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 - – technology disruption, there is increasing trade war between United States & China, increasing energy prices, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, there is backlash against globalization, talent flight as more people leaving formal jobs,
challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, 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 -
Superior customer experience
– The customer experience strategy of Lyon Omnicom's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
Diverse revenue streams
– Lyon Omnicom's is present in almost all the verticals within the industry. This has provided firm in Omnicom's No-No (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.
Successful track record of launching new products
– Lyon Omnicom's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lyon Omnicom's 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.
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.
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.
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.
Training and development
– Lyon Omnicom's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Omnicom's No-No (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.
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.
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.
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.
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 -
Need for greater diversity
– Lyon Omnicom's 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 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lyon Omnicom's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Omnicom's No-No (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Lyon Omnicom's 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, 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Omnicom's No-No (A), it seems that the employees of Lyon Omnicom's 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.
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.
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 Lyon Omnicom's supply chain. Even after few cautionary changes mentioned in the HBR case study - Omnicom's No-No (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lyon Omnicom's vulnerable to further global disruptions in South East Asia.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Omnicom's No-No (A) 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 Lyon Omnicom's has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Omnicom's No-No (A), is just above the industry average. Lyon Omnicom's 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.
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 -
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.
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.
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.
Manufacturing automation
– Lyon Omnicom's 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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Lyon Omnicom's to increase its market reach. Lyon Omnicom's 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.
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. Lyon Omnicom's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lyon Omnicom's 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 Lyon Omnicom's to hire the very best people irrespective of their geographical location.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lyon Omnicom's can use these opportunities to build new business models that can help the communities that Lyon Omnicom's operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Developing new processes and practices
– Lyon Omnicom's 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.
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.
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 -
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 .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lyon Omnicom's 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 Omnicom's No-No (A) .
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.
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.
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.
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. Lyon Omnicom's 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.
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.
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 Lyon Omnicom's in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Lyon Omnicom's 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.
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.
Regulatory challenges
– Lyon Omnicom's 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.
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.
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.
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.
