A paper company is unable to compete on cost as a result of the installation of three very efficient paper machines by competitors. Prices for its products are falling by the day, and the company is making a loss. In the face of such competition, management feels that the only course of action is to improve "flexibility" and/or take advantage of the flexibility they already have. The problem is that no one knows quite what flexibility is, let alone how to implement an improvement plan. The case describes four improvement paths, each of which might be considered to improve "flexibility." The conflicts between these plans are also considered by the company. In addition, the sales force gives a look at the flexibility requirements of the company from the customer's viewpoint.
Swot Analysis of "Stermon Mills, Inc." written by David M. Upton includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Flexibility Paper facing as an external strategic factors. Some of the topics covered in Stermon Mills, Inc. case study are - Strategic Management Strategies, Competition, Human resource management, Managing uncertainty, Manufacturing and Technology & Operations.
Some of the macro environment factors that can be used to understand the Stermon Mills, Inc. casestudy better are - – central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, increasing commodity prices, supply chains are disrupted by pandemic ,
increasing household debt because of falling income levels, geopolitical disruptions, etc
Introduction to SWOT Analysis of Stermon Mills, Inc.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Stermon Mills, Inc. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Flexibility Paper, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Flexibility Paper 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 Stermon Mills, Inc. can be done for the following purposes –
1. Strategic planning using facts provided in Stermon Mills, Inc. case study
2. Improving business portfolio management of Flexibility Paper
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Flexibility Paper
Strengths Stermon Mills, Inc. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Flexibility Paper in Stermon Mills, Inc. Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Flexibility Paper in the sector have low bargaining power. Stermon Mills, Inc. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Flexibility Paper to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Flexibility Paper is one of the leading recruiters in the industry. Managers in the Stermon Mills, Inc. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Flexibility Paper is present in almost all the verticals within the industry. This has provided firm in Stermon Mills, Inc. 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.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Flexibility Paper digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Flexibility Paper 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 switching costs
– The high switching costs that Flexibility Paper 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.
Cross disciplinary teams
– Horizontal connected teams at the Flexibility Paper are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Sustainable margins compare to other players in Technology & Operations industry
– Stermon Mills, Inc. firm has clearly differentiated products in the market place. This has enabled Flexibility Paper to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Flexibility Paper to invest into research and development (R&D) and innovation.
Organizational Resilience of Flexibility Paper
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Flexibility Paper does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Stermon Mills, Inc. 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.
Strong track record of project management
– Flexibility Paper 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
– Flexibility Paper is one of the most innovative firm in sector. Manager in Stermon Mills, Inc. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– Flexibility Paper 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 Stermon Mills, Inc. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Stermon Mills, Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Stermon Mills, Inc. are -
Interest costs
– Compare to the competition, Flexibility Paper 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 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 Flexibility Paper supply chain. Even after few cautionary changes mentioned in the HBR case study - Stermon Mills, Inc., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Flexibility Paper vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Flexibility Paper 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. Flexibility Paper 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.
Low market penetration in new markets
– Outside its home market of Flexibility Paper, firm in the HBR case study Stermon Mills, Inc. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Flexibility Paper 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Stermon Mills, Inc., is just above the industry average. Flexibility Paper 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Flexibility Paper is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Stermon Mills, Inc. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
Flexibility Paper 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Stermon Mills, Inc., in the dynamic environment Flexibility Paper has struggled to respond to the nimble upstart competition. Flexibility Paper has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Flexibility Paper 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 - Stermon Mills, Inc. should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, firm in the HBR case study Stermon Mills, Inc. 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 Flexibility Paper 's lucrative customers.
Opportunities Stermon Mills, Inc. | 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 Stermon Mills, Inc. are -
Loyalty marketing
– Flexibility Paper 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.
Buying journey improvements
– Flexibility Paper can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Stermon Mills, Inc. 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 Flexibility Paper 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 Technology & Operations segment.
Low interest rates
– Even though inflation is raising its head in most developed economies, Flexibility Paper 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Flexibility Paper 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, Stermon Mills, Inc., 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 Flexibility Paper in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Flexibility Paper can use these opportunities to build new business models that can help the communities that Flexibility Paper operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Flexibility Paper 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. Flexibility Paper 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Flexibility Paper can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Flexibility Paper is facing challenges because of the dominance of functional experts in the organization. Stermon Mills, Inc. case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Leveraging digital technologies
– Flexibility Paper 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.
Using analytics as competitive advantage
– Flexibility Paper 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 Stermon Mills, Inc. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Flexibility Paper to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Flexibility Paper can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Stermon Mills, Inc. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Stermon Mills, Inc. are -
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. Flexibility Paper needs to understand the core reasons impacting the Technology & Operations 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, Flexibility Paper 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 Stermon Mills, Inc. .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Flexibility Paper with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Flexibility Paper is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Flexibility Paper 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.
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.
Technology acceleration in Forth Industrial Revolution
– Flexibility Paper has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Flexibility Paper needs to keep up with the evolution of technology in the Technology & Operations 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Flexibility Paper in the Technology & Operations industry. The Technology & Operations 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.
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. Flexibility Paper 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.
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 Flexibility Paper business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Flexibility Paper 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. Flexibility Paper can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Regulatory challenges
– Flexibility Paper 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 Technology & Operations industry regulations.
Increasing wage structure of Flexibility Paper
– 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 Flexibility Paper.
Weighted SWOT Analysis of Stermon Mills, Inc. 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 Stermon Mills, Inc. 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 Stermon Mills, Inc. 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 Stermon Mills, Inc. 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 Stermon Mills, Inc. 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 Flexibility Paper needs to make to build a sustainable competitive advantage.