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 - – there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, increasing government debt because of Covid-19 spendings,
technology disruption, increasing commodity prices, 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 -
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.
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.
High switching costs
– The high switching costs that Tube Laser 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.
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.
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.
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.
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.
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.
Training and development
– Tube Laser has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Precision Steel Fabrication: An Equipment Purchase Decision 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 Tube Laser in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Tube Laser 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 Tube Laser is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Precision Steel Fabrication: An Equipment Purchase Decision Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
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 -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Precision Steel Fabrication: An Equipment Purchase Decision, in the dynamic environment Tube Laser has struggled to respond to the nimble upstart competition. Tube Laser has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Tube Laser 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. Tube Laser 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 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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Precision Steel Fabrication: An Equipment Purchase Decision, it seems that the employees of Tube Laser don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Tube Laser is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Precision Steel Fabrication: An Equipment Purchase Decision can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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.
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 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 Tube Laser supply chain. Even after few cautionary changes mentioned in the HBR case study - Precision Steel Fabrication: An Equipment Purchase Decision, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Tube Laser vulnerable to further global disruptions in South East Asia.
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 -
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tube Laser can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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 Tube Laser in the consumer business. Now Tube Laser can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tube Laser 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.
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.
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. Tube Laser can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Tube Laser 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 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 -
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 Tube Laser.
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.
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.
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.
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. Tube Laser needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
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.
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. Tube Laser 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.
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.
Stagnating economy with rate increase
– Tube Laser 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.
Increasing wage structure of Tube Laser
– 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 Tube Laser.
High dependence on third party suppliers
– Tube Laser 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.
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.
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.
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.