Case Study Description of Precision Steel Fabrication: An Equipment Purchase Decision
For nearly 60 years, Precision Steel Fabrication (PSF) had been making fabricated steel components for the contract furniture (commercial office furniture) industry. At the time of the case, the $10 million firm was emerging from a downturn in sales and seeing its first sales increase in three years, and was contemplating the purchase of a $1 million tube laser. The tube laser could do the work of three machines: a table saw, a hydraulic press, and a deburring machine. Should PSF purchase a tube laser? If so, how should three vendors' offerings be evaluated and what criteria are most salient? While the tube laser would greatly increase the firm's manufacturing efficiency, the decision itself is relatively risky. The case is written to provide the framework for evaluating an equipment purchase decision within the context of business and operations strategy, and in a small business environment.
Swot Analysis of "Precision Steel Fabrication: An Equipment Purchase Decision" written by Nancy M. Levenburg, Brian Scalabrino includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tube Laser facing as an external strategic factors. Some of the topics covered in Precision Steel Fabrication: An Equipment Purchase Decision case study are - Strategic Management Strategies, Manufacturing, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Precision Steel Fabrication: An Equipment Purchase Decision casestudy better are - – talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , geopolitical disruptions, technology disruption, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google,
cloud computing is disrupting traditional business models, wage bills are increasing, etc
Introduction to SWOT Analysis of Precision Steel Fabrication: An Equipment Purchase Decision
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Precision Steel Fabrication: An Equipment Purchase Decision case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tube Laser, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tube Laser 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 Precision Steel Fabrication: An Equipment Purchase Decision can be done for the following purposes –
1. Strategic planning using facts provided in Precision Steel Fabrication: An Equipment Purchase Decision case study
2. Improving business portfolio management of Tube Laser
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 Tube Laser
Strengths Precision Steel Fabrication: An Equipment Purchase Decision | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tube Laser in Precision Steel Fabrication: An Equipment Purchase Decision Harvard Business Review case study are -
Organizational Resilience of Tube Laser
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Tube Laser does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Tube Laser 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 Precision Steel Fabrication: An Equipment Purchase Decision HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Tube Laser is one of the leading recruiters in the industry. Managers in the Precision Steel Fabrication: An Equipment Purchase Decision are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the Precision Steel Fabrication: An Equipment Purchase Decision 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.
Diverse revenue streams
– Tube Laser is present in almost all the verticals within the industry. This has provided firm in Precision Steel Fabrication: An Equipment Purchase Decision 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.
Analytics focus
– Tube Laser 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 Nancy M. Levenburg, Brian Scalabrino 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.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Tube Laser digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Tube Laser 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.
Effective Research and Development (R&D)
– Tube Laser 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 Precision Steel Fabrication: An Equipment Purchase Decision - 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
– Precision Steel Fabrication: An Equipment Purchase Decision firm has clearly differentiated products in the market place. This has enabled Tube Laser to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Tube Laser to invest into research and development (R&D) and innovation.
Ability to lead change in Technology & Operations field
– Tube Laser 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 Tube Laser in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Tube Laser 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 brand equity
– Tube Laser has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tube Laser to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Precision Steel Fabrication: An Equipment Purchase Decision | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Precision Steel Fabrication: An Equipment Purchase Decision are -
High cash cycle compare to competitors
Tube Laser 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.
Need for greater diversity
– Tube Laser 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 Precision Steel Fabrication: An Equipment Purchase Decision 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 Precision Steel Fabrication: An Equipment Purchase Decision can leverage the sales team experience to cultivate customer relationships as Tube Laser is planning to shift buying processes online.
Lack of clear differentiation of Tube Laser products
– To increase the profitability and margins on the products, Tube Laser needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Tube Laser, firm in the HBR case study Precision Steel Fabrication: An Equipment Purchase Decision needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– After analyzing the HBR case study Precision Steel Fabrication: An Equipment Purchase Decision, it seems that company is thinking about the frontier risks that can impact Technology & Operations 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Precision Steel Fabrication: An Equipment Purchase Decision 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 Tube Laser 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Tube Laser 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Tube Laser 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Nancy M. Levenburg, Brian Scalabrino suggests that, Tube Laser is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Capital Spending Reduction
– Even during the low interest decade, Tube Laser 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.
Opportunities Precision Steel Fabrication: An Equipment Purchase Decision | 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 Precision Steel Fabrication: An Equipment Purchase Decision are -
Better consumer reach
– The expansion of the 5G network will help Tube Laser to increase its market reach. Tube Laser 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.
Developing new processes and practices
– Tube Laser 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.
Loyalty marketing
– Tube Laser 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.
Leveraging digital technologies
– Tube Laser 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.
Manufacturing automation
– Tube Laser 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tube Laser is facing challenges because of the dominance of functional experts in the organization. Precision Steel Fabrication: An Equipment Purchase Decision 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. Tube Laser 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 Tube Laser has opened avenues for new revenue streams for the organization in the industry. This can help Tube Laser to build a more holistic ecosystem as suggested in the Precision Steel Fabrication: An Equipment Purchase Decision case study. Tube Laser can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Tube Laser can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Precision Steel Fabrication: An Equipment Purchase Decision suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Tube Laser 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Tube Laser 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, Precision Steel Fabrication: An Equipment Purchase Decision, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tube Laser 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 Tube Laser to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Tube Laser 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 Precision Steel Fabrication: An Equipment Purchase Decision - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tube Laser to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Precision Steel Fabrication: An Equipment Purchase Decision External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Precision Steel Fabrication: An Equipment Purchase Decision are -
Regulatory challenges
– Tube Laser 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Tube Laser with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Tube Laser 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.
Environmental challenges
– Tube Laser 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. Tube Laser can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
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 Tube Laser business can come under increasing regulations regarding data privacy, data security, etc.
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. Tube Laser can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Tube Laser has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Tube Laser 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.
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.
Shortening product life cycle
– it is one of the major threat that Tube Laser is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Tube Laser in the Technology & Operations sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tube Laser 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 Precision Steel Fabrication: An Equipment Purchase Decision .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Tube Laser 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.
Weighted SWOT Analysis of Precision Steel Fabrication: An Equipment Purchase Decision 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 Precision Steel Fabrication: An Equipment Purchase Decision 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 Precision Steel Fabrication: An Equipment Purchase Decision 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 Precision Steel Fabrication: An Equipment Purchase Decision 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 Precision Steel Fabrication: An Equipment Purchase Decision 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 Tube Laser needs to make to build a sustainable competitive advantage.