In February 2001, Omnicom, Inc.'s CFO Randall Weisenberger restructured Omnicom's liabilities by replacing a plain-vanilla convertible bond with a liquid yield option note (LYON). Omnicom's LYON was a "No-No," a name that reflects the fact that the bond sold for par (NO accretion) even though it paid a 0% coupon (NO coupon) in most scenarios. To entice investors to buy this security, the LYON contained a conversion feature whereby investors could convert their bonds into common equity under certain circumstances. In addition, the Omnicom LYON contained a "co-pay" feature that reflected the fact that the interest rate payable to investors was contingent on Omnicom's stock price. The co-pay feature was a central issue in the case, as it allowed the corporation to treat the bonds under the Internal Revenue Service's Contingent Payment Debt Instrument rules. This effectively allowed the corporation to take large interest expense tax deductions even though no cash coupons were paid. The tax shield existed only as long as the bonds remained outstanding. However, the Omnicom LYON was putable and callable annually. In the event that investors put the bonds back to the company, the tax shield would be extinguished.
Swot Analysis of "Omnicom's No-No (A)" written by Todd Pulvino, James Litinsky includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lyon Omnicom's facing as an external strategic factors. Some of the topics covered in Omnicom's No-No (A) case study are - Strategic Management Strategies, Financial markets and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Omnicom's No-No (A) casestudy better are - – there is increasing trade war between United States & China, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google,
customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Omnicom's No-No (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Omnicom's No-No (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lyon Omnicom's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lyon Omnicom's 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 Omnicom's No-No (A) can be done for the following purposes –
1. Strategic planning using facts provided in Omnicom's No-No (A) case study
2. Improving business portfolio management of Lyon Omnicom's
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 Lyon Omnicom's
Strengths Omnicom's No-No (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lyon Omnicom's in Omnicom's No-No (A) Harvard Business Review case study are -
Analytics focus
– Lyon Omnicom's 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 Todd Pulvino, James Litinsky 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.
Learning organization
- Lyon Omnicom's 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 Lyon Omnicom's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Omnicom's No-No (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Omnicom's No-No (A) 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.
Ability to recruit top talent
– Lyon Omnicom's is one of the leading recruiters in the industry. Managers in the Omnicom's No-No (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.
High switching costs
– The high switching costs that Lyon Omnicom's 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.
Effective Research and Development (R&D)
– Lyon Omnicom's 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 Omnicom's No-No (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.
Organizational Resilience of Lyon Omnicom's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lyon Omnicom's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Lyon Omnicom's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Lyon Omnicom's is one of the most innovative firm in sector. Manager in Omnicom's No-No (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Lyon Omnicom's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lyon Omnicom's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Lyon Omnicom's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lyon Omnicom's has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Sustainable margins compare to other players in Finance & Accounting industry
– Omnicom's No-No (A) firm has clearly differentiated products in the market place. This has enabled Lyon Omnicom's to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Lyon Omnicom's to invest into research and development (R&D) and innovation.
Weaknesses Omnicom's No-No (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Omnicom's No-No (A) are -
Increasing silos among functional specialists
– The organizational structure of Lyon Omnicom's is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Lyon Omnicom's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lyon Omnicom's to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study Omnicom's No-No (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Omnicom's No-No (A) can leverage the sales team experience to cultivate customer relationships as Lyon Omnicom's is planning to shift buying processes online.
High cash cycle compare to competitors
Lyon Omnicom's 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.
No frontier risks strategy
– After analyzing the HBR case study Omnicom's No-No (A), it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Lack of clear differentiation of Lyon Omnicom's products
– To increase the profitability and margins on the products, Lyon Omnicom's needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Omnicom's No-No (A) HBR case study mentions - Lyon Omnicom's 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, Todd Pulvino, James Litinsky suggests that, Lyon Omnicom's 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Omnicom's No-No (A), in the dynamic environment Lyon Omnicom's has struggled to respond to the nimble upstart competition. Lyon Omnicom's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Lyon Omnicom's, firm in the HBR case study Omnicom's No-No (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Lyon Omnicom's 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. Lyon Omnicom's 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.
Capital Spending Reduction
– Even during the low interest decade, Lyon Omnicom's 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.
Opportunities Omnicom's No-No (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 Omnicom's No-No (A) are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Lyon Omnicom's 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.
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 Lyon Omnicom's in the consumer business. Now Lyon Omnicom's can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Lyon Omnicom's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Omnicom's No-No (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.
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 Lyon Omnicom's 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.
Using analytics as competitive advantage
– Lyon Omnicom's 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 Omnicom's No-No (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lyon Omnicom's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Lyon Omnicom's 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.
Learning at scale
– Online learning technologies has now opened space for Lyon Omnicom's 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.
Loyalty marketing
– Lyon Omnicom's 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.
Leveraging digital technologies
– Lyon Omnicom's 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lyon Omnicom's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Lyon Omnicom's 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. Lyon Omnicom's 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lyon Omnicom's 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.
Creating value in data economy
– The success of analytics program of Lyon Omnicom's has opened avenues for new revenue streams for the organization in the industry. This can help Lyon Omnicom's to build a more holistic ecosystem as suggested in the Omnicom's No-No (A) case study. Lyon Omnicom's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Omnicom's No-No (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Omnicom's No-No (A) are -
Shortening product life cycle
– it is one of the major threat that Lyon Omnicom's is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Lyon Omnicom's.
Environmental challenges
– Lyon Omnicom's 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. Lyon Omnicom's can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Technology acceleration in Forth Industrial Revolution
– Lyon Omnicom's has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Lyon Omnicom's 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.
High dependence on third party suppliers
– Lyon Omnicom's 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lyon Omnicom's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Omnicom's No-No (A), Lyon Omnicom's 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 .
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 Lyon Omnicom's business can come under increasing regulations regarding data privacy, data security, 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.
Increasing wage structure of Lyon Omnicom's
– 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 Lyon Omnicom's.
Consumer confidence and its impact on Lyon Omnicom's 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lyon Omnicom's in the Finance & Accounting industry. The Finance & Accounting 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.
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. Lyon Omnicom's needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Omnicom's No-No (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 Omnicom's No-No (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 Omnicom's No-No (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 Omnicom's No-No (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 Omnicom's No-No (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 Lyon Omnicom's needs to make to build a sustainable competitive advantage.