Case Study Description of Alcoa's Bid for Alcan (A)
In spring 2007, Alcoa CEO Alain Belda was concerned about the company's market position in light of increased competition from developing markets. China's recent entry into the aluminum market was affecting both supply and demand. Furthermore, downstream and upstream product was coming on-line from other parts of the world, including Russia. As a result, Alcoa had lost its historical market dominance and stock premium. Belda was convinced that for Alcoa to regain its leadership position, the company would have to increase efficiencies by expanding its scale, diversification and reach. The acquisition of a large competitor presented the best opportunity to achieve this goal and, as a result, he was particularly intrigued by Canadian rival, Alcan because its assets would complement Alcoa's portfolio and enhance its reach. Further, Alcan had sold off non-aluminum assets, essentially making it a pure play in aluminum. That and its access to relatively cheap Canadian hydro power made it an even more intriguing acquisition opportunity for Alcoa. However, another major competitor, Rio Tinto, was also interested in Alcan; the company was in play.
Swot Analysis of "Alcoa's Bid for Alcan (A)" written by Paul M. Healy, Penelope Rossano includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Alcan Alcoa facing as an external strategic factors. Some of the topics covered in Alcoa's Bid for Alcan (A) case study are - Strategic Management Strategies, Competition, Emerging markets, Financial management, Financial markets, Marketing, Mergers & acquisitions, Strategy execution and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Alcoa's Bid for Alcan (A) casestudy better are - – there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, increasing commodity prices, there is backlash against globalization, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic ,
talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Alcoa's Bid for Alcan (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Alcoa's Bid for Alcan (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Alcan Alcoa, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Alcan Alcoa 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 Alcoa's Bid for Alcan (A) can be done for the following purposes –
1. Strategic planning using facts provided in Alcoa's Bid for Alcan (A) case study
2. Improving business portfolio management of Alcan Alcoa
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Alcan Alcoa
Strengths Alcoa's Bid for Alcan (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Alcan Alcoa in Alcoa's Bid for Alcan (A) Harvard Business Review case study are -
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Alcan Alcoa digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Alcan Alcoa 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
- Alcan Alcoa 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 Alcan Alcoa is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Alcoa's Bid for Alcan (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Alcan Alcoa has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Alcan Alcoa to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Strategy & Execution field
– Alcan Alcoa 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 Alcan Alcoa in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Alcan Alcoa 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 Alcoa's Bid for Alcan (A) - 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
– Alcan Alcoa is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Alcan Alcoa in the sector have low bargaining power. Alcoa's Bid for Alcan (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Alcan Alcoa to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Alcan Alcoa 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 Alcoa's Bid for Alcan (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Alcan Alcoa is one of the most innovative firm in sector. Manager in Alcoa's Bid for Alcan (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Alcan Alcoa 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.
Analytics focus
– Alcan Alcoa 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 Paul M. Healy, Penelope Rossano 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.
Organizational Resilience of Alcan Alcoa
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Alcan Alcoa does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Alcoa's Bid for Alcan (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alcoa's Bid for Alcan (A) are -
Capital Spending Reduction
– Even during the low interest decade, Alcan Alcoa has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High operating costs
– Compare to the competitors, firm in the HBR case study Alcoa's Bid for Alcan (A) 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 Alcan Alcoa 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Alcoa's Bid for Alcan (A), is just above the industry average. Alcan Alcoa 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.
Lack of clear differentiation of Alcan Alcoa products
– To increase the profitability and margins on the products, Alcan Alcoa needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Alcoa's Bid for Alcan (A), in the dynamic environment Alcan Alcoa has struggled to respond to the nimble upstart competition. Alcan Alcoa has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Alcan Alcoa 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Alcan Alcoa 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Alcoa's Bid for Alcan (A), it seems that the employees of Alcan Alcoa 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 Alcan Alcoa 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Alcan Alcoa is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Alcoa's Bid for Alcan (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study Alcoa's Bid for Alcan (A), it seems that company is thinking about the frontier risks that can impact Strategy & Execution 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.
Opportunities Alcoa's Bid for Alcan (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Alcoa's Bid for Alcan (A) are -
Building a culture of innovation
– managers at Alcan Alcoa 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 Strategy & Execution segment.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Alcan Alcoa 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 Alcan Alcoa to hire the very best people irrespective of their geographical location.
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 Alcan Alcoa 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.
Using analytics as competitive advantage
– Alcan Alcoa 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 Alcoa's Bid for Alcan (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Alcan Alcoa to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Alcan Alcoa 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
– Alcan Alcoa 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.
Creating value in data economy
– The success of analytics program of Alcan Alcoa has opened avenues for new revenue streams for the organization in the industry. This can help Alcan Alcoa to build a more holistic ecosystem as suggested in the Alcoa's Bid for Alcan (A) case study. Alcan Alcoa can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Alcan Alcoa to increase its market reach. Alcan Alcoa 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.
Learning at scale
– Online learning technologies has now opened space for Alcan Alcoa 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
– Alcan Alcoa can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Alcan Alcoa can use these opportunities to build new business models that can help the communities that Alcan Alcoa operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Alcan Alcoa 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Alcan Alcoa 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. Alcan Alcoa 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 Alcoa's Bid for Alcan (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Alcoa's Bid for Alcan (A) are -
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 wage structure of Alcan Alcoa
– 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 Alcan Alcoa.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Alcan Alcoa can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Alcan Alcoa needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Alcan Alcoa 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 Alcoa's Bid for Alcan (A) .
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 Alcan Alcoa in the Strategy & Execution sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Alcan Alcoa with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Alcan Alcoa business can come under increasing regulations regarding data privacy, data security, etc.
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.
Technology acceleration in Forth Industrial Revolution
– Alcan Alcoa has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Alcan Alcoa needs to keep up with the evolution of technology in the Strategy & Execution 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Alcoa's Bid for Alcan (A), Alcan Alcoa may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
High dependence on third party suppliers
– Alcan Alcoa 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.
Consumer confidence and its impact on Alcan Alcoa 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.
Weighted SWOT Analysis of Alcoa's Bid for Alcan (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Alcoa's Bid for Alcan (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Alcoa's Bid for Alcan (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Alcoa's Bid for Alcan (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Alcoa's Bid for Alcan (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Alcan Alcoa needs to make to build a sustainable competitive advantage.