Case Study Description of Recapitalization of Inco
On October 3, 1988, Inco Limited surprised the Canadian financial community by announcing a recapitalization plan. The plan included a special cash dividend of US$10 per share, an offering of nickel notes and a shareholders rights plan, poison pill - the first of its kind in Canada. The issue is the impact of such plans on share price. The nickel notes provide a vehicle for discussing contingent claims analysis.
Authors :: Mark D. Behrman, Robert W. White, Bruce Rothney
Swot Analysis of "Recapitalization of Inco" written by Mark D. Behrman, Robert W. White, Bruce Rothney includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Inco Nickel facing as an external strategic factors. Some of the topics covered in Recapitalization of Inco case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Recapitalization of Inco casestudy better are - – there is backlash against globalization, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, geopolitical disruptions, increasing commodity prices, increasing energy prices, supply chains are disrupted by pandemic ,
competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Recapitalization of Inco
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Recapitalization of Inco case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Inco Nickel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Inco Nickel 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 Recapitalization of Inco can be done for the following purposes –
1. Strategic planning using facts provided in Recapitalization of Inco case study
2. Improving business portfolio management of Inco Nickel
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 Inco Nickel
Strengths Recapitalization of Inco | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Inco Nickel in Recapitalization of Inco Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Inco Nickel in the sector have low bargaining power. Recapitalization of Inco has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Inco Nickel to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Inco Nickel has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Inco Nickel 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.
Highly skilled collaborators
– Inco Nickel 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 Recapitalization of Inco HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Inco Nickel 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 Mark D. Behrman, Robert W. White, Bruce Rothney 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.
Training and development
– Inco Nickel has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Recapitalization of Inco 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.
Diverse revenue streams
– Inco Nickel is present in almost all the verticals within the industry. This has provided firm in Recapitalization of Inco 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.
Learning organization
- Inco Nickel 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 Inco Nickel is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Recapitalization of Inco Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Inco Nickel is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Finance & Accounting industry
– Recapitalization of Inco firm has clearly differentiated products in the market place. This has enabled Inco Nickel to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Inco Nickel to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Inco Nickel 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 Recapitalization of Inco - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Inco Nickel are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High switching costs
– The high switching costs that Inco Nickel 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 Recapitalization of Inco | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Recapitalization of Inco are -
High bargaining power of channel partners
– Because of the regulatory requirements, Mark D. Behrman, Robert W. White, Bruce Rothney suggests that, Inco Nickel 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.
Increasing silos among functional specialists
– The organizational structure of Inco Nickel is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Inco Nickel needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Inco Nickel to focus more on services rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Recapitalization of Inco, is just above the industry average. Inco Nickel 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.
Lack of clear differentiation of Inco Nickel products
– To increase the profitability and margins on the products, Inco Nickel needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Inco Nickel 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 - Recapitalization of Inco should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Inco Nickel 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Recapitalization of Inco, in the dynamic environment Inco Nickel has struggled to respond to the nimble upstart competition. Inco Nickel has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study Recapitalization of Inco 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 Inco Nickel 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Inco Nickel 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, Inco Nickel 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Recapitalization of Inco, it seems that the employees of Inco Nickel 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.
Opportunities Recapitalization of Inco | 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 Recapitalization of Inco are -
Better consumer reach
– The expansion of the 5G network will help Inco Nickel to increase its market reach. Inco Nickel 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Inco Nickel 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 Inco Nickel to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Inco Nickel 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.
Learning at scale
– Online learning technologies has now opened space for Inco Nickel 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Inco Nickel 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, Recapitalization of Inco, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Inco Nickel can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Inco Nickel can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Inco Nickel 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 Inco Nickel in the consumer business. Now Inco Nickel can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Inco Nickel 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 Recapitalization of Inco - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Inco Nickel to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Inco Nickel can use these opportunities to build new business models that can help the communities that Inco Nickel operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Inco Nickel in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Leveraging digital technologies
– Inco Nickel 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.
Threats Recapitalization of Inco External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Recapitalization of Inco are -
High dependence on third party suppliers
– Inco Nickel 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.
Increasing wage structure of Inco Nickel
– 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 Inco Nickel.
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.
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 Inco Nickel.
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. Inco Nickel needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Inco Nickel is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Inco Nickel 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.
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. Inco Nickel 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Inco Nickel 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 Recapitalization of Inco .
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 Inco Nickel in the Finance & Accounting sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Inco Nickel has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Inco Nickel needs to keep up with the evolution of technology in the Finance & Accounting 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.
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. Inco Nickel can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Recapitalization of Inco 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 Recapitalization of Inco 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 Recapitalization of Inco 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 Recapitalization of Inco 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 Recapitalization of Inco 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 Inco Nickel needs to make to build a sustainable competitive advantage.