Case Study Description of Alcoa's Bid for Alcan (B)
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 (B)" 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 (B) 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 (B) casestudy better are - – increasing energy prices, wage bills are increasing, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, etc
Introduction to SWOT Analysis of Alcoa's Bid for Alcan (B)
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 (B) 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 (B) can be done for the following purposes –
1. Strategic planning using facts provided in Alcoa's Bid for Alcan (B) 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 (B) | 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 (B) 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.
Diverse revenue streams
– Alcan Alcoa is present in almost all the verticals within the industry. This has provided firm in Alcoa's Bid for Alcan (B) 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.
Cross disciplinary teams
– Horizontal connected teams at the Alcan Alcoa 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.
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.
Successful track record of launching new products
– Alcan Alcoa has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Alcan Alcoa 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 recruit top talent
– Alcan Alcoa is one of the leading recruiters in the industry. Managers in the Alcoa's Bid for Alcan (B) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Alcan Alcoa has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Alcoa's Bid for Alcan (B) 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.
Innovation driven organization
– Alcan Alcoa is one of the most innovative firm in sector. Manager in Alcoa's Bid for Alcan (B) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Alcan Alcoa in the sector have low bargaining power. Alcoa's Bid for Alcan (B) 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.
Operational resilience
– The operational resilience strategy in the Alcoa's Bid for Alcan (B) 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.
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.
Weaknesses Alcoa's Bid for Alcan (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alcoa's Bid for Alcan (B) are -
No frontier risks strategy
– After analyzing the HBR case study Alcoa's Bid for Alcan (B), 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.
Interest costs
– Compare to the competition, Alcan Alcoa 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.
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 Alcan Alcoa supply chain. Even after few cautionary changes mentioned in the HBR case study - Alcoa's Bid for Alcan (B), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Alcan Alcoa vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Alcoa's Bid for Alcan (B), 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.
Slow to strategic competitive environment developments
– As Alcoa's Bid for Alcan (B) HBR case study mentions - Alcan Alcoa 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.
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.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Alcoa's Bid for Alcan (B) 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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Alcoa's Bid for Alcan (B), 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.
Increasing silos among functional specialists
– The organizational structure of Alcan Alcoa is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Alcan Alcoa needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Alcan Alcoa to focus more on services rather than just following the product oriented approach.
Opportunities Alcoa's Bid for Alcan (B) | 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 (B) are -
Developing new processes and practices
– Alcan Alcoa can develop new processes and procedures in Strategy & Execution 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.
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. Alcan Alcoa can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
Buying journey improvements
– Alcan Alcoa can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Alcoa's Bid for Alcan (B) 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.
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.
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 Alcan Alcoa in the consumer business. Now Alcan Alcoa can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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 (B) 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Alcan Alcoa is facing challenges because of the dominance of functional experts in the organization. Alcoa's Bid for Alcan (B) 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.
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.
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.
Threats Alcoa's Bid for Alcan (B) 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 (B) 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 Alcan Alcoa in the Strategy & Execution sector and impact the bottomline of the organization.
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.
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. Alcan Alcoa 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.
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.
Regulatory challenges
– Alcan Alcoa 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 Strategy & Execution industry regulations.
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.
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 (B), 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 .
Stagnating economy with rate increase
– Alcan Alcoa 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Alcan Alcoa in the Strategy & Execution industry. The Strategy & Execution 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.
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 (B) .
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
– 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.
Environmental challenges
– Alcan Alcoa 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. Alcan Alcoa can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Weighted SWOT Analysis of Alcoa's Bid for Alcan (B) 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 (B) 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 (B) 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 (B) 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 (B) 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.
