Case Study Description of Argos Soditic--The Kermel Proposal
In April 2002, Guy Semmens, a partner in Argos Soditic, has to decide whether to take the lead in the management buyout (MBO) of Kermel, a niche player in the specialty fiber market. Invites participants to consider an MBO from the perspective of the private equity investor and answer the following questions: What is the fair value of Kermel? How should you structure the deal to provide incentives for management while generating adequate returns? What would be the exit strategy?
Swot Analysis of "Argos Soditic--The Kermel Proposal" written by Benoit Leleux, Henri Bourgeois includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Kermel Argos facing as an external strategic factors. Some of the topics covered in Argos Soditic--The Kermel Proposal case study are - Strategic Management Strategies, Financial analysis, Strategy and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Argos Soditic--The Kermel Proposal casestudy better are - – technology disruption, there is backlash against globalization, increasing commodity prices, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings,
talent flight as more people leaving formal jobs, increasing energy prices, etc
Introduction to SWOT Analysis of Argos Soditic--The Kermel Proposal
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Argos Soditic--The Kermel Proposal case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kermel Argos, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kermel Argos 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 Argos Soditic--The Kermel Proposal can be done for the following purposes –
1. Strategic planning using facts provided in Argos Soditic--The Kermel Proposal case study
2. Improving business portfolio management of Kermel Argos
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 Kermel Argos
Strengths Argos Soditic--The Kermel Proposal | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kermel Argos in Argos Soditic--The Kermel Proposal Harvard Business Review case study are -
Ability to lead change in Strategy & Execution field
– Kermel Argos 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 Kermel Argos in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Kermel Argos digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kermel Argos 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.
Sustainable margins compare to other players in Strategy & Execution industry
– Argos Soditic--The Kermel Proposal firm has clearly differentiated products in the market place. This has enabled Kermel Argos to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Kermel Argos to invest into research and development (R&D) and innovation.
High brand equity
– Kermel Argos has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Kermel Argos to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Kermel Argos in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Kermel Argos 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.
Successful track record of launching new products
– Kermel Argos has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kermel Argos has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Organizational Resilience of Kermel Argos
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Kermel Argos does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Kermel Argos 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 Argos Soditic--The Kermel Proposal - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Kermel Argos in the sector have low bargaining power. Argos Soditic--The Kermel Proposal has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Kermel Argos to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Kermel Argos 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 Argos Soditic--The Kermel Proposal HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Kermel Argos 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 Kermel Argos is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Argos Soditic--The Kermel Proposal Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Argos Soditic--The Kermel Proposal | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Argos Soditic--The Kermel Proposal are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Argos Soditic--The Kermel Proposal HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Kermel Argos has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Argos Soditic--The Kermel Proposal, is just above the industry average. Kermel Argos 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Kermel Argos is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Argos Soditic--The Kermel Proposal can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of Kermel Argos, firm in the HBR case study Argos Soditic--The Kermel Proposal needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Kermel Argos 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 - Argos Soditic--The Kermel Proposal should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Kermel Argos is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Kermel Argos needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Kermel Argos to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Kermel Argos 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.
High cash cycle compare to competitors
Kermel Argos 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Benoit Leleux, Henri Bourgeois suggests that, Kermel Argos 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.
No frontier risks strategy
– After analyzing the HBR case study Argos Soditic--The Kermel Proposal, 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.
Slow to strategic competitive environment developments
– As Argos Soditic--The Kermel Proposal HBR case study mentions - Kermel Argos takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities Argos Soditic--The Kermel Proposal | 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 Argos Soditic--The Kermel Proposal are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Kermel Argos 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. Kermel Argos can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Kermel Argos can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Kermel Argos 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.
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 Kermel Argos in the consumer business. Now Kermel Argos can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Kermel Argos can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Argos Soditic--The Kermel Proposal 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.
Developing new processes and practices
– Kermel Argos 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kermel Argos can use these opportunities to build new business models that can help the communities that Kermel Argos operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kermel Argos 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.
Creating value in data economy
– The success of analytics program of Kermel Argos has opened avenues for new revenue streams for the organization in the industry. This can help Kermel Argos to build a more holistic ecosystem as suggested in the Argos Soditic--The Kermel Proposal case study. Kermel Argos can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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 Kermel Argos 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.
Better consumer reach
– The expansion of the 5G network will help Kermel Argos to increase its market reach. Kermel Argos 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.
Learning at scale
– Online learning technologies has now opened space for Kermel Argos 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.
Threats Argos Soditic--The Kermel Proposal External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Argos Soditic--The Kermel Proposal are -
Technology acceleration in Forth Industrial Revolution
– Kermel Argos has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Kermel Argos 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.
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. Kermel Argos can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
Regulatory challenges
– Kermel Argos 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.
Shortening product life cycle
– it is one of the major threat that Kermel Argos is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Kermel Argos needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Kermel Argos 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Kermel Argos 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 Argos Soditic--The Kermel Proposal .
Environmental challenges
– Kermel Argos 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. Kermel Argos can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
High dependence on third party suppliers
– Kermel Argos 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 Kermel Argos with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Kermel Argos 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.
Weighted SWOT Analysis of Argos Soditic--The Kermel Proposal 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 Argos Soditic--The Kermel Proposal 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 Argos Soditic--The Kermel Proposal 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 Argos Soditic--The Kermel Proposal 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 Argos Soditic--The Kermel Proposal 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 Kermel Argos needs to make to build a sustainable competitive advantage.
