Case Study Description of Bertelsmann: The Ownership Question
Leaders of Bertelsmann AG (BAG), the 5th largest media conglomerate worldwide, and first in Europe, had a decision to make in early 2006. Under an agreement it had reached in 2000, GBL, its only shareholder not controlled by the Mohn family, had the right to sell its 25% stake in the company in the stock market, provided it did not reach an agreement with the Mohn family beforehand for a buyback of this share package for a price to be negotiated. Briefly outlines Bertelsmann's business lines, corporate culture, and its governance structure in terms of family and business control, and the conditions of both alternatives and their consequences for the company are described (IPO vs. share buyback). Students are expected to deliver a well-rounded rationale for their recommendation on which alternative to take, as if they were in the shoes of Gunter Thielen, CEO of Bertelsmann.
Swot Analysis of "Bertelsmann: The Ownership Question" written by F. A. Neumann, Josep Tapies includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Bertelsmann Mohn facing as an external strategic factors. Some of the topics covered in Bertelsmann: The Ownership Question case study are - Strategic Management Strategies, Communication, Mergers & acquisitions and Organizational Development.
Some of the macro environment factors that can be used to understand the Bertelsmann: The Ownership Question casestudy better are - – technology disruption, increasing commodity prices, increasing transportation and logistics costs, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion,
increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Bertelsmann: The Ownership Question
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Bertelsmann: The Ownership Question case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Bertelsmann Mohn, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Bertelsmann Mohn 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 Bertelsmann: The Ownership Question can be done for the following purposes –
1. Strategic planning using facts provided in Bertelsmann: The Ownership Question case study
2. Improving business portfolio management of Bertelsmann Mohn
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 Bertelsmann Mohn
Strengths Bertelsmann: The Ownership Question | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Bertelsmann Mohn in Bertelsmann: The Ownership Question Harvard Business Review case study are -
Successful track record of launching new products
– Bertelsmann Mohn has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Bertelsmann Mohn 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.
Superior customer experience
– The customer experience strategy of Bertelsmann Mohn 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 Bertelsmann Mohn digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Bertelsmann Mohn 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 Bertelsmann Mohn 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.
Operational resilience
– The operational resilience strategy in the Bertelsmann: The Ownership Question 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.
Effective Research and Development (R&D)
– Bertelsmann Mohn 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 Bertelsmann: The Ownership Question - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Bertelsmann Mohn has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Bertelsmann: The Ownership Question 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.
Strong track record of project management
– Bertelsmann Mohn is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Bertelsmann Mohn 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.
Analytics focus
– Bertelsmann Mohn 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 F. A. Neumann, Josep Tapies 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.
Diverse revenue streams
– Bertelsmann Mohn is present in almost all the verticals within the industry. This has provided firm in Bertelsmann: The Ownership Question 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.
Sustainable margins compare to other players in Organizational Development industry
– Bertelsmann: The Ownership Question firm has clearly differentiated products in the market place. This has enabled Bertelsmann Mohn to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Bertelsmann Mohn to invest into research and development (R&D) and innovation.
Weaknesses Bertelsmann: The Ownership Question | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Bertelsmann: The Ownership Question are -
High cash cycle compare to competitors
Bertelsmann Mohn 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Bertelsmann: The Ownership Question, in the dynamic environment Bertelsmann Mohn has struggled to respond to the nimble upstart competition. Bertelsmann Mohn has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Bertelsmann Mohn is dominated by functional specialists. It is not different from other players in the Organizational Development segment. Bertelsmann Mohn needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Bertelsmann Mohn to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Bertelsmann Mohn 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. Bertelsmann Mohn 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.
Capital Spending Reduction
– Even during the low interest decade, Bertelsmann Mohn 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Bertelsmann Mohn 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.
Slow to strategic competitive environment developments
– As Bertelsmann: The Ownership Question HBR case study mentions - Bertelsmann Mohn takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High bargaining power of channel partners
– Because of the regulatory requirements, F. A. Neumann, Josep Tapies suggests that, Bertelsmann Mohn 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.
Products dominated business model
– Even though Bertelsmann Mohn 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 - Bertelsmann: The Ownership Question should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Bertelsmann Mohn 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.
Interest costs
– Compare to the competition, Bertelsmann Mohn 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.
Opportunities Bertelsmann: The Ownership Question | 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 Bertelsmann: The Ownership Question are -
Better consumer reach
– The expansion of the 5G network will help Bertelsmann Mohn to increase its market reach. Bertelsmann Mohn 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Bertelsmann Mohn can use these opportunities to build new business models that can help the communities that Bertelsmann Mohn operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Buying journey improvements
– Bertelsmann Mohn can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Bertelsmann: The Ownership Question 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Bertelsmann Mohn 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, Bertelsmann: The Ownership Question, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Bertelsmann Mohn 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.
Loyalty marketing
– Bertelsmann Mohn 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.
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. Bertelsmann Mohn can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Bertelsmann Mohn in the consumer business. Now Bertelsmann Mohn can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Bertelsmann Mohn 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.
Manufacturing automation
– Bertelsmann Mohn 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.
Learning at scale
– Online learning technologies has now opened space for Bertelsmann Mohn 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.
Using analytics as competitive advantage
– Bertelsmann Mohn 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 Bertelsmann: The Ownership Question - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Bertelsmann Mohn to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Bertelsmann Mohn has opened avenues for new revenue streams for the organization in the industry. This can help Bertelsmann Mohn to build a more holistic ecosystem as suggested in the Bertelsmann: The Ownership Question case study. Bertelsmann Mohn can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Bertelsmann: The Ownership Question External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Bertelsmann: The Ownership Question are -
Regulatory challenges
– Bertelsmann Mohn 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.
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 Bertelsmann Mohn business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Bertelsmann Mohn 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.
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.
Consumer confidence and its impact on Bertelsmann Mohn 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.
Technology acceleration in Forth Industrial Revolution
– Bertelsmann Mohn has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Bertelsmann Mohn 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.
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 Bertelsmann Mohn is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Bertelsmann Mohn 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.
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 Bertelsmann Mohn.
Stagnating economy with rate increase
– Bertelsmann Mohn 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.
Environmental challenges
– Bertelsmann Mohn 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. Bertelsmann Mohn can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
Increasing wage structure of Bertelsmann Mohn
– 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 Bertelsmann Mohn.
Weighted SWOT Analysis of Bertelsmann: The Ownership Question 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 Bertelsmann: The Ownership Question 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 Bertelsmann: The Ownership Question 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 Bertelsmann: The Ownership Question 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 Bertelsmann: The Ownership Question 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 Bertelsmann Mohn needs to make to build a sustainable competitive advantage.