Case Study Description of Alcoa's Bid for Alcan (A)
In spring 2007, Alcoa CEO Alain Belda was concerned about the company's market position in light of increased competition from developing markets. China's recent entry into the aluminum market was affecting both supply and demand. Furthermore, downstream and upstream product was coming on-line from other parts of the world, including Russia. As a result, Alcoa had lost its historical market dominance and stock premium. Belda was convinced that for Alcoa to regain its leadership position, the company would have to increase efficiencies by expanding its scale, diversification and reach. The acquisition of a large competitor presented the best opportunity to achieve this goal and, as a result, he was particularly intrigued by Canadian rival, Alcan because its assets would complement Alcoa's portfolio and enhance its reach. Further, Alcan had sold off non-aluminum assets, essentially making it a pure play in aluminum. That and its access to relatively cheap Canadian hydro power made it an even more intriguing acquisition opportunity for Alcoa. However, another major competitor, Rio Tinto, was also interested in Alcan; the company was in play.
Swot Analysis of "Alcoa's Bid for Alcan (A)" written by Paul M. Healy, Penelope Rossano includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Alcan Alcoa facing as an external strategic factors. Some of the topics covered in Alcoa's Bid for Alcan (A) case study are - Strategic Management Strategies, Competition, Emerging markets, Financial management, Financial markets, Marketing, Mergers & acquisitions, Strategy execution and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Alcoa's Bid for Alcan (A) casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, wage bills are increasing, technology disruption, geopolitical disruptions, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%,
competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, etc
Introduction to SWOT Analysis of Alcoa's Bid for Alcan (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Alcoa's Bid for Alcan (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Alcan Alcoa, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Alcan Alcoa 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 Alcoa's Bid for Alcan (A) can be done for the following purposes –
1. Strategic planning using facts provided in Alcoa's Bid for Alcan (A) case study
2. Improving business portfolio management of Alcan Alcoa
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 Alcan Alcoa
Strengths Alcoa's Bid for Alcan (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Alcan Alcoa in Alcoa's Bid for Alcan (A) Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Alcan Alcoa in the sector have low bargaining power. Alcoa's Bid for Alcan (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Alcan Alcoa to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Alcan Alcoa 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.
Training and development
– Alcan Alcoa has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Alcoa's Bid for Alcan (A) 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.
Innovation driven organization
– Alcan Alcoa is one of the most innovative firm in sector. Manager in Alcoa's Bid for Alcan (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Alcan Alcoa is one of the leading recruiters in the industry. Managers in the Alcoa's Bid for Alcan (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Alcan Alcoa is present in almost all the verticals within the industry. This has provided firm in Alcoa's Bid for Alcan (A) 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)
– Alcan Alcoa 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 Alcoa's Bid for Alcan (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Alcan Alcoa has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Alcan Alcoa to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Alcan Alcoa
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Alcan Alcoa does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Alcan Alcoa 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 Alcoa's Bid for Alcan (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Alcan Alcoa in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Alcan Alcoa digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Alcan Alcoa has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Weaknesses Alcoa's Bid for Alcan (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alcoa's Bid for Alcan (A) are -
High bargaining power of channel partners
– Because of the regulatory requirements, Paul M. Healy, Penelope Rossano suggests that, Alcan Alcoa 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.
Products dominated business model
– Even though Alcan Alcoa 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 - Alcoa's Bid for Alcan (A) should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Alcan Alcoa has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Alcan Alcoa even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Alcan Alcoa is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Alcoa's Bid for Alcan (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Alcoa's Bid for Alcan (A) HBR case study mentions - Alcan Alcoa 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.
Capital Spending Reduction
– Even during the low interest decade, Alcan Alcoa 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.
Need for greater diversity
– Alcan Alcoa 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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Alcan Alcoa supply chain. Even after few cautionary changes mentioned in the HBR case study - Alcoa's Bid for Alcan (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Alcan Alcoa vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Alcoa's Bid for Alcan (A), it seems that the employees of Alcan Alcoa 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.
Lack of clear differentiation of Alcan Alcoa products
– To increase the profitability and margins on the products, Alcan Alcoa needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Alcan Alcoa 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 Alcoa's Bid for Alcan (A) | 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 Alcoa's Bid for Alcan (A) are -
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 Alcan Alcoa 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.
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 Alcan Alcoa in the consumer business. Now Alcan Alcoa can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Alcan Alcoa 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.
Manufacturing automation
– Alcan Alcoa 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.
Better consumer reach
– The expansion of the 5G network will help Alcan Alcoa to increase its market reach. Alcan Alcoa 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, Alcan Alcoa 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, Alcoa's Bid for Alcan (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Alcan Alcoa is facing challenges because of the dominance of functional experts in the organization. Alcoa's Bid for Alcan (A) 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.
Using analytics as competitive advantage
– Alcan Alcoa 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 Alcoa's Bid for Alcan (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Alcan Alcoa to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Alcan Alcoa 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Alcan Alcoa 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, Alcan Alcoa can use these opportunities to build new business models that can help the communities that Alcan Alcoa operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Leveraging digital technologies
– Alcan Alcoa 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Alcan Alcoa 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 Alcan Alcoa to hire the very best people irrespective of their geographical location.
Threats Alcoa's Bid for Alcan (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Alcoa's Bid for Alcan (A) are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Alcan Alcoa 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.
Environmental challenges
– Alcan Alcoa 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. Alcan Alcoa can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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. Alcan Alcoa needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Alcan Alcoa has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Alcan Alcoa 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.
Increasing wage structure of Alcan Alcoa
– 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 Alcan Alcoa.
Stagnating economy with rate increase
– Alcan Alcoa 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.
Regulatory challenges
– Alcan Alcoa 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 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 Alcan Alcoa 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Alcan Alcoa 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 Alcoa's Bid for Alcan (A) .
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. Alcan Alcoa can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Alcan Alcoa.
Weighted SWOT Analysis of Alcoa's Bid for Alcan (A) 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 Alcoa's Bid for Alcan (A) 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 Alcoa's Bid for Alcan (A) 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 Alcoa's Bid for Alcan (A) 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 Alcoa's Bid for Alcan (A) 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 Alcan Alcoa needs to make to build a sustainable competitive advantage.