Case Study Description of Governance Failure at Satyam
An unrelated acquisition decision by Satyam Corporation created discontent among shareholders and lead to a series of investigations. The investigations revealed a fraud of about INR 50 billion. This led to resignations by several board members and the CEO. The entire episode became a mockery of corporate governance practices, raising questions about the efficacy of well accepted governance norms.This case covers the events that led to the failure of Satyam in detail. The roles of not only the promoter but also other parties, such as the managers, board of directors, auditors and bankers, are discussed in detail. The case draws attention to various corporate governance and ethical issues and also provides an opportunity to discuss the measures that should be taken by regulators, auditors and other bodies to prevent such frauds.This case can be used in an undergraduate, MBA and executive development program to highlight following issues: 1) Ethics and corporate governance: This case can be used to discuss the effectiveness of current corporate governance regulations and how can they be made more effective. 2) Organizational culture and values: Corporate governance mechanisms, such as ownership structure, board composition and stakeholder influence, determine the organizational culture and values. Smaller firms inherit the corporate values from their founders. In larger companies, managers and board members play a pivotal role in shaping the corporate values. This case can be used to discuss the factors affecting development of corporate values.
Swot Analysis of "Governance Failure at Satyam" written by Ajai Gaur, Nisha Kohli includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Satyam Governance facing as an external strategic factors. Some of the topics covered in Governance Failure at Satyam case study are - Strategic Management Strategies, Boards and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Governance Failure at Satyam casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, increasing transportation and logistics costs, increasing commodity prices,
supply chains are disrupted by pandemic , geopolitical disruptions, etc
Introduction to SWOT Analysis of Governance Failure at Satyam
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Governance Failure at Satyam case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Satyam Governance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Satyam Governance 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 Governance Failure at Satyam can be done for the following purposes –
1. Strategic planning using facts provided in Governance Failure at Satyam case study
2. Improving business portfolio management of Satyam Governance
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 Satyam Governance
Strengths Governance Failure at Satyam | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Satyam Governance in Governance Failure at Satyam Harvard Business Review case study are -
Analytics focus
– Satyam Governance 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 Ajai Gaur, Nisha Kohli 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 Satyam Governance digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Satyam Governance 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.
Learning organization
- Satyam Governance 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 Satyam Governance is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Governance Failure at Satyam Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Satyam Governance 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Governance Failure at Satyam firm has clearly differentiated products in the market place. This has enabled Satyam Governance to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Satyam Governance to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Satyam Governance is present in almost all the verticals within the industry. This has provided firm in Governance Failure at Satyam 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.
Superior customer experience
– The customer experience strategy of Satyam Governance in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Satyam Governance
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Satyam Governance does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Satyam Governance has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Governance Failure at Satyam 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.
Operational resilience
– The operational resilience strategy in the Governance Failure at Satyam 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.
Strong track record of project management
– Satyam Governance is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Satyam Governance 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 Governance Failure at Satyam HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Governance Failure at Satyam | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Governance Failure at Satyam are -
Slow decision making process
– As mentioned earlier in the report, Satyam Governance 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. Satyam Governance 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.
High cash cycle compare to competitors
Satyam Governance 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.
Slow to strategic competitive environment developments
– As Governance Failure at Satyam HBR case study mentions - Satyam Governance 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Governance Failure at Satyam, it seems that the employees of Satyam Governance 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.
No frontier risks strategy
– After analyzing the HBR case study Governance Failure at Satyam, 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Governance Failure at Satyam, in the dynamic environment Satyam Governance has struggled to respond to the nimble upstart competition. Satyam Governance has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Satyam Governance products
– To increase the profitability and margins on the products, Satyam Governance needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Governance Failure at Satyam, is just above the industry average. Satyam Governance 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.
Increasing silos among functional specialists
– The organizational structure of Satyam Governance is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Satyam Governance needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Satyam Governance to focus more on services rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Satyam Governance 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.
Products dominated business model
– Even though Satyam Governance 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 - Governance Failure at Satyam should strive to include more intangible value offerings along with its core products and services.
Opportunities Governance Failure at Satyam | 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 Governance Failure at Satyam are -
Loyalty marketing
– Satyam Governance 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.
Learning at scale
– Online learning technologies has now opened space for Satyam Governance 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.
Manufacturing automation
– Satyam Governance 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Satyam Governance 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, Governance Failure at Satyam, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Satyam Governance 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Satyam Governance can use these opportunities to build new business models that can help the communities that Satyam Governance operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Building a culture of innovation
– managers at Satyam Governance 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Satyam Governance 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Satyam Governance 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 Satyam Governance to hire the very best people irrespective of their geographical location.
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 Satyam Governance in the consumer business. Now Satyam Governance can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Satyam Governance 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.
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. Satyam Governance can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Satyam Governance 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. Satyam Governance 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.
Threats Governance Failure at Satyam External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Governance Failure at Satyam are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Satyam Governance with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Satyam Governance in the Finance & Accounting sector and impact the bottomline of the organization.
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.
Technology acceleration in Forth Industrial Revolution
– Satyam Governance has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Satyam Governance 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.
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. Satyam Governance 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.
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 Satyam Governance.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Satyam Governance 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.
Regulatory challenges
– Satyam Governance 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.
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. Satyam Governance can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Governance Failure at Satyam, Satyam Governance 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 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. Satyam Governance needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.
Stagnating economy with rate increase
– Satyam Governance 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.
Weighted SWOT Analysis of Governance Failure at Satyam 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 Governance Failure at Satyam 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 Governance Failure at Satyam 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 Governance Failure at Satyam 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 Governance Failure at Satyam 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 Satyam Governance needs to make to build a sustainable competitive advantage.
