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 - – supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, technology disruption, increasing transportation and logistics costs, wage bills are increasing,
increasing commodity prices, cloud computing is disrupting traditional business models, 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 -
Successful track record of launching new products
– Arcelor Repurchase has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Arcelor Repurchase 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.
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.
Analytics focus
– Arcelor Repurchase 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 Theo Vermaelen, Divad Andrade 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Arcelor Repurchase digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Arcelor Repurchase 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.
Training and development
– Arcelor Repurchase has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Arcelor: Undervaluation: Threat or Opportunity? 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
– 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.
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.
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.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Arcelor Repurchase 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.
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.
Aligning sales with marketing
– It come across in the case study Arcelor: Undervaluation: Threat or Opportunity? 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 Arcelor: Undervaluation: Threat or Opportunity? can leverage the sales team experience to cultivate customer relationships as Arcelor Repurchase is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Arcelor Repurchase 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.
Lack of clear differentiation of Arcelor Repurchase products
– To increase the profitability and margins on the products, Arcelor Repurchase needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Arcelor: Undervaluation: Threat or Opportunity?, in the dynamic environment Arcelor Repurchase has struggled to respond to the nimble upstart competition. Arcelor Repurchase 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 Arcelor: Undervaluation: Threat or Opportunity?, is just above the industry average. Arcelor Repurchase 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.
Interest costs
– Compare to the competition, Arcelor Repurchase 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.
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.
Products dominated business model
– Even though Arcelor Repurchase 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 - Arcelor: Undervaluation: Threat or Opportunity? should strive to include more intangible value offerings along with its core products and services.
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.
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 -
Developing new processes and practices
– Arcelor Repurchase can develop new processes and procedures in Finance & Accounting 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.
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.
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.
Building a culture of innovation
– managers at Arcelor Repurchase can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Arcelor Repurchase 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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Arcelor Repurchase is facing challenges because of the dominance of functional experts in the organization. Arcelor: Undervaluation: Threat or Opportunity? 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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Arcelor Repurchase can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Arcelor Repurchase in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
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 -
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.
Consumer confidence and its impact on Arcelor Repurchase 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.
Stagnating economy with rate increase
– Arcelor Repurchase 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.
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.
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 .
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. Arcelor Repurchase 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.
Regulatory challenges
– Arcelor Repurchase needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
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.
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.
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.
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.
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? .
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.