Case Study Description of Eastboro Machine Tools Corp. (V. 1.1)
This is a Darden case study.In mid September 2001, Jennifer Campbell, the chief financial officer of this large CAD/CAM (computer-aided design and manufacturing) equipment manufacturer must decide whether to pay out dividends to the firm's shareholders or repurchase stock. If Campbell chooses to pay out dividends, she must also decide on the magnitude of the payout. A subsidiary question is whether the firm should embark on a campaign of corporate image advertising and change its corporate name to reflect its new outlook. Serves as an omnibus review of the many practical aspects of the dividend and share buyback decisions, including (1) signaling effects, (2) clientele effects, and (3) finance and investment implications of increasing dividend payout and share repurchase decisions. Can follow a treatment of the Miller Modigliani dividend irrelevance theorem and serve to highlight practical considerations in setting dividend policy.
Swot Analysis of "Eastboro Machine Tools Corp. (V. 1.1)" written by Robert F. Bruner, Casey S. Opitz includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Dividend Payout facing as an external strategic factors. Some of the topics covered in Eastboro Machine Tools Corp. (V. 1.1) case study are - Strategic Management Strategies, Financial markets, Growth strategy and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Eastboro Machine Tools Corp. (V. 1.1) casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, geopolitical disruptions,
there is backlash against globalization, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Eastboro Machine Tools Corp. (V. 1.1)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Eastboro Machine Tools Corp. (V. 1.1) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Dividend Payout, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Dividend Payout 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 Eastboro Machine Tools Corp. (V. 1.1) can be done for the following purposes –
1. Strategic planning using facts provided in Eastboro Machine Tools Corp. (V. 1.1) case study
2. Improving business portfolio management of Dividend Payout
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 Dividend Payout
Strengths Eastboro Machine Tools Corp. (V. 1.1) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Dividend Payout in Eastboro Machine Tools Corp. (V. 1.1) Harvard Business Review case study are -
Effective Research and Development (R&D)
– Dividend Payout 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 Eastboro Machine Tools Corp. (V. 1.1) - 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
– Dividend Payout 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 Robert F. Bruner, Casey S. Opitz 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.
Sustainable margins compare to other players in Strategy & Execution industry
– Eastboro Machine Tools Corp. (V. 1.1) firm has clearly differentiated products in the market place. This has enabled Dividend Payout to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Dividend Payout to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Dividend Payout is present in almost all the verticals within the industry. This has provided firm in Eastboro Machine Tools Corp. (V. 1.1) 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.
Learning organization
- Dividend Payout 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 Dividend Payout is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Eastboro Machine Tools Corp. (V. 1.1) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Strategy & Execution field
– Dividend Payout 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 Dividend Payout in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Dividend Payout is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Dividend Payout is one of the leading recruiters in the industry. Managers in the Eastboro Machine Tools Corp. (V. 1.1) 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 Dividend Payout
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Dividend Payout does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Dividend Payout 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.
Low bargaining power of suppliers
– Suppliers of Dividend Payout in the sector have low bargaining power. Eastboro Machine Tools Corp. (V. 1.1) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Dividend Payout to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Dividend Payout in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Eastboro Machine Tools Corp. (V. 1.1) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Eastboro Machine Tools Corp. (V. 1.1) are -
Lack of clear differentiation of Dividend Payout products
– To increase the profitability and margins on the products, Dividend Payout needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Dividend Payout 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.
Aligning sales with marketing
– It come across in the case study Eastboro Machine Tools Corp. (V. 1.1) 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 Eastboro Machine Tools Corp. (V. 1.1) can leverage the sales team experience to cultivate customer relationships as Dividend Payout is planning to shift buying processes online.
Need for greater diversity
– Dividend Payout 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.
Low market penetration in new markets
– Outside its home market of Dividend Payout, firm in the HBR case study Eastboro Machine Tools Corp. (V. 1.1) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Eastboro Machine Tools Corp. (V. 1.1), in the dynamic environment Dividend Payout has struggled to respond to the nimble upstart competition. Dividend Payout has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Dividend Payout is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Dividend Payout needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Dividend Payout to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Dividend Payout 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 - Eastboro Machine Tools Corp. (V. 1.1) should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Eastboro Machine Tools Corp. (V. 1.1), it seems that the employees of Dividend Payout don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Eastboro Machine Tools Corp. (V. 1.1), is just above the industry average. Dividend Payout 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.
Skills based hiring
– The stress on hiring functional specialists at Dividend Payout 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.
Opportunities Eastboro Machine Tools Corp. (V. 1.1) | 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 Eastboro Machine Tools Corp. (V. 1.1) are -
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. Dividend Payout 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. Dividend Payout 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.
Developing new processes and practices
– Dividend Payout can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Dividend Payout 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Dividend Payout is facing challenges because of the dominance of functional experts in the organization. Eastboro Machine Tools Corp. (V. 1.1) 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.
Loyalty marketing
– Dividend Payout 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.
Manufacturing automation
– Dividend Payout 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Dividend Payout 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.
Creating value in data economy
– The success of analytics program of Dividend Payout has opened avenues for new revenue streams for the organization in the industry. This can help Dividend Payout to build a more holistic ecosystem as suggested in the Eastboro Machine Tools Corp. (V. 1.1) case study. Dividend Payout can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Dividend Payout to increase its market reach. Dividend Payout 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Dividend Payout 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, Eastboro Machine Tools Corp. (V. 1.1), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Dividend Payout can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Dividend Payout can use these opportunities to build new business models that can help the communities that Dividend Payout 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 Dividend Payout in the consumer business. Now Dividend Payout can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Eastboro Machine Tools Corp. (V. 1.1) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Eastboro Machine Tools Corp. (V. 1.1) are -
Consumer confidence and its impact on Dividend Payout 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.
Regulatory challenges
– Dividend Payout needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Technology acceleration in Forth Industrial Revolution
– Dividend Payout has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Dividend Payout 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.
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 Dividend Payout.
Shortening product life cycle
– it is one of the major threat that Dividend Payout is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Dividend Payout can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Dividend Payout can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Dividend Payout 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 Eastboro Machine Tools Corp. (V. 1.1) .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Eastboro Machine Tools Corp. (V. 1.1), Dividend Payout 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 .
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Dividend Payout 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.
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 Dividend Payout business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Eastboro Machine Tools Corp. (V. 1.1) 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 Eastboro Machine Tools Corp. (V. 1.1) 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 Eastboro Machine Tools Corp. (V. 1.1) 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 Eastboro Machine Tools Corp. (V. 1.1) 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 Eastboro Machine Tools Corp. (V. 1.1) 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 Dividend Payout needs to make to build a sustainable competitive advantage.