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 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 (UV1613) reveals Bertelsmann's decision to reorganize all e-commerce operations into one division.
Swot Analysis of "Bertelsmann (B)" 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 (B) case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Bertelsmann (B) casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices,
there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Bertelsmann (B) 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 (B) can be done for the following purposes –
1. Strategic planning using facts provided in Bertelsmann (B) 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 (B) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Bertelsmann's Bertelsmann in Bertelsmann (B) Harvard Business Review case study are -
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.
Training and development
– Bertelsmann's Bertelsmann has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Bertelsmann (B) 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.
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 (B) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 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.
Organizational Resilience of Bertelsmann's Bertelsmann
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Bertelsmann's Bertelsmann 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
– Bertelsmann (B) 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.
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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Bertelsmann's Bertelsmann digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Bertelsmann's Bertelsmann 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.
Cross disciplinary teams
– Horizontal connected teams at the Bertelsmann's Bertelsmann 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
– 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.
Ability to recruit top talent
– Bertelsmann's Bertelsmann is one of the leading recruiters in the industry. Managers in the Bertelsmann (B) 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 Bertelsmann (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Bertelsmann (B) are -
Lack of clear differentiation of Bertelsmann's Bertelsmann products
– To increase the profitability and margins on the products, Bertelsmann's Bertelsmann needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Bertelsmann's Bertelsmann is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Bertelsmann's Bertelsmann needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Bertelsmann's Bertelsmann to focus more on services rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Bertelsmann's Bertelsmann 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.
Need for greater diversity
– Bertelsmann's Bertelsmann 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.
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 (B) should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– After analyzing the HBR case study Bertelsmann (B), 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Bertelsmann's Bertelsmann 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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Bertelsmann (B) 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.
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.
Opportunities Bertelsmann (B) | 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 (B) are -
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Bertelsmann's Bertelsmann 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
– Bertelsmann's Bertelsmann 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.
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 Bertelsmann's Bertelsmann in the consumer business. Now Bertelsmann's Bertelsmann can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
Using analytics as competitive advantage
– Bertelsmann's Bertelsmann 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 Bertelsmann (B) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Bertelsmann's Bertelsmann to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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 (B) 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 Bertelsmann's Bertelsmann 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.
Buying journey improvements
– Bertelsmann's Bertelsmann can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Bertelsmann (B) 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.
Threats Bertelsmann (B) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Bertelsmann (B) are -
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.
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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Bertelsmann's Bertelsmann 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 Bertelsmann (B) .
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 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.
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.
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.
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.
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 Bertelsmann's Bertelsmann in the Strategy & Execution sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Bertelsmann (B) 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 (B) 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 (B) 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 (B) 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 (B) 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.
