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 - – increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels,
increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, 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 -
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.
Training and development
– Sandvik Synergies has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Sandvik AB (A) 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.
Analytics focus
– Sandvik Synergies is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Julian Birkinshaw, Roderick E. White, Robin Teigland can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
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.
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.
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.
Strong track record of project management
– Sandvik Synergies is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
Effective Research and Development (R&D)
– Sandvik Synergies 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 Sandvik AB (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Sandvik Synergies is one of the leading recruiters in the industry. Managers in the Sandvik AB (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Sandvik AB (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sandvik Synergies 's lucrative customers.
Lack of clear differentiation of Sandvik Synergies products
– To increase the profitability and margins on the products, Sandvik Synergies needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Sandvik AB (A), is just above the industry average. Sandvik Synergies 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.
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.
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.
Need for greater diversity
– Sandvik Synergies has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sandvik Synergies is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Sandvik AB (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
Slow decision making process
– As mentioned earlier in the report, Sandvik Synergies has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Sandvik Synergies even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
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 -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sandvik Synergies is facing challenges because of the dominance of functional experts in the organization. Sandvik AB (A) 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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sandvik Synergies 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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sandvik Synergies in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Sandvik Synergies to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Manufacturing automation
– Sandvik Synergies 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.
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.
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.
Creating value in data economy
– The success of analytics program of Sandvik Synergies has opened avenues for new revenue streams for the organization in the industry. This can help Sandvik Synergies to build a more holistic ecosystem as suggested in the Sandvik AB (A) case study. Sandvik Synergies can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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 -
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. Sandvik Synergies can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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) .
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.
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.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Sandvik AB (A), Sandvik Synergies 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 .
Consumer confidence and its impact on Sandvik Synergies 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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– 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.
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.
