Case Study Description of Compensation at Level 3 Communications
Level 3's unique compensation plan rewarded managers for the firm's performance only if the firm's stock price movement exceeded that of the market. This design was intended to maximize shareholder value by tying manager's performance more closely to that of the firm, rather than tying it to the level of the overall market. The past year had been a difficult one for the telecommunications sector, and Level 3, like many other firms, was concerned about both retaining employees and adequately compensating them. Moreover, Level 3 needed to hire a substantial number of employees over the coming year, and the firm's compensation plan would play a significant role in attracting good employees. With the annual compensation committee meeting approaching, the CEO must reevaluate whether the plan was successful and whether any changes were warranted. Possible changes included changing its benchmark index from the S&P 500 to another (perhaps more specialized) index and adjusting the size of the indexed option grant and its cash/option mix to produce the right incentives in light of falling stock prices.
Swot Analysis of "Compensation at Level 3 Communications" written by Lisa Meulbroek includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Compensation Level facing as an external strategic factors. Some of the topics covered in Compensation at Level 3 Communications case study are - Strategic Management Strategies, Compensation, Financial analysis, Financial markets, Motivating people, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Compensation at Level 3 Communications casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, geopolitical disruptions,
there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Compensation at Level 3 Communications
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Compensation at Level 3 Communications case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Compensation Level, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Compensation Level 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 Compensation at Level 3 Communications can be done for the following purposes –
1. Strategic planning using facts provided in Compensation at Level 3 Communications case study
2. Improving business portfolio management of Compensation Level
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Compensation Level
Strengths Compensation at Level 3 Communications | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Compensation Level in Compensation at Level 3 Communications Harvard Business Review case study are -
High switching costs
– The high switching costs that Compensation Level 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.
Operational resilience
– The operational resilience strategy in the Compensation at Level 3 Communications 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.
Analytics focus
– Compensation Level is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Lisa Meulbroek can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Innovation driven organization
– Compensation Level is one of the most innovative firm in sector. Manager in Compensation at Level 3 Communications Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Finance & Accounting field
– Compensation Level 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 Compensation Level in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Compensation Level is present in almost all the verticals within the industry. This has provided firm in Compensation at Level 3 Communications 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.
Low bargaining power of suppliers
– Suppliers of Compensation Level in the sector have low bargaining power. Compensation at Level 3 Communications has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Compensation Level to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Compensation Level 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Compensation at Level 3 Communications firm has clearly differentiated products in the market place. This has enabled Compensation Level to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Compensation Level to invest into research and development (R&D) and innovation.
High brand equity
– Compensation Level has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Compensation Level to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Compensation Level 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 Compensation Level is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Compensation at Level 3 Communications Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Compensation Level is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Compensation at Level 3 Communications | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Compensation at Level 3 Communications are -
High cash cycle compare to competitors
Compensation Level 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.
Capital Spending Reduction
– Even during the low interest decade, Compensation Level 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Compensation at Level 3 Communications 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 Compensation Level has relatively successful track record of launching new products.
Lack of clear differentiation of Compensation Level products
– To increase the profitability and margins on the products, Compensation Level needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Compensation Level 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Compensation Level is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Compensation at Level 3 Communications can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Compensation Level is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Compensation Level needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Compensation Level to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Compensation Level 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. Compensation Level 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Compensation at Level 3 Communications has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Compensation Level 's lucrative customers.
Interest costs
– Compare to the competition, Compensation Level 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Compensation at Level 3 Communications, in the dynamic environment Compensation Level has struggled to respond to the nimble upstart competition. Compensation Level has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Compensation at Level 3 Communications | 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 Compensation at Level 3 Communications are -
Developing new processes and practices
– Compensation Level can develop new processes and procedures in Finance & Accounting 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.
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 Compensation Level in the consumer business. Now Compensation Level can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Compensation Level in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Compensation Level is facing challenges because of the dominance of functional experts in the organization. Compensation at Level 3 Communications 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Compensation Level 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 Compensation Level to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Compensation Level 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Compensation Level 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, Compensation at Level 3 Communications, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Compensation Level 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. Compensation Level 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.
Better consumer reach
– The expansion of the 5G network will help Compensation Level to increase its market reach. Compensation Level 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Compensation Level can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Compensation Level can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Building a culture of innovation
– managers at Compensation Level 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 Finance & Accounting segment.
Buying journey improvements
– Compensation Level can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Compensation at Level 3 Communications 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.
Threats Compensation at Level 3 Communications External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Compensation at Level 3 Communications are -
High dependence on third party suppliers
– Compensation Level 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.
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. Compensation Level needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Compensation Level with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Compensation Level 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. Compensation Level can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Stagnating economy with rate increase
– Compensation Level 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.
Shortening product life cycle
– it is one of the major threat that Compensation Level is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Compensation Level 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.
Technology acceleration in Forth Industrial Revolution
– Compensation Level has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Compensation Level needs to keep up with the evolution of technology in the Finance & Accounting 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.
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.
Regulatory challenges
– Compensation Level 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 Finance & Accounting industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Compensation at Level 3 Communications, Compensation Level may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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.
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 Compensation Level in the Finance & Accounting sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Compensation at Level 3 Communications 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 Compensation at Level 3 Communications 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 Compensation at Level 3 Communications 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 Compensation at Level 3 Communications 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 Compensation at Level 3 Communications 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 Compensation Level needs to make to build a sustainable competitive advantage.
