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 - – increasing household debt because of falling income levels, increasing commodity prices, technology disruption, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion,
increasing government debt because of Covid-19 spendings, there is backlash against globalization, 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 -
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.
High brand equity
– Flexibility Paper has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Flexibility Paper to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Learning organization
- Flexibility Paper is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Flexibility Paper is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Stermon Mills, Inc. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Flexibility Paper has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Stermon Mills, Inc. 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.
Superior customer experience
– The customer experience strategy of Flexibility Paper in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Flexibility Paper has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Flexibility Paper 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.
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.
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.
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.
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.
Ability to lead change in Technology & Operations field
– Flexibility Paper 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 Flexibility Paper in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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 -
Increasing silos among functional specialists
– The organizational structure of Flexibility Paper is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Flexibility Paper needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Flexibility Paper to focus more on services rather than just following the product oriented approach.
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.
Slow to strategic competitive environment developments
– As Stermon Mills, Inc. HBR case study mentions - Flexibility Paper 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.
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.
High bargaining power of channel partners
– Because of the regulatory requirements, David M. Upton suggests that, Flexibility Paper 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.
Lack of clear differentiation of Flexibility Paper products
– To increase the profitability and margins on the products, Flexibility Paper needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Flexibility Paper needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Need for greater diversity
– Flexibility Paper 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.
Aligning sales with marketing
– It come across in the case study Stermon Mills, Inc. 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 Stermon Mills, Inc. can leverage the sales team experience to cultivate customer relationships as Flexibility Paper is planning to shift buying processes online.
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 -
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.
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.
Creating value in data economy
– The success of analytics program of Flexibility Paper has opened avenues for new revenue streams for the organization in the industry. This can help Flexibility Paper to build a more holistic ecosystem as suggested in the Stermon Mills, Inc. case study. Flexibility Paper can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Flexibility Paper to increase its market reach. Flexibility Paper 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.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Flexibility Paper can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Flexibility Paper can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations 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.
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 Flexibility Paper in the consumer business. Now Flexibility Paper can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Flexibility Paper 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 Flexibility Paper to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Flexibility Paper to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Loyalty marketing
– 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.
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 Flexibility Paper 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.
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 -
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.
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.
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.
Stagnating economy with rate increase
– Flexibility Paper 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 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.
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.
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 Flexibility Paper.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Stermon Mills, Inc., Flexibility Paper may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
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.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Flexibility Paper can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
