Bertelsmann, a global media company, whose holdings include television, books, music, and printing, is considering the purchase of the publisher Random House. The backdrop for the purchase, laid out in the A case (UV1610), is a publishing industry showing decreasing profitability, with the rise of celebrity-author advances and powerful retailers like Barnes & Noble and Amazon. Further complicating the decision is Bertelsmann's recent emphasis on multimedia operations, the development of which may threaten Bertelsmann's traditional print operations. The B case (UV1612) describes Bertelsmann's purchase of Random House, and begins to make explicit the CEO's strategy for the purchase. As Bertelsmann makes a series of deals to become stronger in content delivery, difficulties with implementing new strategies under the current corporate structure are revealed. The B case leaves the reader considering where Bertelsmann should focus further investments and what structure will support a cultural shift. The C case reveals Bertelsmann's decision to reorganize all e-commerce operations into one division.
Swot Analysis of "Bertelsmann (C)" written by Jeanne M. Liedtka, Emily Jean Gibbons includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Bertelsmann's Bertelsmann facing as an external strategic factors. Some of the topics covered in Bertelsmann (C) case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Bertelsmann (C) casestudy better are - – there is increasing trade war between United States & China, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%,
supply chains are disrupted by pandemic , increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Bertelsmann (C) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Bertelsmann's Bertelsmann, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Bertelsmann's Bertelsmann 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 Bertelsmann (C) can be done for the following purposes –
1. Strategic planning using facts provided in Bertelsmann (C) case study
2. Improving business portfolio management of Bertelsmann's Bertelsmann
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 Bertelsmann's Bertelsmann
Strengths Bertelsmann (C) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Bertelsmann's Bertelsmann in Bertelsmann (C) Harvard Business Review case study are -
Sustainable margins compare to other players in Strategy & Execution industry
– Bertelsmann (C) firm has clearly differentiated products in the market place. This has enabled Bertelsmann's Bertelsmann to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Bertelsmann's Bertelsmann to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Bertelsmann's Bertelsmann has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Bertelsmann's Bertelsmann 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.
Innovation driven organization
– Bertelsmann's Bertelsmann is one of the most innovative firm in sector. Manager in Bertelsmann (C) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Bertelsmann's Bertelsmann 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 Bertelsmann's Bertelsmann is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Bertelsmann (C) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Bertelsmann's Bertelsmann 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 Bertelsmann (C) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Bertelsmann (C) 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 Bertelsmann's Bertelsmann 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.
Superior customer experience
– The customer experience strategy of Bertelsmann's Bertelsmann in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Bertelsmann's Bertelsmann is present in almost all the verticals within the industry. This has provided firm in Bertelsmann (C) 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.
Analytics focus
– Bertelsmann's Bertelsmann 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 Jeanne M. Liedtka, Emily Jean Gibbons 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.
High brand equity
– Bertelsmann's Bertelsmann has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Bertelsmann's Bertelsmann to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Bertelsmann's Bertelsmann 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 Bertelsmann (C) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Bertelsmann (C) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Bertelsmann (C) are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Bertelsmann (C), in the dynamic environment Bertelsmann's Bertelsmann has struggled to respond to the nimble upstart competition. Bertelsmann's Bertelsmann has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study Bertelsmann (C) 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 Bertelsmann (C) can leverage the sales team experience to cultivate customer relationships as Bertelsmann's Bertelsmann is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Bertelsmann (C), it seems that the employees of Bertelsmann's Bertelsmann 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Bertelsmann (C) 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 Bertelsmann's Bertelsmann has relatively successful track record of launching new products.
No frontier risks strategy
– After analyzing the HBR case study Bertelsmann (C), 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.
Products dominated business model
– Even though Bertelsmann's Bertelsmann 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 - Bertelsmann (C) should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Bertelsmann's Bertelsmann 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.
Slow decision making process
– As mentioned earlier in the report, Bertelsmann's Bertelsmann 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. Bertelsmann's Bertelsmann 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Bertelsmann (C) 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 Bertelsmann's Bertelsmann 's lucrative customers.
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 Bertelsmann's Bertelsmann supply chain. Even after few cautionary changes mentioned in the HBR case study - Bertelsmann (C), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Bertelsmann's Bertelsmann vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Bertelsmann's Bertelsmann 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.
Opportunities Bertelsmann (C) | 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 Bertelsmann (C) are -
Learning at scale
– Online learning technologies has now opened space for Bertelsmann's Bertelsmann 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Bertelsmann's Bertelsmann can use these opportunities to build new business models that can help the communities that Bertelsmann's Bertelsmann operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Creating value in data economy
– The success of analytics program of Bertelsmann's Bertelsmann has opened avenues for new revenue streams for the organization in the industry. This can help Bertelsmann's Bertelsmann to build a more holistic ecosystem as suggested in the Bertelsmann (C) case study. Bertelsmann's Bertelsmann 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. Bertelsmann's Bertelsmann 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. Bertelsmann's Bertelsmann 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.
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. Bertelsmann's Bertelsmann can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Bertelsmann's Bertelsmann is facing challenges because of the dominance of functional experts in the organization. Bertelsmann (C) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Bertelsmann's Bertelsmann to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Low interest rates
– Even though inflation is raising its head in most developed economies, Bertelsmann's Bertelsmann 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.
Buying journey improvements
– Bertelsmann's Bertelsmann can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Bertelsmann (C) 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.
Better consumer reach
– The expansion of the 5G network will help Bertelsmann's Bertelsmann to increase its market reach. Bertelsmann's Bertelsmann 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.
Developing new processes and practices
– Bertelsmann's Bertelsmann 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.
Manufacturing automation
– Bertelsmann's Bertelsmann 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.
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. Bertelsmann's Bertelsmann can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Bertelsmann (C) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Bertelsmann (C) are -
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 Bertelsmann's Bertelsmann.
Increasing wage structure of Bertelsmann's Bertelsmann
– 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 Bertelsmann's Bertelsmann.
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. Bertelsmann's Bertelsmann needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Bertelsmann's Bertelsmann 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.
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.
Regulatory challenges
– Bertelsmann's Bertelsmann 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.
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. Bertelsmann's Bertelsmann 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.
Environmental challenges
– Bertelsmann's Bertelsmann 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. Bertelsmann's Bertelsmann can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Technology acceleration in Forth Industrial Revolution
– Bertelsmann's Bertelsmann has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Bertelsmann's Bertelsmann 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
– Bertelsmann's Bertelsmann 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.
Shortening product life cycle
– it is one of the major threat that Bertelsmann's Bertelsmann is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Bertelsmann's Bertelsmann 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Bertelsmann's Bertelsmann in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of Bertelsmann (C) 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 Bertelsmann (C) 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 Bertelsmann (C) 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 Bertelsmann (C) 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 Bertelsmann (C) 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 Bertelsmann's Bertelsmann needs to make to build a sustainable competitive advantage.