Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

Case Study SWOT Analysis Solution

Case Study Description of Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress

Wisconsin Central Ltd. is a regional railroad formed in a leveraged buyout, which is currently in default on its loan covenants. The case uses this situation to examine the financial structure of a typical LBO association and its internal control mechanisms and distinct role of the board of directors.

Authors :: Michael C. Jensen, Willy Burkhardt, Brian Barry

Topics :: Finance & Accounting

Tags :: Financial management, Mergers & acquisitions, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis

Swot Analysis of "Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress" written by Michael C. Jensen, Willy Burkhardt, Brian Barry includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Wisconsin Railroad facing as an external strategic factors. Some of the topics covered in Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress case study are - Strategic Management Strategies, Financial management, Mergers & acquisitions and Finance & Accounting.

Some of the macro environment factors that can be used to understand the Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress casestudy better are - – increasing energy prices, increasing transportation and logistics costs, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, technology disruption, wage bills are increasing, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc

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Introduction to SWOT Analysis of Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wisconsin Railroad, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wisconsin Railroad 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress can be done for the following purposes –
1. Strategic planning using facts provided in Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress case study
2. Improving business portfolio management of Wisconsin Railroad
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 Wisconsin Railroad

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Strengths Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Wisconsin Railroad in Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress Harvard Business Review case study are -

Sustainable margins compare to other players in Finance & Accounting industry

– Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress firm has clearly differentiated products in the market place. This has enabled Wisconsin Railroad to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Wisconsin Railroad to invest into research and development (R&D) and innovation.

Organizational Resilience of Wisconsin Railroad

– The covid-19 pandemic has put organizational resilience at the centre of everthing that Wisconsin Railroad does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

High brand equity

– Wisconsin Railroad has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wisconsin Railroad to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Diverse revenue streams

– Wisconsin Railroad is present in almost all the verticals within the industry. This has provided firm in Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress 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.

Operational resilience

– The operational resilience strategy in the Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress 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.

Highly skilled collaborators

– Wisconsin Railroad has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.

Innovation driven organization

– Wisconsin Railroad is one of the most innovative firm in sector. Manager in Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.

Ability to recruit top talent

– Wisconsin Railroad is one of the leading recruiters in the industry. Managers in the Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.

Successful track record of launching new products

– Wisconsin Railroad has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Wisconsin Railroad 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.

Cross disciplinary teams

– Horizontal connected teams at the Wisconsin Railroad 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.

Strong track record of project management

– Wisconsin Railroad is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Analytics focus

– Wisconsin Railroad 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 Michael C. Jensen, Willy Burkhardt, Brian Barry 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.

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Weaknesses Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress are -

Interest costs

– Compare to the competition, Wisconsin Railroad 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.

High operating costs

– Compare to the competitors, firm in the HBR case study Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress 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 Wisconsin Railroad 's lucrative customers.

Slow decision making process

– As mentioned earlier in the report, Wisconsin Railroad 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. Wisconsin Railroad even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

Employees’ incomplete understanding of strategy

– From the instances in the HBR case study Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress, it seems that the employees of Wisconsin Railroad 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.

Slow to strategic competitive environment developments

– As Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress HBR case study mentions - Wisconsin Railroad 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.

Ability to respond to the competition

– As the decision making is very deliberative, highlighted in the case study Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress, in the dynamic environment Wisconsin Railroad has struggled to respond to the nimble upstart competition. Wisconsin Railroad has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Compensation and incentives

– The revenue per employee as mentioned in the HBR case study Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress, is just above the industry average. Wisconsin Railroad 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.

High dependence on star products

– The top 2 products and services of the firm as mentioned in the Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress 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 Wisconsin Railroad has relatively successful track record of launching new products.

High bargaining power of channel partners

– Because of the regulatory requirements, Michael C. Jensen, Willy Burkhardt, Brian Barry suggests that, Wisconsin Railroad 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.

No frontier risks strategy

– After analyzing the HBR case study Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress, 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.

Aligning sales with marketing

– It come across in the case study Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress 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 Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress can leverage the sales team experience to cultivate customer relationships as Wisconsin Railroad is planning to shift buying processes online.

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Opportunities Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress | 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 Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress are -

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Wisconsin Railroad 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, Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Wisconsin Railroad 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.

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 Wisconsin Railroad to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.

Better consumer reach

– The expansion of the 5G network will help Wisconsin Railroad to increase its market reach. Wisconsin Railroad 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.

Manufacturing automation

– Wisconsin Railroad 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.

Buying journey improvements

– Wisconsin Railroad can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress 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.

Building a culture of innovation

– managers at Wisconsin Railroad 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.

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 Wisconsin Railroad in the consumer business. Now Wisconsin Railroad can target international markets with far fewer capital restrictions requirements than the existing system.

Loyalty marketing

– Wisconsin Railroad 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Wisconsin Railroad can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Wisconsin Railroad 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 Wisconsin Railroad to hire the very best people irrespective of their geographical location.

Developing new processes and practices

– Wisconsin Railroad 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

– Wisconsin Railroad 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.

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Threats Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats mentioned in the HBR case study Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress are -

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Wisconsin Railroad 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 Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress .

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.

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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Wisconsin Railroad with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.

Increasing wage structure of Wisconsin Railroad

– 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 Wisconsin Railroad.

Environmental challenges

– Wisconsin Railroad 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. Wisconsin Railroad can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.

High dependence on third party suppliers

– Wisconsin Railroad 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress, Wisconsin Railroad 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 .

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 Wisconsin Railroad in the Finance & Accounting sector and impact the bottomline of the organization.

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. Wisconsin Railroad needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.

Technology acceleration in Forth Industrial Revolution

– Wisconsin Railroad has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Wisconsin Railroad 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.

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 Wisconsin Railroad.

Consumer confidence and its impact on Wisconsin Railroad 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.

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Weighted SWOT Analysis of Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress 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 Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress 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 Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress 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 Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress 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 Wisconsin Central Ltd. Railroad and Berkshire Partners (A): Leveraged Buyouts and Financial Distress 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 Wisconsin Railroad needs to make to build a sustainable competitive advantage.

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