AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder
Confidential Instructions for the Founder for PON023.Two-party term sheet negotiation between a venture capitalist and the founder of an aerospace start-up company in which participants are scored both on their substantive performance and on the other party's perception of the relationship. The venture capital (VC) firm Aerovent Capital is considering a $100 million investment in the startup company Earth Escape. The founder of Earth Escape and the lead partner from Aerovent Capital must negotiate a term sheet outlining eight significant terms of the investment. Both parties are concerned with structuring a deal that protects their substantive investment interests and with creating a positive foundation for their potential collaboration. The simulation introduces the incorporation of process and relationship interests into negotiation strategy. This is a role play case.
Swot Analysis of "AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder" written by Nicholas Sabin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aerovent Escape facing as an external strategic factors. Some of the topics covered in AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder case study are - Strategic Management Strategies, Negotiations, Venture capital and Strategy & Execution.
Some of the macro environment factors that can be used to understand the AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder casestudy better are - – there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, technology disruption, there is backlash against globalization,
wage bills are increasing, geopolitical disruptions, etc
Introduction to SWOT Analysis of AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aerovent Escape, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aerovent Escape 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 AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder can be done for the following purposes –
1. Strategic planning using facts provided in AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder case study
2. Improving business portfolio management of Aerovent Escape
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 Aerovent Escape
Strengths AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aerovent Escape in AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder Harvard Business Review case study are -
Highly skilled collaborators
– Aerovent Escape 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 AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Aerovent Escape
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Aerovent Escape does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Aerovent Escape has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder 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 switching costs
– The high switching costs that Aerovent Escape 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.
Effective Research and Development (R&D)
– Aerovent Escape 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 AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Aerovent Escape in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Aerovent Escape 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 Aerovent Escape is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Strategy & Execution industry
– AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder firm has clearly differentiated products in the market place. This has enabled Aerovent Escape to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Aerovent Escape to invest into research and development (R&D) and innovation.
Strong track record of project management
– Aerovent Escape 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 Aerovent Escape in the sector have low bargaining power. AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aerovent Escape to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Aerovent Escape has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Aerovent Escape 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.
Diverse revenue streams
– Aerovent Escape is present in almost all the verticals within the industry. This has provided firm in AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder 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.
Weaknesses AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder are -
High bargaining power of channel partners
– Because of the regulatory requirements, Nicholas Sabin suggests that, Aerovent Escape is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Low market penetration in new markets
– Outside its home market of Aerovent Escape, firm in the HBR case study AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder, in the dynamic environment Aerovent Escape has struggled to respond to the nimble upstart competition. Aerovent Escape 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 AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder, is just above the industry average. Aerovent Escape 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 Aerovent Escape is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Aerovent Escape needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aerovent Escape to focus more on services rather than just following the product oriented approach.
High cash cycle compare to competitors
Aerovent Escape 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.
Aligning sales with marketing
– It come across in the case study AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder 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 AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder can leverage the sales team experience to cultivate customer relationships as Aerovent Escape is planning to shift buying processes online.
Interest costs
– Compare to the competition, Aerovent Escape 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 star products
– The top 2 products and services of the firm as mentioned in the AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder 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 Aerovent Escape has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder, it seems that the employees of Aerovent Escape 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.
Lack of clear differentiation of Aerovent Escape products
– To increase the profitability and margins on the products, Aerovent Escape needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder | 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 AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Aerovent Escape 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 Aerovent Escape to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Aerovent Escape 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aerovent Escape can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Aerovent Escape 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aerovent Escape 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.
Developing new processes and practices
– Aerovent Escape 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.
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 Aerovent Escape 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.
Creating value in data economy
– The success of analytics program of Aerovent Escape has opened avenues for new revenue streams for the organization in the industry. This can help Aerovent Escape to build a more holistic ecosystem as suggested in the AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder case study. Aerovent Escape can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Aerovent Escape 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aerovent Escape is facing challenges because of the dominance of functional experts in the organization. AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder 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, Aerovent Escape 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, AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Aerovent Escape 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. Aerovent Escape can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder are -
Consumer confidence and its impact on Aerovent Escape 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.
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 Aerovent Escape
– 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 Aerovent Escape.
Regulatory challenges
– Aerovent Escape 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.
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 Aerovent Escape in the Strategy & Execution sector and impact the bottomline of the organization.
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 Aerovent Escape business can come under increasing regulations regarding data privacy, data security, etc.
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. Aerovent Escape 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 dependence on third party suppliers
– Aerovent Escape 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aerovent Escape 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 AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Aerovent Escape with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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
– Aerovent Escape 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.
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 Aerovent Escape.
Weighted SWOT Analysis of AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder 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 AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder 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 AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder 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 AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder 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 AEROSPACE INVESTMENT: BALANCING VENTURE & RELATIONSHIP CAPITAL - Confidential Instructions for the Founder 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 Aerovent Escape needs to make to build a sustainable competitive advantage.
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