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 - – increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, central banks are concerned over increasing inflation,
technology disruption, 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 -
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.
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.
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.
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.
Learning organization
- Alcan Alcoa 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 Alcan Alcoa is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Alcoa's Bid for Alcan (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Alcan Alcoa 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
– Alcan Alcoa has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Alcan Alcoa 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.
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.
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.
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.
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.
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 -
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.
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.
Interest costs
– Compare to the competition, Alcan Alcoa 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.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Alcoa's Bid for Alcan (A), in the dynamic environment Alcan Alcoa has struggled to respond to the nimble upstart competition. Alcan Alcoa has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
Increasing silos among functional specialists
– The organizational structure of Alcan Alcoa is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Alcan Alcoa needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Alcan Alcoa to focus more on services rather than just following the product oriented approach.
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.
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.
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 -
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.
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. Alcan Alcoa 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. Alcan Alcoa 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.
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.
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. Alcan Alcoa can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Alcan Alcoa can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Alcoa's Bid for Alcan (A) 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.
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.
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Alcan Alcoa 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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Alcan Alcoa 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.
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.
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 -
Consumer confidence and its impact on Alcan Alcoa 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.
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 Alcan Alcoa business can come under increasing regulations regarding data privacy, data security, etc.
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 Alcan Alcoa 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 Alcan Alcoa.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Alcoa's Bid for Alcan (A), Alcan Alcoa 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 .
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.
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.
Shortening product life cycle
– it is one of the major threat that Alcan Alcoa is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Alcan Alcoa 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.
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.