relational Sovereign facing as an external strategic factors. Some of the topics covered in Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund case study are - Strategic Management Strategies, Performance measurement and Organizational Development.
Some of the macro environment factors that can be used to understand the Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund casestudy better are - – geopolitical disruptions, increasing transportation and logistics costs, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, there is backlash against globalization, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google,
increasing energy prices, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Relational Sovereign, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Relational Sovereign 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 Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund can be done for the following purposes –
1. Strategic planning using facts provided in Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund case study
2. Improving business portfolio management of Relational Sovereign
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 Relational Sovereign
Strengths Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Relational Sovereign in Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund Harvard Business Review case study are -
Organizational Resilience of Relational Sovereign
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Relational Sovereign does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Relational Sovereign 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 David F. Larcker, Brian Tayan 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.
High switching costs
– The high switching costs that Relational Sovereign 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.
High brand equity
– Relational Sovereign has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Relational Sovereign to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Relational Sovereign in the sector have low bargaining power. Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Relational Sovereign to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Relational Sovereign has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Relational Sovereign 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.
Cross disciplinary teams
– Horizontal connected teams at the Relational Sovereign are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Relational Sovereign digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Relational Sovereign 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.
Ability to lead change in Organizational Development field
– Relational Sovereign 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 Relational Sovereign in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Relational Sovereign 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 Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund 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.
Learning organization
- Relational Sovereign 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 Relational Sovereign is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund are -
Low market penetration in new markets
– Outside its home market of Relational Sovereign, firm in the HBR case study Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at Relational Sovereign 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 cash cycle compare to competitors
Relational Sovereign 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.
High bargaining power of channel partners
– Because of the regulatory requirements, David F. Larcker, Brian Tayan suggests that, Relational Sovereign is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund 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 Relational Sovereign has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Relational Sovereign 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.
Aligning sales with marketing
– It come across in the case study Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund 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 Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund can leverage the sales team experience to cultivate customer relationships as Relational Sovereign is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund, is just above the industry average. Relational Sovereign needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund, it seems that the employees of Relational Sovereign 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.
Increasing silos among functional specialists
– The organizational structure of Relational Sovereign is dominated by functional specialists. It is not different from other players in the Organizational Development segment. Relational Sovereign needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Relational Sovereign to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Relational Sovereign 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.
Opportunities Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund | 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 Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund are -
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. Relational Sovereign can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Relational Sovereign 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, Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Relational Sovereign can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Organizational Development segment.
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. Relational Sovereign 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. Relational Sovereign 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Relational Sovereign 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 Relational Sovereign to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Relational Sovereign has opened avenues for new revenue streams for the organization in the industry. This can help Relational Sovereign to build a more holistic ecosystem as suggested in the Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund case study. Relational Sovereign can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Relational Sovereign can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Manufacturing automation
– Relational Sovereign 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.
Loyalty marketing
– Relational Sovereign 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.
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 Relational Sovereign in the consumer business. Now Relational Sovereign can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Relational Sovereign 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Relational Sovereign can use these opportunities to build new business models that can help the communities that Relational Sovereign operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Better consumer reach
– The expansion of the 5G network will help Relational Sovereign to increase its market reach. Relational Sovereign 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.
Threats Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Relational Sovereign 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 Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund .
Consumer confidence and its impact on Relational Sovereign 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Relational Sovereign in the Organizational Development industry. The Organizational Development industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Regulatory challenges
– Relational Sovereign 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Relational Sovereign with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Relational Sovereign
– 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 Relational Sovereign.
Technology acceleration in Forth Industrial Revolution
– Relational Sovereign has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Relational Sovereign 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.
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 Relational Sovereign.
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. Relational Sovereign 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.
Shortening product life cycle
– it is one of the major threat that Relational Sovereign is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Relational Sovereign business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund 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 Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund 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 Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund 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 Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund 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 Sovereign Bancorp and Relational Investors: The Role of the Activist Hedge Fund 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 Relational Sovereign needs to make to build a sustainable competitive advantage.
