Lehigh Steel is a specialty steel manufacturer that plummeted from record profits to record losses in less than three years, driven by an inability to distinguish between profitable and unprofitable business. The scale and growth of service activities and overhead costs in an increasingly customized product line suggests that activity-based costing (ABC) could unlock the secrets of profitability. However, the high fixed-cost structure suggests that theory of constraints (TOC) could also be relevant. Lehigh must determine how to measure profitability to rationalize its products.
Swot Analysis of "Lehigh Steel" written by V.G. Narayanan, Laura E. Donohue includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lehigh Steel facing as an external strategic factors. Some of the topics covered in Lehigh Steel case study are - Strategic Management Strategies, Costs, Financial analysis, Product development and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Lehigh Steel casestudy better are - – technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, supply chains are disrupted by pandemic , increasing transportation and logistics costs, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies,
talent flight as more people leaving formal jobs, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lehigh Steel case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lehigh Steel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lehigh Steel 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 Lehigh Steel can be done for the following purposes –
1. Strategic planning using facts provided in Lehigh Steel case study
2. Improving business portfolio management of Lehigh Steel
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lehigh Steel
Strengths Lehigh Steel | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lehigh Steel in Lehigh Steel Harvard Business Review case study are -
Highly skilled collaborators
– Lehigh Steel has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Lehigh Steel HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Lehigh Steel is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Lehigh Steel is one of the leading recruiters in the industry. Managers in the Lehigh Steel are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Lehigh Steel digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lehigh Steel 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Lehigh Steel firm has clearly differentiated products in the market place. This has enabled Lehigh Steel to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Lehigh Steel to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Lehigh Steel 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 Lehigh Steel - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Lehigh Steel in the sector have low bargaining power. Lehigh Steel has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lehigh Steel to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Lehigh Steel has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lehigh Steel to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Lehigh Steel 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.
Ability to lead change in Finance & Accounting field
– Lehigh Steel 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 Lehigh Steel in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Lehigh Steel has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Lehigh Steel 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.
Organizational Resilience of Lehigh Steel
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lehigh Steel does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Lehigh Steel | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lehigh Steel are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Lehigh Steel, in the dynamic environment Lehigh Steel has struggled to respond to the nimble upstart competition. Lehigh Steel has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Lehigh Steel, it seems that the employees of Lehigh Steel 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Lehigh Steel 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 Lehigh Steel 's lucrative customers.
High bargaining power of channel partners
– Because of the regulatory requirements, V.G. Narayanan, Laura E. Donohue suggests that, Lehigh Steel 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Lehigh Steel 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.
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 Lehigh Steel supply chain. Even after few cautionary changes mentioned in the HBR case study - Lehigh Steel, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lehigh Steel vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Lehigh Steel 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Lehigh Steel 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 Lehigh Steel has relatively successful track record of launching new products.
Skills based hiring
– The stress on hiring functional specialists at Lehigh Steel 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.
Low market penetration in new markets
– Outside its home market of Lehigh Steel, firm in the HBR case study Lehigh Steel needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Lehigh Steel has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Opportunities Lehigh Steel | 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 Lehigh Steel are -
Better consumer reach
– The expansion of the 5G network will help Lehigh Steel to increase its market reach. Lehigh Steel 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lehigh Steel is facing challenges because of the dominance of functional experts in the organization. Lehigh Steel 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lehigh Steel 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. Lehigh Steel 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.
Building a culture of innovation
– managers at Lehigh Steel 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 Finance & Accounting segment.
Manufacturing automation
– Lehigh Steel can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Using analytics as competitive advantage
– Lehigh Steel has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Lehigh Steel - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lehigh Steel to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lehigh Steel can use these opportunities to build new business models that can help the communities that Lehigh Steel operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lehigh Steel 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 Lehigh Steel to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Lehigh Steel has opened avenues for new revenue streams for the organization in the industry. This can help Lehigh Steel to build a more holistic ecosystem as suggested in the Lehigh Steel case study. Lehigh Steel can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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 Lehigh Steel in the consumer business. Now Lehigh Steel can target international markets with far fewer capital restrictions requirements than the existing system.
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 Lehigh Steel 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.
Learning at scale
– Online learning technologies has now opened space for Lehigh Steel 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.
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. Lehigh Steel can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Lehigh Steel External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lehigh Steel are -
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 Lehigh Steel in the Finance & Accounting sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Lehigh Steel, Lehigh Steel may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Consumer confidence and its impact on Lehigh Steel 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lehigh Steel 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 Lehigh Steel .
Shortening product life cycle
– it is one of the major threat that Lehigh Steel is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Lehigh Steel has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Lehigh Steel needs to keep up with the evolution of technology in the Finance & Accounting 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.
Regulatory challenges
– Lehigh Steel 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 Finance & Accounting industry regulations.
Environmental challenges
– Lehigh Steel 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. Lehigh Steel can take advantage of this fund but it will also bring new competitors in the Finance & Accounting 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. Lehigh Steel 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.
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.
Stagnating economy with rate increase
– Lehigh Steel 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.
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 Lehigh Steel.
Weighted SWOT Analysis of Lehigh Steel 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 Lehigh Steel 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 Lehigh Steel 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 Lehigh Steel 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 Lehigh Steel 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 Lehigh Steel needs to make to build a sustainable competitive advantage.
