Case Study Description of Arcelor: Undervaluation: Threat or Opportunity?
Arcelor believes its shares are undervalued and has to decide whether to buy back stock via a repurchase tender offer or via an open market repurchase. Before doing so, it has to value the company to get an estimate of the fair value of the company. It has also to decide whether it can afford the buyback: is the increase in leverage a move to a better capital structure?
Swot Analysis of "Arcelor: Undervaluation: Threat or Opportunity?" written by Theo Vermaelen, Divad Andrade includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Arcelor Repurchase facing as an external strategic factors. Some of the topics covered in Arcelor: Undervaluation: Threat or Opportunity? case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Arcelor: Undervaluation: Threat or Opportunity? casestudy better are - – digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, there is backlash against globalization, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion,
increasing energy prices, technology disruption, etc
Introduction to SWOT Analysis of Arcelor: Undervaluation: Threat or Opportunity?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Arcelor: Undervaluation: Threat or Opportunity? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arcelor Repurchase, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arcelor Repurchase 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 Arcelor: Undervaluation: Threat or Opportunity? can be done for the following purposes –
1. Strategic planning using facts provided in Arcelor: Undervaluation: Threat or Opportunity? case study
2. Improving business portfolio management of Arcelor Repurchase
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 Arcelor Repurchase
Strengths Arcelor: Undervaluation: Threat or Opportunity? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arcelor Repurchase in Arcelor: Undervaluation: Threat or Opportunity? Harvard Business Review case study are -
Ability to recruit top talent
– Arcelor Repurchase is one of the leading recruiters in the industry. Managers in the Arcelor: Undervaluation: Threat or Opportunity? are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Finance & Accounting field
– Arcelor Repurchase 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 Arcelor Repurchase in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Arcelor Repurchase 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 Arcelor: Undervaluation: Threat or Opportunity? HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Arcelor Repurchase in the sector have low bargaining power. Arcelor: Undervaluation: Threat or Opportunity? has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arcelor Repurchase to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Arcelor Repurchase is one of the most innovative firm in sector. Manager in Arcelor: Undervaluation: Threat or Opportunity? Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Finance & Accounting industry
– Arcelor: Undervaluation: Threat or Opportunity? firm has clearly differentiated products in the market place. This has enabled Arcelor Repurchase to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Arcelor Repurchase to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Arcelor: Undervaluation: Threat or Opportunity? 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.
Diverse revenue streams
– Arcelor Repurchase is present in almost all the verticals within the industry. This has provided firm in Arcelor: Undervaluation: Threat or Opportunity? 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.
Organizational Resilience of Arcelor Repurchase
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Arcelor Repurchase does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Arcelor Repurchase 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 Arcelor: Undervaluation: Threat or Opportunity? - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Arcelor Repurchase is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Arcelor Repurchase has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arcelor Repurchase to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Arcelor: Undervaluation: Threat or Opportunity? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arcelor: Undervaluation: Threat or Opportunity? are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Arcelor: Undervaluation: Threat or Opportunity? 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 Arcelor Repurchase has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Arcelor: Undervaluation: Threat or Opportunity? HBR case study mentions - Arcelor Repurchase 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 cash cycle compare to competitors
Arcelor Repurchase 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.
Increasing silos among functional specialists
– The organizational structure of Arcelor Repurchase is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Arcelor Repurchase needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Arcelor Repurchase to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Arcelor: Undervaluation: Threat or Opportunity?, it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Arcelor: Undervaluation: Threat or Opportunity? 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 Arcelor Repurchase 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Arcelor Repurchase 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. Arcelor Repurchase 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Arcelor: Undervaluation: Threat or Opportunity?, it seems that the employees of Arcelor Repurchase 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.
Skills based hiring
– The stress on hiring functional specialists at Arcelor Repurchase 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 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 Arcelor Repurchase supply chain. Even after few cautionary changes mentioned in the HBR case study - Arcelor: Undervaluation: Threat or Opportunity?, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Arcelor Repurchase vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Arcelor Repurchase 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 Arcelor: Undervaluation: Threat or Opportunity? | 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 Arcelor: Undervaluation: Threat or Opportunity? are -
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 Arcelor Repurchase 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
– Arcelor Repurchase 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.
Leveraging digital technologies
– Arcelor Repurchase can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Arcelor Repurchase 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, Arcelor: Undervaluation: Threat or Opportunity?, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Arcelor Repurchase 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.
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 Arcelor Repurchase in the consumer business. Now Arcelor Repurchase can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Arcelor Repurchase can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Arcelor: Undervaluation: Threat or Opportunity? suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Manufacturing automation
– Arcelor Repurchase 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.
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. Arcelor Repurchase can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Arcelor Repurchase 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, Arcelor Repurchase can use these opportunities to build new business models that can help the communities that Arcelor Repurchase operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Arcelor Repurchase 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. Arcelor Repurchase 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.
Creating value in data economy
– The success of analytics program of Arcelor Repurchase has opened avenues for new revenue streams for the organization in the industry. This can help Arcelor Repurchase to build a more holistic ecosystem as suggested in the Arcelor: Undervaluation: Threat or Opportunity? case study. Arcelor Repurchase can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Arcelor: Undervaluation: Threat or Opportunity? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Arcelor: Undervaluation: Threat or Opportunity? are -
Environmental challenges
– Arcelor Repurchase 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. Arcelor Repurchase can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 Arcelor Repurchase in the Finance & Accounting sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Arcelor Repurchase has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Arcelor Repurchase 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arcelor Repurchase in the Finance & Accounting industry. The Finance & Accounting 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Arcelor Repurchase 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 Arcelor: Undervaluation: Threat or Opportunity? .
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Arcelor Repurchase can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Arcelor Repurchase.
Increasing wage structure of Arcelor Repurchase
– 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 Arcelor Repurchase.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Arcelor: Undervaluation: Threat or Opportunity?, Arcelor Repurchase 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 .
High dependence on third party suppliers
– Arcelor Repurchase 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.
Shortening product life cycle
– it is one of the major threat that Arcelor Repurchase is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Arcelor Repurchase business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Arcelor: Undervaluation: Threat or Opportunity? 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 Arcelor: Undervaluation: Threat or Opportunity? 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 Arcelor: Undervaluation: Threat or Opportunity? 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 Arcelor: Undervaluation: Threat or Opportunity? 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 Arcelor: Undervaluation: Threat or Opportunity? 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 Arcelor Repurchase needs to make to build a sustainable competitive advantage.