This case illustrates the importance of structuring negotiations with large companies and investors that are critical to a start-up's success. It depicts a firm with innovative technology that contracts with giant companies in order to survive. It also demonstrates how the company's management must be flexible when constructing a business model that will accommodate the positions of its strategic partners and investors. Arepa must decide which business model to adopt and how to sequence and structure negotiations with distribution partners, content providers, and investors. All of the decisions interrelate.
Swot Analysis of "Arepa" written by Jay O. Light, Dan J. Green includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Arepa Investors facing as an external strategic factors. Some of the topics covered in Arepa case study are - Strategic Management Strategies, Entrepreneurial finance, Financial analysis, International business, Internet, Negotiations and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Arepa casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy,
challanges to central banks by blockchain based private currencies, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Arepa case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arepa Investors, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arepa Investors 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 Arepa can be done for the following purposes –
1. Strategic planning using facts provided in Arepa case study
2. Improving business portfolio management of Arepa Investors
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 Arepa Investors
Strengths Arepa | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arepa Investors in Arepa Harvard Business Review case study are -
Sustainable margins compare to other players in Strategy & Execution industry
– Arepa firm has clearly differentiated products in the market place. This has enabled Arepa Investors to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Arepa Investors to invest into research and development (R&D) and innovation.
Strong track record of project management
– Arepa Investors is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Arepa Investors in the sector have low bargaining power. Arepa has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arepa Investors to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Arepa Investors is present in almost all the verticals within the industry. This has provided firm in Arepa 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.
High switching costs
– The high switching costs that Arepa Investors 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.
Highly skilled collaborators
– Arepa Investors 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 Arepa HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Arepa Investors 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.
Ability to recruit top talent
– Arepa Investors is one of the leading recruiters in the industry. Managers in the Arepa 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 Arepa Investors
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Arepa Investors does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Arepa 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.
Learning organization
- Arepa Investors 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 Arepa Investors is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Arepa Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Arepa Investors digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Arepa Investors 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 Arepa | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arepa are -
Interest costs
– Compare to the competition, Arepa Investors 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.
No frontier risks strategy
– After analyzing the HBR case study Arepa, 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.
Need for greater diversity
– Arepa Investors 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Arepa, in the dynamic environment Arepa Investors has struggled to respond to the nimble upstart competition. Arepa Investors has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Arepa Investors supply chain. Even after few cautionary changes mentioned in the HBR case study - Arepa, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Arepa Investors vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Arepa 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 Arepa can leverage the sales team experience to cultivate customer relationships as Arepa Investors is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Arepa Investors, firm in the HBR case study Arepa needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Arepa Investors products
– To increase the profitability and margins on the products, Arepa Investors needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the segment, Arepa Investors 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.
Products dominated business model
– Even though Arepa Investors 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 - Arepa should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners
– Because of the regulatory requirements, Jay O. Light, Dan J. Green suggests that, Arepa Investors 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.
Opportunities Arepa | 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 Arepa are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Arepa Investors 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.
Learning at scale
– Online learning technologies has now opened space for Arepa Investors 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.
Leveraging digital technologies
– Arepa Investors 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.
Using analytics as competitive advantage
– Arepa Investors 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 Arepa - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Arepa Investors to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Arepa Investors 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 Arepa Investors to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Arepa Investors 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. Arepa Investors can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Arepa Investors can use these opportunities to build new business models that can help the communities that Arepa Investors operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
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 Arepa Investors in the consumer business. Now Arepa Investors can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Arepa Investors is facing challenges because of the dominance of functional experts in the organization. Arepa 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.
Better consumer reach
– The expansion of the 5G network will help Arepa Investors to increase its market reach. Arepa Investors 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.
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 Arepa Investors 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Arepa Investors can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Arepa External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Arepa 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 Arepa Investors.
Regulatory challenges
– Arepa Investors 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Arepa Investors with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Arepa Investors needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Increasing wage structure of Arepa Investors
– 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 Arepa Investors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Arepa, Arepa Investors 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 .
High dependence on third party suppliers
– Arepa Investors 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.
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 Arepa Investors business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Arepa Investors 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 Arepa .
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. Arepa Investors can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Arepa Investors is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Arepa Investors 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.
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 Arepa Investors in the Strategy & Execution sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Arepa 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 Arepa 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 Arepa 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 Arepa 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 Arepa 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 Arepa Investors needs to make to build a sustainable competitive advantage.