Case Study Description of Mercury Athletic: Valuing the Opportunity
When students have the English-language PDF of this Brief Case in a coursepack, they will also have the option to purchase an audio version.In January 2007, West Coast Fashions, Inc., a large designer and marketer of branded apparel, announced a strategic reorganization that would result in the divestiture of their wholly owned footwear subsidiary, Mercury Athletic. John Liedtke, the head of business development for Active Gear, a mid-sized athletic and casual footwear company, saw the potential acquisition of Mercury as a unique opportunity to roughly double the size of his business. The case uses the potential acquisition of Mercury Athletic as a vehicle to teach students basic DCF (discounted cash flow) valuation using the weighted average cost of capital (WACC). Debt-Free Cash Flow Projections, Terminal Values, Non-operating Assets, Valuation, Operating Projections, Enterprise and Equity Value, Sensitivity Analysis, Acquisition, Weighted Average Cost of Capital, United States, Footwear, Athletic Apparel, Footwear
Swot Analysis of "Mercury Athletic: Valuing the Opportunity" written by Timothy A. Luehrman, Joel L. Heilprin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Athletic Mercury facing as an external strategic factors. Some of the topics covered in Mercury Athletic: Valuing the Opportunity case study are - Strategic Management Strategies, Financial analysis, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Mercury Athletic: Valuing the Opportunity casestudy better are - – technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, there is backlash against globalization, increasing energy prices, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion,
talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Mercury Athletic: Valuing the Opportunity
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Mercury Athletic: Valuing the Opportunity case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Athletic Mercury, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Athletic Mercury 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 Mercury Athletic: Valuing the Opportunity can be done for the following purposes –
1. Strategic planning using facts provided in Mercury Athletic: Valuing the Opportunity case study
2. Improving business portfolio management of Athletic Mercury
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Athletic Mercury
Strengths Mercury Athletic: Valuing the Opportunity | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Athletic Mercury in Mercury Athletic: Valuing the Opportunity Harvard Business Review case study are -
Training and development
– Athletic Mercury has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Mercury Athletic: Valuing the Opportunity 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.
Successful track record of launching new products
– Athletic Mercury has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Athletic Mercury 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.
Cross disciplinary teams
– Horizontal connected teams at the Athletic Mercury 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Mercury Athletic: Valuing the Opportunity firm has clearly differentiated products in the market place. This has enabled Athletic Mercury to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Athletic Mercury to invest into research and development (R&D) and innovation.
Ability to lead change in Finance & Accounting field
– Athletic Mercury is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Athletic Mercury in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Athletic Mercury 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 Mercury Athletic: Valuing the Opportunity - 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
– Athletic Mercury 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 Timothy A. Luehrman, Joel L. Heilprin 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.
Ability to recruit top talent
– Athletic Mercury is one of the leading recruiters in the industry. Managers in the Mercury Athletic: Valuing the Opportunity are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Athletic Mercury
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Athletic Mercury does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Athletic Mercury 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 Athletic Mercury is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Mercury Athletic: Valuing the Opportunity Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Athletic Mercury has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Athletic Mercury to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Athletic Mercury digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Athletic Mercury 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.
Weaknesses Mercury Athletic: Valuing the Opportunity | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Mercury Athletic: Valuing the Opportunity are -
Increasing silos among functional specialists
– The organizational structure of Athletic Mercury is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Athletic Mercury needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Athletic Mercury to focus more on services rather than just following the product oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Mercury Athletic: Valuing the Opportunity 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 Athletic Mercury has relatively successful track record of launching new products.
Need for greater diversity
– Athletic Mercury 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 strategic competitive environment developments
– As Mercury Athletic: Valuing the Opportunity HBR case study mentions - Athletic Mercury 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.
Capital Spending Reduction
– Even during the low interest decade, Athletic Mercury 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.
Skills based hiring
– The stress on hiring functional specialists at Athletic Mercury has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Products dominated business model
– Even though Athletic Mercury 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 - Mercury Athletic: Valuing the Opportunity should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Athletic Mercury, firm in the HBR case study Mercury Athletic: Valuing the Opportunity needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Athletic Mercury products
– To increase the profitability and margins on the products, Athletic Mercury needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study Mercury Athletic: Valuing the Opportunity 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 Athletic Mercury 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Athletic Mercury 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. Athletic Mercury 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 Mercury Athletic: Valuing the Opportunity | 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 Mercury Athletic: Valuing the Opportunity are -
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 Athletic Mercury in the consumer business. Now Athletic Mercury can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Athletic Mercury 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 Mercury Athletic: Valuing the Opportunity - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Athletic Mercury to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Athletic Mercury 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Athletic Mercury can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Athletic Mercury 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. Athletic Mercury 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Athletic Mercury is facing challenges because of the dominance of functional experts in the organization. Mercury Athletic: Valuing the Opportunity 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.
Learning at scale
– Online learning technologies has now opened space for Athletic Mercury 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Athletic Mercury 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, Mercury Athletic: Valuing the Opportunity, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Athletic Mercury can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Mercury Athletic: Valuing the Opportunity 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 Athletic Mercury 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 Athletic Mercury to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Athletic Mercury 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.
Manufacturing automation
– Athletic Mercury can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Athletic Mercury can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Mercury Athletic: Valuing the Opportunity External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Mercury Athletic: Valuing the Opportunity are -
Regulatory challenges
– Athletic Mercury 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 Finance & Accounting industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Athletic Mercury 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 Mercury Athletic: Valuing the Opportunity .
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
– Athletic Mercury has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Athletic Mercury needs to keep up with the evolution of technology in the Finance & Accounting 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Mercury Athletic: Valuing the Opportunity, Athletic Mercury may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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 Athletic Mercury business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Athletic Mercury can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Athletic Mercury 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Athletic Mercury with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Stagnating economy with rate increase
– Athletic Mercury 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.
Shortening product life cycle
– it is one of the major threat that Athletic Mercury is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Athletic Mercury needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Mercury Athletic: Valuing the Opportunity 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 Mercury Athletic: Valuing the Opportunity 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 Mercury Athletic: Valuing the Opportunity 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 Mercury Athletic: Valuing the Opportunity 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 Mercury Athletic: Valuing the Opportunity 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 Athletic Mercury needs to make to build a sustainable competitive advantage.