Hindalco's Acquisition of Novelis: The Making of a Giant SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Hindalco's Acquisition of Novelis: The Making of a Giant
On May 16, 2007, India-based Hindalco Industries, a subsidiary of AV Birla Group of companies acquired the US-Canadian aluminum giant Novelis. The acquisition was the result of an agreement arrived at between Hindalco and Novelis on February 10, 2007. Hindalco was to buy Novelis for US $6 billion in cash, making it the second biggest acquisition by an Indian company till then. The acquisition resulted in formation of a Fortune 500 company -- the world's largest producer of aluminum -- and expected to be the industry cost leader with a presence over the entire aluminum value chain from mining to final aluminum products. The case provides a general introduction to the aluminum industry including different products, players, and processes. Also there is indirect analysis of the industry and a mentioning of the critical success factors for the industry. The case covers the growth strategies of Hindalco and Novelis and briefly covers their competition as well. It also talks in detail about the various synergies of the deal and ends with the description of the situation post-deal, with Novelis turning black owing to a variety of reasons.
Authors :: Aastha Sachdeva, Madhur Deep, R. Srinivasan
Swot Analysis of "Hindalco's Acquisition of Novelis: The Making of a Giant" written by Aastha Sachdeva, Madhur Deep, R. Srinivasan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Novelis Hindalco facing as an external strategic factors. Some of the topics covered in Hindalco's Acquisition of Novelis: The Making of a Giant case study are - Strategic Management Strategies, Mergers & acquisitions and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Hindalco's Acquisition of Novelis: The Making of a Giant casestudy better are - – increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, challanges to central banks by blockchain based private currencies, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels,
central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Hindalco's Acquisition of Novelis: The Making of a Giant
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hindalco's Acquisition of Novelis: The Making of a Giant case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Novelis Hindalco, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Novelis Hindalco 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 Hindalco's Acquisition of Novelis: The Making of a Giant can be done for the following purposes –
1. Strategic planning using facts provided in Hindalco's Acquisition of Novelis: The Making of a Giant case study
2. Improving business portfolio management of Novelis Hindalco
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 Novelis Hindalco
Strengths Hindalco's Acquisition of Novelis: The Making of a Giant | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Novelis Hindalco in Hindalco's Acquisition of Novelis: The Making of a Giant Harvard Business Review case study are -
Learning organization
- Novelis Hindalco 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 Novelis Hindalco is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Hindalco's Acquisition of Novelis: The Making of a Giant Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Novelis Hindalco 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.
Effective Research and Development (R&D)
– Novelis Hindalco 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 Hindalco's Acquisition of Novelis: The Making of a Giant - 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
– Novelis Hindalco 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 Aastha Sachdeva, Madhur Deep, R. Srinivasan 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
– Novelis Hindalco has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Novelis Hindalco to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Strategy & Execution industry
– Hindalco's Acquisition of Novelis: The Making of a Giant firm has clearly differentiated products in the market place. This has enabled Novelis Hindalco to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Novelis Hindalco to invest into research and development (R&D) and innovation.
Innovation driven organization
– Novelis Hindalco is one of the most innovative firm in sector. Manager in Hindalco's Acquisition of Novelis: The Making of a Giant Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Novelis Hindalco in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Strategy & Execution field
– Novelis Hindalco 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 Novelis Hindalco in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Novelis Hindalco in the sector have low bargaining power. Hindalco's Acquisition of Novelis: The Making of a Giant has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Novelis Hindalco to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Novelis Hindalco is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Novelis Hindalco has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Hindalco's Acquisition of Novelis: The Making of a Giant 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.
Weaknesses Hindalco's Acquisition of Novelis: The Making of a Giant | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hindalco's Acquisition of Novelis: The Making of a Giant are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Hindalco's Acquisition of Novelis: The Making of a Giant, in the dynamic environment Novelis Hindalco has struggled to respond to the nimble upstart competition. Novelis Hindalco has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Novelis Hindalco is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Hindalco's Acquisition of Novelis: The Making of a Giant can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Novelis Hindalco products
– To increase the profitability and margins on the products, Novelis Hindalco needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Novelis Hindalco 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 bargaining power of channel partners
– Because of the regulatory requirements, Aastha Sachdeva, Madhur Deep, R. Srinivasan suggests that, Novelis Hindalco 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Novelis Hindalco 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Hindalco's Acquisition of Novelis: The Making of a Giant, is just above the industry average. Novelis Hindalco needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Low market penetration in new markets
– Outside its home market of Novelis Hindalco, firm in the HBR case study Hindalco's Acquisition of Novelis: The Making of a Giant needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Novelis Hindalco 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.
Interest costs
– Compare to the competition, Novelis Hindalco 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 Hindalco's Acquisition of Novelis: The Making of a Giant, 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.
Opportunities Hindalco's Acquisition of Novelis: The Making of a Giant | 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 Hindalco's Acquisition of Novelis: The Making of a Giant are -
Leveraging digital technologies
– Novelis Hindalco 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 Novelis Hindalco in the consumer business. Now Novelis Hindalco can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Novelis Hindalco 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 Hindalco's Acquisition of Novelis: The Making of a Giant - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Novelis Hindalco to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Novelis Hindalco can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Novelis Hindalco to increase its market reach. Novelis Hindalco 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Novelis Hindalco 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.
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. Novelis Hindalco 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. Novelis Hindalco 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.
Building a culture of innovation
– managers at Novelis Hindalco 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.
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. Novelis Hindalco can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Novelis Hindalco 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.
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. Novelis Hindalco can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Novelis Hindalco 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.
Loyalty marketing
– Novelis Hindalco has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Hindalco's Acquisition of Novelis: The Making of a Giant External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hindalco's Acquisition of Novelis: The Making of a Giant are -
Consumer confidence and its impact on Novelis Hindalco 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.
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 Novelis Hindalco in the Strategy & Execution sector and impact the bottomline of the organization.
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 Novelis Hindalco.
Shortening product life cycle
– it is one of the major threat that Novelis Hindalco is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Novelis Hindalco
– 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 Novelis Hindalco.
Stagnating economy with rate increase
– Novelis Hindalco 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.
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. Novelis Hindalco 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.
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 Novelis Hindalco business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Hindalco's Acquisition of Novelis: The Making of a Giant, Novelis Hindalco 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 .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Novelis Hindalco 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.
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.
High dependence on third party suppliers
– Novelis Hindalco 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 Novelis Hindalco with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Hindalco's Acquisition of Novelis: The Making of a Giant 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 Hindalco's Acquisition of Novelis: The Making of a Giant 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 Hindalco's Acquisition of Novelis: The Making of a Giant 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 Hindalco's Acquisition of Novelis: The Making of a Giant 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 Hindalco's Acquisition of Novelis: The Making of a Giant 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 Novelis Hindalco needs to make to build a sustainable competitive advantage.