Case Study Description of Strategies of Unrelated Diversification
Conglomerates lie at the heart of debates in corporate strategy. They include, perhaps, the best known companies in history--Beatrice Corp., General Electric, ITT, Siemens, and ABB--and at various times over the last few decades have been both admired and vilified as a form of corporate organization. Regardless of the time at which these debates have occurred, they invariably focus on a few common questions, which this note addresses: Why do conglomerates exist? Do they add value to their component businesses? If so, how?
Swot Analysis of "Strategies of Unrelated Diversification" written by Samhita Jayanti, Bharat N. Anand includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Conglomerates Debates facing as an external strategic factors. Some of the topics covered in Strategies of Unrelated Diversification case study are - Strategic Management Strategies, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Strategies of Unrelated Diversification casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, increasing energy prices, wage bills are increasing, central banks are concerned over increasing inflation, increasing commodity prices, there is increasing trade war between United States & China,
digital marketing is dominated by two big players Facebook and Google, technology disruption, etc
Introduction to SWOT Analysis of Strategies of Unrelated Diversification
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Strategies of Unrelated Diversification case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Conglomerates Debates, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Conglomerates Debates 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 Strategies of Unrelated Diversification can be done for the following purposes –
1. Strategic planning using facts provided in Strategies of Unrelated Diversification case study
2. Improving business portfolio management of Conglomerates Debates
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 Conglomerates Debates
Strengths Strategies of Unrelated Diversification | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Conglomerates Debates in Strategies of Unrelated Diversification Harvard Business Review case study are -
Strong track record of project management
– Conglomerates Debates is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Conglomerates Debates 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.
Training and development
– Conglomerates Debates has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Strategies of Unrelated Diversification Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– Conglomerates Debates has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Conglomerates Debates to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Strategies of Unrelated Diversification Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Organizational Resilience of Conglomerates Debates
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Conglomerates Debates does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Conglomerates Debates 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 Strategies of Unrelated Diversification HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Conglomerates Debates 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 Conglomerates Debates is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Strategies of Unrelated Diversification Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Conglomerates Debates 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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Conglomerates Debates digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Conglomerates Debates 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.
Diverse revenue streams
– Conglomerates Debates is present in almost all the verticals within the industry. This has provided firm in Strategies of Unrelated Diversification 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.
Sustainable margins compare to other players in Strategy & Execution industry
– Strategies of Unrelated Diversification firm has clearly differentiated products in the market place. This has enabled Conglomerates Debates to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Conglomerates Debates to invest into research and development (R&D) and innovation.
Weaknesses Strategies of Unrelated Diversification | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Strategies of Unrelated Diversification are -
Slow decision making process
– As mentioned earlier in the report, Conglomerates Debates 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. Conglomerates Debates 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Strategies of Unrelated Diversification, it seems that the employees of Conglomerates Debates 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.
Interest costs
– Compare to the competition, Conglomerates Debates has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Need for greater diversity
– Conglomerates Debates 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 Conglomerates Debates supply chain. Even after few cautionary changes mentioned in the HBR case study - Strategies of Unrelated Diversification, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Conglomerates Debates vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Samhita Jayanti, Bharat N. Anand suggests that, Conglomerates Debates 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 Conglomerates Debates is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Conglomerates Debates needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Conglomerates Debates to focus more on services rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Strategies of Unrelated Diversification, in the dynamic environment Conglomerates Debates has struggled to respond to the nimble upstart competition. Conglomerates Debates has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Strategies of Unrelated Diversification, is just above the industry average. Conglomerates Debates 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.
Capital Spending Reduction
– Even during the low interest decade, Conglomerates Debates 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.
Low market penetration in new markets
– Outside its home market of Conglomerates Debates, firm in the HBR case study Strategies of Unrelated Diversification needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Strategies of Unrelated Diversification | 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 Strategies of Unrelated Diversification are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Conglomerates Debates 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Conglomerates Debates can use these opportunities to build new business models that can help the communities that Conglomerates Debates operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Conglomerates Debates can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Conglomerates Debates 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. Conglomerates Debates 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.
Loyalty marketing
– Conglomerates Debates 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.
Buying journey improvements
– Conglomerates Debates can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Strategies of Unrelated Diversification 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 Conglomerates Debates 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 Conglomerates Debates to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Conglomerates Debates 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Conglomerates Debates is facing challenges because of the dominance of functional experts in the organization. Strategies of Unrelated Diversification 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.
Learning at scale
– Online learning technologies has now opened space for Conglomerates Debates 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Conglomerates Debates 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, Strategies of Unrelated Diversification, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Conglomerates Debates 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 Conglomerates Debates to increase its market reach. Conglomerates Debates 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.
Threats Strategies of Unrelated Diversification External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Strategies of Unrelated Diversification are -
Shortening product life cycle
– it is one of the major threat that Conglomerates Debates is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Conglomerates Debates will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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 Conglomerates Debates in the Strategy & Execution sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Conglomerates Debates with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Conglomerates Debates 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Conglomerates Debates 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 Strategies of Unrelated Diversification .
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.
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. Conglomerates Debates needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Increasing wage structure of Conglomerates Debates
– 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 Conglomerates Debates.
High dependence on third party suppliers
– Conglomerates Debates 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.
Environmental challenges
– Conglomerates Debates 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. Conglomerates Debates can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Consumer confidence and its impact on Conglomerates Debates 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 Strategies of Unrelated Diversification 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 Strategies of Unrelated Diversification 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 Strategies of Unrelated Diversification 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 Strategies of Unrelated Diversification 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 Strategies of Unrelated Diversification 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 Conglomerates Debates needs to make to build a sustainable competitive advantage.
