Case Study Description of MCI-WorldCom Combination (A)
Outlines the accounting decision faced by WorldCom in its acquisition of MCI. Two methods are discussed (purchase and pooling) and students are asked to evaluate which would be more suitable for WorldCom.
Swot Analysis of "MCI-WorldCom Combination (A)" written by Paul M. Healy, Jacob Cohen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Worldcom Mci facing as an external strategic factors. Some of the topics covered in MCI-WorldCom Combination (A) case study are - Strategic Management Strategies, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the MCI-WorldCom Combination (A) casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, increasing transportation and logistics costs, supply chains are disrupted by pandemic , geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of MCI-WorldCom Combination (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in MCI-WorldCom Combination (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Worldcom Mci, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Worldcom Mci 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 MCI-WorldCom Combination (A) can be done for the following purposes –
1. Strategic planning using facts provided in MCI-WorldCom Combination (A) case study
2. Improving business portfolio management of Worldcom Mci
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 Worldcom Mci
Strengths MCI-WorldCom Combination (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Worldcom Mci in MCI-WorldCom Combination (A) Harvard Business Review case study are -
Analytics focus
– Worldcom Mci 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 Paul M. Healy, Jacob Cohen 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.
Low bargaining power of suppliers
– Suppliers of Worldcom Mci in the sector have low bargaining power. MCI-WorldCom Combination (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Worldcom Mci to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the MCI-WorldCom Combination (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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Worldcom Mci digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Worldcom Mci 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.
Cross disciplinary teams
– Horizontal connected teams at the Worldcom Mci 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.
High switching costs
– The high switching costs that Worldcom Mci 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.
Ability to lead change in Finance & Accounting field
– Worldcom Mci 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 Worldcom Mci in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Worldcom Mci has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Worldcom Mci 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.
Ability to recruit top talent
– Worldcom Mci is one of the leading recruiters in the industry. Managers in the MCI-WorldCom Combination (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.
Innovation driven organization
– Worldcom Mci is one of the most innovative firm in sector. Manager in MCI-WorldCom Combination (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Worldcom Mci
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Worldcom Mci does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Worldcom Mci has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Worldcom Mci to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses MCI-WorldCom Combination (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of MCI-WorldCom Combination (A) are -
Increasing silos among functional specialists
– The organizational structure of Worldcom Mci is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Worldcom Mci needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Worldcom Mci to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Worldcom Mci has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - MCI-WorldCom Combination (A) should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Worldcom Mci products
– To increase the profitability and margins on the products, Worldcom Mci needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Paul M. Healy, Jacob Cohen suggests that, Worldcom Mci 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.
Capital Spending Reduction
– Even during the low interest decade, Worldcom Mci 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.
Slow decision making process
– As mentioned earlier in the report, Worldcom Mci 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. Worldcom Mci 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 MCI-WorldCom Combination (A) 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 Worldcom Mci 's lucrative customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the MCI-WorldCom Combination (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 Worldcom Mci has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study MCI-WorldCom Combination (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 MCI-WorldCom Combination (A) can leverage the sales team experience to cultivate customer relationships as Worldcom Mci is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study MCI-WorldCom Combination (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.
Need for greater diversity
– Worldcom Mci 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.
Opportunities MCI-WorldCom Combination (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 MCI-WorldCom Combination (A) are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Worldcom Mci 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Worldcom Mci 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 Worldcom Mci to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Worldcom Mci 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.
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. Worldcom Mci can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Worldcom Mci 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.
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. Worldcom Mci 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. Worldcom Mci 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.
Buying journey improvements
– Worldcom Mci can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. MCI-WorldCom Combination (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 Worldcom Mci 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.
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. Worldcom Mci can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Worldcom Mci 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 Worldcom Mci in the consumer business. Now Worldcom Mci can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Worldcom Mci has opened avenues for new revenue streams for the organization in the industry. This can help Worldcom Mci to build a more holistic ecosystem as suggested in the MCI-WorldCom Combination (A) case study. Worldcom Mci can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Worldcom Mci 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, MCI-WorldCom Combination (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats MCI-WorldCom Combination (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study MCI-WorldCom Combination (A) are -
Regulatory challenges
– Worldcom Mci 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Worldcom Mci 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. Worldcom Mci needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Worldcom Mci 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 MCI-WorldCom Combination (A) .
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 Worldcom Mci.
Stagnating economy with rate increase
– Worldcom Mci can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study MCI-WorldCom Combination (A), Worldcom Mci 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 wage structure of Worldcom Mci
– 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 Worldcom Mci.
Technology acceleration in Forth Industrial Revolution
– Worldcom Mci has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Worldcom Mci 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.
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. Worldcom Mci 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.
High dependence on third party suppliers
– Worldcom Mci 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
– Worldcom Mci 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. Worldcom Mci can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Worldcom Mci with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of MCI-WorldCom Combination (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 MCI-WorldCom Combination (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 MCI-WorldCom Combination (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 MCI-WorldCom Combination (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 MCI-WorldCom Combination (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 Worldcom Mci needs to make to build a sustainable competitive advantage.