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 - – central banks are concerned over increasing inflation, technology disruption, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, increasing energy prices,
wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
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.
Highly skilled collaborators
– Novelis Hindalco 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 Hindalco's Acquisition of Novelis: The Making of a Giant HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
High switching costs
– The high switching costs that Novelis Hindalco 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.
Operational resilience
– The operational resilience strategy in the Hindalco's Acquisition of Novelis: The Making of a Giant 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.
Ability to recruit top talent
– Novelis Hindalco is one of the leading recruiters in the industry. Managers in the Hindalco's Acquisition of Novelis: The Making of a Giant are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Diverse revenue streams
– Novelis Hindalco is present in almost all the verticals within the industry. This has provided firm in Hindalco's Acquisition of Novelis: The Making of a Giant 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.
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.
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 -
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.
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.
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.
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.
Need for greater diversity
– Novelis Hindalco 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.
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.
Increasing silos among functional specialists
– The organizational structure of Novelis Hindalco is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Novelis Hindalco needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Novelis Hindalco to focus more on services rather than just following the product oriented approach.
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.
Skills based hiring
– The stress on hiring functional specialists at Novelis Hindalco 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.
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.
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 -
Creating value in data economy
– The success of analytics program of Novelis Hindalco has opened avenues for new revenue streams for the organization in the industry. This can help Novelis Hindalco to build a more holistic ecosystem as suggested in the Hindalco's Acquisition of Novelis: The Making of a Giant case study. Novelis Hindalco can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Novelis Hindalco 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 Novelis Hindalco to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Novelis Hindalco is facing challenges because of the dominance of functional experts in the organization. Hindalco's Acquisition of Novelis: The Making of a Giant 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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Novelis Hindalco 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.
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.
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.
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.
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.
Buying journey improvements
– Novelis Hindalco can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Hindalco's Acquisition of Novelis: The Making of a Giant 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 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 -
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. Novelis Hindalco can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Novelis Hindalco 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.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Novelis Hindalco has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Novelis Hindalco needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High 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. Novelis Hindalco needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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.
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.
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.
Environmental challenges
– Novelis Hindalco 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. Novelis Hindalco can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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.
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.
