Case Study Description of Molycorp: Issuing the ''Happy Meal'' Securities (B)
Molycorp, the Western hemisphere's only producer of rare earth minerals, was in the middle of a $1 billion capital expansion in its effort to become a vertically integrated supplier of rare earth minerals, oxides, and metals. After reporting lower than expected revenues and earnings for the second quarter of 2012, management needed to design a new funding strategy for the firm. In August 2012, Molycorp announced it would issue $120 million of equity and $360 million of convertible debt. To facilitate the issuance of convertible debt, the firm entered a ''share lending agreement'' with Morgan Stanley whereby Morgan Stanley would borrow shares from Molycorp in a transaction referred to as a ''Happy Meal''. The goal was to help convertible debt investors ''hedge their respective investments through short sales.'' The challenge of the case is to understand why Molycorp used this financing strategy and what impact it would likely have on the firm, its prospects, and its stock price.
Swot Analysis of "Molycorp: Issuing the ''Happy Meal'' Securities (B)" written by Benjamin C. Esty, E. Scott Mayfield includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Molycorp Convertible facing as an external strategic factors. Some of the topics covered in Molycorp: Issuing the ''Happy Meal'' Securities (B) case study are - Strategic Management Strategies, Budgeting, Competition, Financial analysis, Financial markets, Managing uncertainty, Manufacturing, Marketing and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Molycorp: Issuing the ''Happy Meal'' Securities (B) casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , increasing energy prices, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels,
there is increasing trade war between United States & China, increasing commodity prices, etc
Introduction to SWOT Analysis of Molycorp: Issuing the ''Happy Meal'' Securities (B)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Molycorp: Issuing the ''Happy Meal'' Securities (B) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Molycorp Convertible, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Molycorp Convertible 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 Molycorp: Issuing the ''Happy Meal'' Securities (B) can be done for the following purposes –
1. Strategic planning using facts provided in Molycorp: Issuing the ''Happy Meal'' Securities (B) case study
2. Improving business portfolio management of Molycorp Convertible
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 Molycorp Convertible
Strengths Molycorp: Issuing the ''Happy Meal'' Securities (B) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Molycorp Convertible in Molycorp: Issuing the ''Happy Meal'' Securities (B) Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Molycorp Convertible in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Molycorp Convertible is one of the leading recruiters in the industry. Managers in the Molycorp: Issuing the ''Happy Meal'' Securities (B) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Molycorp Convertible 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 Molycorp Convertible is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Molycorp: Issuing the ''Happy Meal'' Securities (B) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Molycorp Convertible in the sector have low bargaining power. Molycorp: Issuing the ''Happy Meal'' Securities (B) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Molycorp Convertible to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Molycorp Convertible is one of the most innovative firm in sector. Manager in Molycorp: Issuing the ''Happy Meal'' Securities (B) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the Molycorp: Issuing the ''Happy Meal'' Securities (B) 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.
Cross disciplinary teams
– Horizontal connected teams at the Molycorp Convertible 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.
Successful track record of launching new products
– Molycorp Convertible has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Molycorp Convertible 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.
Diverse revenue streams
– Molycorp Convertible is present in almost all the verticals within the industry. This has provided firm in Molycorp: Issuing the ''Happy Meal'' Securities (B) 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.
Effective Research and Development (R&D)
– Molycorp Convertible 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 Molycorp: Issuing the ''Happy Meal'' Securities (B) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Molycorp Convertible has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Molycorp: Issuing the ''Happy Meal'' Securities (B) 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.
Strong track record of project management
– Molycorp Convertible is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Molycorp: Issuing the ''Happy Meal'' Securities (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Molycorp: Issuing the ''Happy Meal'' Securities (B) are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Molycorp Convertible is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Molycorp: Issuing the ''Happy Meal'' Securities (B) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Molycorp: Issuing the ''Happy Meal'' Securities (B) 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 Molycorp Convertible has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Molycorp: Issuing the ''Happy Meal'' Securities (B), is just above the industry average. Molycorp Convertible 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.
Products dominated business model
– Even though Molycorp Convertible 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 - Molycorp: Issuing the ''Happy Meal'' Securities (B) should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Molycorp Convertible 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Molycorp: Issuing the ''Happy Meal'' Securities (B), it seems that the employees of Molycorp Convertible 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.
Lack of clear differentiation of Molycorp Convertible products
– To increase the profitability and margins on the products, Molycorp Convertible needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Molycorp Convertible 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.
Capital Spending Reduction
– Even during the low interest decade, Molycorp Convertible 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.
Increasing silos among functional specialists
– The organizational structure of Molycorp Convertible is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Molycorp Convertible needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Molycorp Convertible to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Molycorp Convertible 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. Molycorp Convertible 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.
Opportunities Molycorp: Issuing the ''Happy Meal'' Securities (B) | 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 Molycorp: Issuing the ''Happy Meal'' Securities (B) are -
Better consumer reach
– The expansion of the 5G network will help Molycorp Convertible to increase its market reach. Molycorp Convertible 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Molycorp Convertible 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Molycorp Convertible can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Molycorp Convertible 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, Molycorp: Issuing the ''Happy Meal'' Securities (B), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Molycorp Convertible 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.
Loyalty marketing
– Molycorp Convertible 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.
Creating value in data economy
– The success of analytics program of Molycorp Convertible has opened avenues for new revenue streams for the organization in the industry. This can help Molycorp Convertible to build a more holistic ecosystem as suggested in the Molycorp: Issuing the ''Happy Meal'' Securities (B) case study. Molycorp Convertible can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Molycorp Convertible 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.
Manufacturing automation
– Molycorp Convertible can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Building a culture of innovation
– managers at Molycorp Convertible can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
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. Molycorp Convertible can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Molycorp Convertible can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Molycorp Convertible 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 Molycorp: Issuing the ''Happy Meal'' Securities (B) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Molycorp: Issuing the ''Happy Meal'' Securities (B) are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Molycorp Convertible 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.
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 Molycorp Convertible in the Finance & Accounting sector and impact the bottomline 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 Molycorp Convertible.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Molycorp Convertible with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Molycorp Convertible needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing wage structure of Molycorp Convertible
– 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 Molycorp Convertible.
Regulatory challenges
– Molycorp Convertible 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.
Technology acceleration in Forth Industrial Revolution
– Molycorp Convertible has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Molycorp Convertible 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.
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. Molycorp Convertible can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Molycorp Convertible 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 Molycorp: Issuing the ''Happy Meal'' Securities (B) .
Stagnating economy with rate increase
– Molycorp Convertible 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.
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 Molycorp Convertible business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Molycorp: Issuing the ''Happy Meal'' Securities (B) 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 Molycorp: Issuing the ''Happy Meal'' Securities (B) 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 Molycorp: Issuing the ''Happy Meal'' Securities (B) 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 Molycorp: Issuing the ''Happy Meal'' Securities (B) 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 Molycorp: Issuing the ''Happy Meal'' Securities (B) 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 Molycorp Convertible needs to make to build a sustainable competitive advantage.