Case Study Description of Strides Arcolab Limited's Dividend Pay-Out Decision
Arun Kumar, founder and group chief executive officer of Strides Arcolab Limited - a first generation, Indian pharmaceutical company headquartered in Bengaluru - is preparing for a crucial meeting of the Board of Directors. The meeting was called to discuss the proposed dividend payout to the company's shareholders following the completion of a US$1.725 billion sale of its specialty division - Agila Specialties - to the U.S.-based pharmaceutical company Mylan Inc. Kumar proposed that Strides distribute all the free cash available from the sale - after the retirement of debt and internal payouts - in the form of dividends to its shareholders. Strides had already communicated its decision to retire debts and reduce its leverage. Tulsi Jayakumar is affiliated with SP Jain Institute of Management & Research .
Swot Analysis of "Strides Arcolab Limited's Dividend Pay-Out Decision" written by Tulsi Jayakumar, Indu Niranjan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Strides Arcolab facing as an external strategic factors. Some of the topics covered in Strides Arcolab Limited's Dividend Pay-Out Decision case study are - Strategic Management Strategies, Marketing and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Strides Arcolab Limited's Dividend Pay-Out Decision casestudy better are - – increasing government debt because of Covid-19 spendings, increasing energy prices, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models,
there is backlash against globalization, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Strides Arcolab Limited's Dividend Pay-Out Decision
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Strides Arcolab Limited's Dividend Pay-Out Decision case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Strides Arcolab, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Strides Arcolab 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 Strides Arcolab Limited's Dividend Pay-Out Decision can be done for the following purposes –
1. Strategic planning using facts provided in Strides Arcolab Limited's Dividend Pay-Out Decision case study
2. Improving business portfolio management of Strides Arcolab
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Strides Arcolab
Strengths Strides Arcolab Limited's Dividend Pay-Out Decision | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Strides Arcolab in Strides Arcolab Limited's Dividend Pay-Out Decision Harvard Business Review case study are -
High brand equity
– Strides Arcolab has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Strides Arcolab to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Strides Arcolab 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.
Learning organization
- Strides Arcolab 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 Strides Arcolab is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Strides Arcolab Limited's Dividend Pay-Out Decision Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Strides Arcolab is one of the most innovative firm in sector. Manager in Strides Arcolab Limited's Dividend Pay-Out Decision Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Strides Arcolab has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Strides Arcolab 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.
High switching costs
– The high switching costs that Strides Arcolab 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.
Operational resilience
– The operational resilience strategy in the Strides Arcolab Limited's Dividend Pay-Out 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.
Strong track record of project management
– Strides Arcolab 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 lead change in Finance & Accounting field
– Strides Arcolab 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 Strides Arcolab in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Strides Arcolab 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 Strides Arcolab Limited's Dividend Pay-Out 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.
Low bargaining power of suppliers
– Suppliers of Strides Arcolab in the sector have low bargaining power. Strides Arcolab Limited's Dividend Pay-Out Decision has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Strides Arcolab to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Strides Arcolab
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Strides Arcolab does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Strides Arcolab Limited's Dividend Pay-Out Decision | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Strides Arcolab Limited's Dividend Pay-Out Decision are -
Need for greater diversity
– Strides Arcolab 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 Strides Arcolab Limited's Dividend Pay-Out 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 Strides Arcolab Limited's Dividend Pay-Out Decision can leverage the sales team experience to cultivate customer relationships as Strides Arcolab is planning to shift buying processes online.
Interest costs
– Compare to the competition, Strides Arcolab has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High cash cycle compare to competitors
Strides Arcolab 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.
Lack of clear differentiation of Strides Arcolab products
– To increase the profitability and margins on the products, Strides Arcolab needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Strides Arcolab Limited's Dividend Pay-Out Decision HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Strides Arcolab has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Strides Arcolab 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.
Skills based hiring
– The stress on hiring functional specialists at Strides Arcolab 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Strides Arcolab Limited's Dividend Pay-Out 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 Strides Arcolab 's lucrative customers.
Products dominated business model
– Even though Strides Arcolab 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 - Strides Arcolab Limited's Dividend Pay-Out Decision should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Strides Arcolab Limited's Dividend Pay-Out Decision HBR case study mentions - Strides Arcolab 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.
Opportunities Strides Arcolab Limited's Dividend Pay-Out 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 Strides Arcolab Limited's Dividend Pay-Out Decision are -
Using analytics as competitive advantage
– Strides Arcolab 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 Strides Arcolab Limited's Dividend Pay-Out Decision - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Strides Arcolab to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Strides Arcolab is facing challenges because of the dominance of functional experts in the organization. Strides Arcolab Limited's Dividend Pay-Out 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.
Loyalty marketing
– Strides Arcolab 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.
Learning at scale
– Online learning technologies has now opened space for Strides Arcolab 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Strides Arcolab can use these opportunities to build new business models that can help the communities that Strides Arcolab operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Strides Arcolab 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Strides Arcolab 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 Strides Arcolab to hire the very best people irrespective of their geographical location.
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 Strides Arcolab in the consumer business. Now Strides Arcolab can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Strides Arcolab 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. Strides Arcolab 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Strides Arcolab can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Strides Arcolab can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Strides Arcolab 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.
Developing new processes and practices
– Strides Arcolab can develop new processes and procedures in Finance & Accounting 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.
Threats Strides Arcolab Limited's Dividend Pay-Out Decision External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Strides Arcolab Limited's Dividend Pay-Out Decision are -
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.
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. Strides Arcolab 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 Strides Arcolab is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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 Strides Arcolab.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Strides Arcolab Limited's Dividend Pay-Out Decision, Strides Arcolab may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Regulatory challenges
– Strides Arcolab 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 Finance & Accounting industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Strides Arcolab 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 Strides Arcolab Limited's Dividend Pay-Out Decision .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Strides Arcolab in the Finance & Accounting industry. The Finance & Accounting 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Strides Arcolab can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Strides Arcolab
– 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 Strides Arcolab.
High dependence on third party suppliers
– Strides Arcolab 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.
Stagnating economy with rate increase
– Strides Arcolab 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 Strides Arcolab Limited's Dividend Pay-Out 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 Strides Arcolab Limited's Dividend Pay-Out 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 Strides Arcolab Limited's Dividend Pay-Out 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 Strides Arcolab Limited's Dividend Pay-Out 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 Strides Arcolab Limited's Dividend Pay-Out 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 Strides Arcolab needs to make to build a sustainable competitive advantage.