In early 2013 the leaders of McKinsey & Co., were reflecting, as they did periodically, on the path forward for their firm. Founded in Chicago in 1926 by "James O. "Mac" McKinsey," with only a small staff in one office, the firm had grown to be a global company with more than 17,000 firm members, including more than 9,000 consultants. It was arguably the world's preeminent management consulting firm. This case describes the history of events and decisions which have led to this enviable record of success, and poses the questions before the firm's senior leaders in 2013. What should be their path forward? Could the firm continue to grow successfully with its current strategy, organization, and culture?
Swot Analysis of "McKinsey & Company" written by Jay W. Lorsch, Kathleen Durante includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Mckinsey Firm facing as an external strategic factors. Some of the topics covered in McKinsey & Company case study are - Strategic Management Strategies, Corporate governance, Globalization, Marketing, Organizational culture, Strategy execution and Organizational Development.
Some of the macro environment factors that can be used to understand the McKinsey & Company casestudy better are - – central banks are concerned over increasing inflation, there is backlash against globalization, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China,
increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of McKinsey & Company
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in McKinsey & Company case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mckinsey Firm, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mckinsey Firm 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 McKinsey & Company can be done for the following purposes –
1. Strategic planning using facts provided in McKinsey & Company case study
2. Improving business portfolio management of Mckinsey Firm
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 Mckinsey Firm
Strengths McKinsey & Company | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mckinsey Firm in McKinsey & Company Harvard Business Review case study are -
Strong track record of project management
– Mckinsey Firm is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Mckinsey Firm 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 McKinsey & Company HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Organizational Development industry
– McKinsey & Company firm has clearly differentiated products in the market place. This has enabled Mckinsey Firm to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Mckinsey Firm to invest into research and development (R&D) and innovation.
Training and development
– Mckinsey Firm has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in McKinsey & Company 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
– Mckinsey Firm has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Mckinsey Firm to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Mckinsey Firm 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 Jay W. Lorsch, Kathleen Durante 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.
Successful track record of launching new products
– Mckinsey Firm has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Mckinsey Firm 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.
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Mckinsey Firm digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Mckinsey Firm 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.
High switching costs
– The high switching costs that Mckinsey Firm 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.
Innovation driven organization
– Mckinsey Firm is one of the most innovative firm in sector. Manager in McKinsey & Company Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Mckinsey Firm 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.
Low bargaining power of suppliers
– Suppliers of Mckinsey Firm in the sector have low bargaining power. McKinsey & Company has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Mckinsey Firm to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses McKinsey & Company | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of McKinsey & Company are -
Capital Spending Reduction
– Even during the low interest decade, Mckinsey Firm 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 McKinsey & Company 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 McKinsey & Company can leverage the sales team experience to cultivate customer relationships as Mckinsey Firm is planning to shift buying processes online.
Skills based hiring
– The stress on hiring functional specialists at Mckinsey Firm 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 bargaining power of channel partners
– Because of the regulatory requirements, Jay W. Lorsch, Kathleen Durante suggests that, Mckinsey Firm 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study McKinsey & Company, it seems that the employees of Mckinsey Firm 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Mckinsey Firm 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, Mckinsey Firm 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.
Low market penetration in new markets
– Outside its home market of Mckinsey Firm, firm in the HBR case study McKinsey & Company needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study McKinsey & Company, in the dynamic environment Mckinsey Firm has struggled to respond to the nimble upstart competition. Mckinsey Firm has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study McKinsey & Company, is just above the industry average. Mckinsey Firm 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.
Products dominated business model
– Even though Mckinsey Firm 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 - McKinsey & Company should strive to include more intangible value offerings along with its core products and services.
Opportunities McKinsey & Company | 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 McKinsey & Company are -
Learning at scale
– Online learning technologies has now opened space for Mckinsey Firm 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.
Developing new processes and practices
– Mckinsey Firm 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.
Buying journey improvements
– Mckinsey Firm can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. McKinsey & Company 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.
Using analytics as competitive advantage
– Mckinsey Firm 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 McKinsey & Company - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Mckinsey Firm to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Mckinsey Firm 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. Mckinsey Firm 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.
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. Mckinsey Firm can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Mckinsey Firm is facing challenges because of the dominance of functional experts in the organization. McKinsey & Company 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.
Better consumer reach
– The expansion of the 5G network will help Mckinsey Firm to increase its market reach. Mckinsey Firm 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.
Creating value in data economy
– The success of analytics program of Mckinsey Firm has opened avenues for new revenue streams for the organization in the industry. This can help Mckinsey Firm to build a more holistic ecosystem as suggested in the McKinsey & Company case study. Mckinsey Firm can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Mckinsey Firm can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Mckinsey Firm can use these opportunities to build new business models that can help the communities that Mckinsey Firm operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
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 Mckinsey Firm in the consumer business. Now Mckinsey Firm can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Mckinsey Firm 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.
Threats McKinsey & Company External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study McKinsey & Company are -
Consumer confidence and its impact on Mckinsey Firm 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.
Environmental challenges
– Mckinsey Firm 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. Mckinsey Firm can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
Stagnating economy with rate increase
– Mckinsey Firm 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.
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 Mckinsey Firm business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Mckinsey Firm is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Mckinsey Firm 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 McKinsey & Company .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Mckinsey Firm with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Mckinsey Firm 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 Mckinsey Firm in the Organizational Development 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 McKinsey & Company, Mckinsey Firm may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Organizational Development .
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. Mckinsey Firm 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 acceleration in Forth Industrial Revolution
– Mckinsey Firm has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Mckinsey Firm 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.
Weighted SWOT Analysis of McKinsey & Company 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 McKinsey & Company 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 McKinsey & Company 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 McKinsey & Company 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 McKinsey & Company 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 Mckinsey Firm needs to make to build a sustainable competitive advantage.
