NutraSweet's worldwide patent-protected monopoly on aspartame, the low-calorie high-intensity sweetener, ended with the 1987 entry of the Holland Sweetener Co. (HSC) into the European market. Following the arrival of a challenger, NutraSweet acted to reduce sharply the price at which it offered aspartame to its European customers. NutraSweet's pricing move raised the question: were its actions in Europe a credible signal of how it would respond to entry in the U.S. market (where its patent was due to expire in late 1992)? This case explores some aspects of the game between a challenger (such as HSC) that is looking to enter a market and an established player in the market (such as NutraSweet) that may engage in signalling behavior.
Swot Analysis of "Signalling Costs" written by Adam Brandenburger includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aspartame Nutrasweet's facing as an external strategic factors. Some of the topics covered in Signalling Costs case study are - Strategic Management Strategies, Competitive strategy, Intellectual property, Marketing, Pricing and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Signalling Costs casestudy better are - – supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, challanges to central banks by blockchain based private currencies, there is backlash against globalization,
competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Signalling Costs case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aspartame Nutrasweet's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aspartame Nutrasweet's 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 Signalling Costs can be done for the following purposes –
1. Strategic planning using facts provided in Signalling Costs case study
2. Improving business portfolio management of Aspartame Nutrasweet's
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 Aspartame Nutrasweet's
Strengths Signalling Costs | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aspartame Nutrasweet's in Signalling Costs Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Aspartame Nutrasweet's 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.
High brand equity
– Aspartame Nutrasweet's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aspartame Nutrasweet's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Aspartame Nutrasweet's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Signalling Costs 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.
Highly skilled collaborators
– Aspartame Nutrasweet's 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 Signalling Costs HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Aspartame Nutrasweet's 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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Aspartame Nutrasweet's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aspartame Nutrasweet's 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.
Innovation driven organization
– Aspartame Nutrasweet's is one of the most innovative firm in sector. Manager in Signalling Costs Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Aspartame Nutrasweet's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Aspartame Nutrasweet's in the sector have low bargaining power. Signalling Costs has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aspartame Nutrasweet's to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Aspartame Nutrasweet's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Aspartame Nutrasweet's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Strategy & Execution industry
– Signalling Costs firm has clearly differentiated products in the market place. This has enabled Aspartame Nutrasweet's to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Aspartame Nutrasweet's to invest into research and development (R&D) and innovation.
Ability to lead change in Strategy & Execution field
– Aspartame Nutrasweet's 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 Aspartame Nutrasweet's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Signalling Costs | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Signalling Costs are -
High cash cycle compare to competitors
Aspartame Nutrasweet's 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.
Low market penetration in new markets
– Outside its home market of Aspartame Nutrasweet's, firm in the HBR case study Signalling Costs needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– After analyzing the HBR case study Signalling Costs, 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.
Slow to strategic competitive environment developments
– As Signalling Costs HBR case study mentions - Aspartame Nutrasweet's 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.
Increasing silos among functional specialists
– The organizational structure of Aspartame Nutrasweet's is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Aspartame Nutrasweet's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aspartame Nutrasweet's to focus more on services rather than just following the product oriented approach.
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 Aspartame Nutrasweet's supply chain. Even after few cautionary changes mentioned in the HBR case study - Signalling Costs, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Aspartame Nutrasweet's vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Aspartame Nutrasweet's 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.
Aligning sales with marketing
– It come across in the case study Signalling Costs 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 Signalling Costs can leverage the sales team experience to cultivate customer relationships as Aspartame Nutrasweet's is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Aspartame Nutrasweet's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Signalling Costs can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Signalling Costs, is just above the industry average. Aspartame Nutrasweet's 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Adam Brandenburger suggests that, Aspartame Nutrasweet's 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.
Opportunities Signalling Costs | 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 Signalling Costs are -
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. Aspartame Nutrasweet's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aspartame Nutrasweet's is facing challenges because of the dominance of functional experts in the organization. Signalling Costs 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.
Building a culture of innovation
– managers at Aspartame Nutrasweet's 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.
Manufacturing automation
– Aspartame Nutrasweet's 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.
Better consumer reach
– The expansion of the 5G network will help Aspartame Nutrasweet's to increase its market reach. Aspartame Nutrasweet's 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Aspartame Nutrasweet's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Aspartame Nutrasweet's 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aspartame Nutrasweet's 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, Signalling Costs, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Aspartame Nutrasweet's 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.
Using analytics as competitive advantage
– Aspartame Nutrasweet's 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 Signalling Costs - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Aspartame Nutrasweet's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Aspartame Nutrasweet's in the consumer business. Now Aspartame Nutrasweet's can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aspartame Nutrasweet's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aspartame Nutrasweet's 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 Signalling Costs External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Signalling Costs are -
Environmental challenges
– Aspartame Nutrasweet's 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. Aspartame Nutrasweet's can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Shortening product life cycle
– it is one of the major threat that Aspartame Nutrasweet's is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Signalling Costs, Aspartame Nutrasweet's 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 .
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 Aspartame Nutrasweet's business can come under increasing regulations regarding data privacy, data security, etc.
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 Aspartame Nutrasweet's.
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. Aspartame Nutrasweet's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Aspartame Nutrasweet's 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.
Consumer confidence and its impact on Aspartame Nutrasweet's demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Stagnating economy with rate increase
– Aspartame Nutrasweet's 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.
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.
High dependence on third party suppliers
– Aspartame Nutrasweet's 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, Aspartame Nutrasweet's 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 Signalling Costs .
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. Aspartame Nutrasweet's needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Signalling Costs 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 Signalling Costs 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 Signalling Costs 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 Signalling Costs 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 Signalling Costs 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 Aspartame Nutrasweet's needs to make to build a sustainable competitive advantage.
