Case Study Description of Chaparral Steel (Abridged)
Examines a major capacity expansion proposal of Chaparral Steel, a steel minimill. Gives students the opportunity to evaluate the proposed expansion in the context of the competitive environment, market demand, technological choice, and the demands of a global industry. Also challenges them to analyze the proposal's implications for manufacturing strategy, technological innovation, market share, and company finances.
Swot Analysis of "Chaparral Steel (Abridged)" written by Kim B. Clark includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Chaparral Steel facing as an external strategic factors. Some of the topics covered in Chaparral Steel (Abridged) case study are - Strategic Management Strategies, Growth strategy, Manufacturing, Marketing, Technology and Technology & Operations.
Some of the macro environment factors that can be used to understand the Chaparral Steel (Abridged) casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%,
wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Chaparral Steel (Abridged)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Chaparral Steel (Abridged) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Chaparral Steel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Chaparral Steel 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 Chaparral Steel (Abridged) can be done for the following purposes –
1. Strategic planning using facts provided in Chaparral Steel (Abridged) case study
2. Improving business portfolio management of Chaparral Steel
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 Chaparral Steel
Strengths Chaparral Steel (Abridged) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Chaparral Steel in Chaparral Steel (Abridged) Harvard Business Review case study are -
Learning organization
- Chaparral Steel 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 Chaparral Steel is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Chaparral Steel (Abridged) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Chaparral Steel has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Chaparral Steel to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Chaparral Steel 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 Chaparral Steel (Abridged) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the Chaparral Steel (Abridged) 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
– Chaparral Steel is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Chaparral Steel is one of the leading recruiters in the industry. Managers in the Chaparral Steel (Abridged) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Chaparral Steel has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Chaparral Steel (Abridged) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Technology & Operations industry
– Chaparral Steel (Abridged) firm has clearly differentiated products in the market place. This has enabled Chaparral Steel to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Chaparral Steel to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Chaparral Steel in the sector have low bargaining power. Chaparral Steel (Abridged) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Chaparral Steel to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Technology & Operations field
– Chaparral Steel 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 Chaparral Steel in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Chaparral Steel
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Chaparral Steel does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Chaparral Steel has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses Chaparral Steel (Abridged) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Chaparral Steel (Abridged) are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Chaparral Steel is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Chaparral Steel (Abridged) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Chaparral Steel 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. Chaparral Steel 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Chaparral Steel (Abridged), is just above the industry average. Chaparral Steel 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.
Skills based hiring
– The stress on hiring functional specialists at Chaparral Steel has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Chaparral Steel (Abridged), it seems that the employees of Chaparral Steel don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Increasing silos among functional specialists
– The organizational structure of Chaparral Steel is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Chaparral Steel needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Chaparral Steel to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Chaparral Steel, firm in the HBR case study Chaparral Steel (Abridged) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Chaparral Steel products
– To increase the profitability and margins on the products, Chaparral Steel needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the segment, Chaparral Steel 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.
Capital Spending Reduction
– Even during the low interest decade, Chaparral Steel 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.
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 Chaparral Steel supply chain. Even after few cautionary changes mentioned in the HBR case study - Chaparral Steel (Abridged), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Chaparral Steel vulnerable to further global disruptions in South East Asia.
Opportunities Chaparral Steel (Abridged) | 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 Chaparral Steel (Abridged) are -
Buying journey improvements
– Chaparral Steel can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Chaparral Steel (Abridged) 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.
Developing new processes and practices
– Chaparral Steel can develop new processes and procedures in Technology & Operations 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Chaparral Steel 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 Chaparral Steel in the consumer business. Now Chaparral Steel can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Chaparral Steel 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.
Leveraging digital technologies
– Chaparral Steel 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.
Loyalty marketing
– Chaparral Steel 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 Chaparral Steel 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 Chaparral Steel to increase its market reach. Chaparral Steel 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.
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. Chaparral Steel 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. Chaparral Steel 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Chaparral Steel 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 Chaparral Steel to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Chaparral Steel 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.
Learning at scale
– Online learning technologies has now opened space for Chaparral Steel 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.
Threats Chaparral Steel (Abridged) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Chaparral Steel (Abridged) are -
Consumer confidence and its impact on Chaparral Steel 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.
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 Chaparral Steel 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.
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.
Shortening product life cycle
– it is one of the major threat that Chaparral Steel is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Chaparral Steel 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. Chaparral Steel can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
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 Chaparral Steel.
High dependence on third party suppliers
– Chaparral Steel 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.
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. Chaparral Steel 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.
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. Chaparral Steel can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Chaparral Steel (Abridged), Chaparral Steel 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 .
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. Chaparral Steel needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Chaparral Steel 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.
Weighted SWOT Analysis of Chaparral Steel (Abridged) 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 Chaparral Steel (Abridged) 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 Chaparral Steel (Abridged) 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 Chaparral Steel (Abridged) 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 Chaparral Steel (Abridged) 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 Chaparral Steel needs to make to build a sustainable competitive advantage.
