In December 1997 United Rentals (URI) went public on the NYSE. Ten years later, during the peak of the economic meltdown, the company's performance was in decline. United Rentals had experienced its share of problems in the prior years and was still struggling to emerge from this turmoil.In the spring of 2008, the recession had decimated the company's core business, construction equipment rental. The economic downturn resulted in a significant decrease in North American construction and industrial activities and had adversely affected the company's revenues and operating result. The stock of the company quickly fell from the mid-$30 range in late 2007 to $3 in March 2009. In addition, two of the company's former chief financial officers had been charged with securities fraud and other violations, by both the U.S. Attorney's office and the SEC. The Board was faced with the resignation of the founder and chairman, management succession issues, the failed merger with Cerberus, and the lawsuit in Delaware. The Board was responsible for overseeing the change in a number of senior management and board positions which became increasingly difficult due to the turmoil and poor performance of the company. Recruiting and retaining talent in senior management and the board was central to the success of the company, which relied on their people for strong performance. In addition the company's total indebtedness was approximately $3.3 billion, including $146 million of subordinated convertible debenture. The company's substantial indebtedness had the potential to have adverse consequences in a number of ways, including: increase their vulnerability to adverse economic, industry or competitive developments; require the company to devote a substantial portion of their cash flow to debt service, reduce the funds available for other purposes; limit their ability to obtain additional financing; and decrease their profitability or cash flow. And the company was still dealing with multiple purported class action and derivative lawsuits that had been filed against it. It was during this time the board started looking for candidates both for the CEO and Chairman positions.
Authors :: Jay W. Lorsch, Kathleen Durante, Emily McTague
Swot Analysis of "United Rentals (A)" written by Jay W. Lorsch, Kathleen Durante, Emily McTague includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Rentals Indebtedness facing as an external strategic factors. Some of the topics covered in United Rentals (A) case study are - Strategic Management Strategies, Boards, Ethics, Marketing, Mergers & acquisitions and Organizational Development.
Some of the macro environment factors that can be used to understand the United Rentals (A) casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , increasing commodity prices, central banks are concerned over increasing inflation,
geopolitical disruptions, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of United Rentals (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in United Rentals (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rentals Indebtedness, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rentals Indebtedness 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 United Rentals (A) can be done for the following purposes –
1. Strategic planning using facts provided in United Rentals (A) case study
2. Improving business portfolio management of Rentals Indebtedness
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 Rentals Indebtedness
Strengths United Rentals (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rentals Indebtedness in United Rentals (A) Harvard Business Review case study are -
Sustainable margins compare to other players in Organizational Development industry
– United Rentals (A) firm has clearly differentiated products in the market place. This has enabled Rentals Indebtedness to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Rentals Indebtedness to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Rentals Indebtedness is one of the leading recruiters in the industry. Managers in the United Rentals (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Rentals Indebtedness in the sector have low bargaining power. United Rentals (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Rentals Indebtedness to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Rentals Indebtedness has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Rentals Indebtedness 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.
Training and development
– Rentals Indebtedness has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in United Rentals (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.
High switching costs
– The high switching costs that Rentals Indebtedness 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.
Learning organization
- Rentals Indebtedness 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 Rentals Indebtedness is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in United Rentals (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Rentals Indebtedness is present in almost all the verticals within the industry. This has provided firm in United Rentals (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.
Operational resilience
– The operational resilience strategy in the United Rentals (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
– Rentals Indebtedness has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Rentals Indebtedness to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Rentals Indebtedness in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Rentals Indebtedness digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rentals Indebtedness 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.
Weaknesses United Rentals (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of United Rentals (A) are -
No frontier risks strategy
– After analyzing the HBR case study United Rentals (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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study United Rentals (A), it seems that the employees of Rentals Indebtedness 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the United Rentals (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 Rentals Indebtedness has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study United Rentals (A), in the dynamic environment Rentals Indebtedness has struggled to respond to the nimble upstart competition. Rentals Indebtedness has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Rentals Indebtedness 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.
Products dominated business model
– Even though Rentals Indebtedness 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 - United Rentals (A) should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Rentals Indebtedness has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Rentals Indebtedness even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Rentals Indebtedness 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Jay W. Lorsch, Kathleen Durante, Emily McTague suggests that, Rentals Indebtedness 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.
Capital Spending Reduction
– Even during the low interest decade, Rentals Indebtedness 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 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 Rentals Indebtedness supply chain. Even after few cautionary changes mentioned in the HBR case study - United Rentals (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Rentals Indebtedness vulnerable to further global disruptions in South East Asia.
Opportunities United Rentals (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 United Rentals (A) are -
Using analytics as competitive advantage
– Rentals Indebtedness 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 United Rentals (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Rentals Indebtedness to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Rentals Indebtedness 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.
Building a culture of innovation
– managers at Rentals Indebtedness 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.
Creating value in data economy
– The success of analytics program of Rentals Indebtedness has opened avenues for new revenue streams for the organization in the industry. This can help Rentals Indebtedness to build a more holistic ecosystem as suggested in the United Rentals (A) case study. Rentals Indebtedness 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 Rentals Indebtedness in the consumer business. Now Rentals Indebtedness can target international markets with far fewer capital restrictions requirements than the existing system.
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. Rentals Indebtedness can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Rentals Indebtedness 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Rentals Indebtedness 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, United Rentals (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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Rentals Indebtedness can use these opportunities to build new business models that can help the communities that Rentals Indebtedness operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Rentals Indebtedness can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Rentals Indebtedness 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.
Manufacturing automation
– Rentals Indebtedness 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Rentals Indebtedness 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 Rentals Indebtedness to hire the very best people irrespective of their geographical location.
Threats United Rentals (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study United Rentals (A) are -
Shortening product life cycle
– it is one of the major threat that Rentals Indebtedness is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Rentals Indebtedness 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.
Increasing wage structure of Rentals Indebtedness
– 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 Rentals Indebtedness.
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 Rentals Indebtedness.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study United Rentals (A), Rentals Indebtedness 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 .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Rentals Indebtedness 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.
Consumer confidence and its impact on Rentals Indebtedness 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.
High dependence on third party suppliers
– Rentals Indebtedness 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.
Environmental challenges
– Rentals Indebtedness 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. Rentals Indebtedness can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
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. Rentals Indebtedness needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
Regulatory challenges
– Rentals Indebtedness 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 Rentals Indebtedness in the Organizational Development sector and impact the bottomline of the organization.
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. Rentals Indebtedness 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.
Weighted SWOT Analysis of United Rentals (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 United Rentals (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 United Rentals (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 United Rentals (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 United Rentals (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 Rentals Indebtedness needs to make to build a sustainable competitive advantage.
