The CEO of Sandvik Group is reviewing the initiatives he implemented since assuming leadership of the group. The case focuses on his attempts to increase the synergies between the six disparate businesses of the Sandvik Group. Also briefly describes the history of the company followed by a description of the businesses and corporate management of Sandvik. Specific measures taken by Sandvik's management to increase the level of synergy between the businesses are outlined. Concludes with a discussion of the problems and challenges management has experienced in connection with the search for synergy. The main challenge is how to avoid a recentralization of power while at the same time encouraging employees to act with regard to both their business and the group. Closes with the CEO wondering how further changes could be made to expand and sustain the search and exploitation of synergies within the Sandvik group. Written for use in Business Policy/Strategy courses in the second year of an MBA program. Can be used as a corporate strategy case to illustrate concepts such as diversification, synergies, and parenting advantage. Can also be used as a management of change case by putting emphasis on the actions of the CEO can take to achieve his stated goals.
Authors :: Julian Birkinshaw, Roderick E. White, Robin Teigland
Swot Analysis of "Sandvik AB (A)" written by Julian Birkinshaw, Roderick E. White, Robin Teigland includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sandvik Synergies facing as an external strategic factors. Some of the topics covered in Sandvik AB (A) case study are - Strategic Management Strategies, Competitive strategy, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Sandvik AB (A) casestudy better are - – there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, increasing energy prices, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion,
increasing transportation and logistics costs, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Sandvik AB (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sandvik Synergies, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sandvik Synergies 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 Sandvik AB (A) can be done for the following purposes –
1. Strategic planning using facts provided in Sandvik AB (A) case study
2. Improving business portfolio management of Sandvik Synergies
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 Sandvik Synergies
Strengths Sandvik AB (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sandvik Synergies in Sandvik AB (A) Harvard Business Review case study are -
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Sandvik Synergies digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sandvik Synergies 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.
Superior customer experience
– The customer experience strategy of Sandvik Synergies in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Sandvik AB (A) 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 switching costs
– The high switching costs that Sandvik Synergies 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.
Organizational Resilience of Sandvik Synergies
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sandvik Synergies 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
– Sandvik AB (A) firm has clearly differentiated products in the market place. This has enabled Sandvik Synergies to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Sandvik Synergies to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Sandvik Synergies is present in almost all the verticals within the industry. This has provided firm in Sandvik AB (A) 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 Sandvik Synergies 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.
Learning organization
- Sandvik Synergies 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 Sandvik Synergies is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Sandvik AB (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Sandvik Synergies 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 Sandvik AB (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Sandvik Synergies is one of the most innovative firm in sector. Manager in Sandvik AB (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Sandvik Synergies has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sandvik Synergies to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Sandvik AB (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sandvik AB (A) are -
Low market penetration in new markets
– Outside its home market of Sandvik Synergies, firm in the HBR case study Sandvik AB (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Sandvik Synergies 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Sandvik Synergies 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.
No frontier risks strategy
– After analyzing the HBR case study Sandvik AB (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.
Interest costs
– Compare to the competition, Sandvik Synergies 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Sandvik AB (A), in the dynamic environment Sandvik Synergies has struggled to respond to the nimble upstart competition. Sandvik Synergies has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Sandvik Synergies is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Sandvik Synergies needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sandvik Synergies to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Sandvik Synergies has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Sandvik AB (A) should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– It come across in the case study Sandvik AB (A) 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 Sandvik AB (A) can leverage the sales team experience to cultivate customer relationships as Sandvik Synergies is planning to shift buying processes online.
High bargaining power of channel partners
– Because of the regulatory requirements, Julian Birkinshaw, Roderick E. White, Robin Teigland suggests that, Sandvik Synergies 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.
Slow to strategic competitive environment developments
– As Sandvik AB (A) HBR case study mentions - Sandvik Synergies 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.
Opportunities Sandvik AB (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 Sandvik AB (A) are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sandvik Synergies can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Sandvik Synergies 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.
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. Sandvik Synergies 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. Sandvik Synergies 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.
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 Sandvik Synergies 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.
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. Sandvik Synergies can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Sandvik Synergies 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 Sandvik AB (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sandvik Synergies to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Sandvik Synergies can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Sandvik AB (A) 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sandvik Synergies 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 Sandvik Synergies to hire the very best people irrespective of their geographical location.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sandvik Synergies in the consumer business. Now Sandvik Synergies can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Sandvik Synergies 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sandvik Synergies 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, Sandvik AB (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Sandvik Synergies 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sandvik Synergies can use these opportunities to build new business models that can help the communities that Sandvik Synergies operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Threats Sandvik AB (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Sandvik AB (A) 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 Sandvik Synergies in the Strategy & Execution sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sandvik Synergies 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 Sandvik AB (A) .
Regulatory challenges
– Sandvik Synergies 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.
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 Sandvik Synergies.
Shortening product life cycle
– it is one of the major threat that Sandvik Synergies is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Sandvik Synergies 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. Sandvik Synergies can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Technology acceleration in Forth Industrial Revolution
– Sandvik Synergies has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Sandvik Synergies 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.
High dependence on third party suppliers
– Sandvik Synergies 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.
Stagnating economy with rate increase
– Sandvik Synergies 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.
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. Sandvik Synergies needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sandvik Synergies with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Sandvik Synergies 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.
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 Sandvik Synergies business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Sandvik AB (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 Sandvik AB (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 Sandvik AB (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 Sandvik AB (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 Sandvik AB (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 Sandvik Synergies needs to make to build a sustainable competitive advantage.