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 - – cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, increasing energy prices, increasing commodity prices,
there is increasing trade war between United States & China, technology disruption, 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 -
High switching costs
– The high switching costs that Molycorp Convertible 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 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.
Analytics focus
– Molycorp Convertible 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 Benjamin C. Esty, E. Scott Mayfield 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.
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.
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.
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.
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.
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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Molycorp Convertible digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Molycorp Convertible has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
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.
Ability to lead change in Finance & Accounting field
– Molycorp Convertible 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 Molycorp Convertible in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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 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.
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 Molycorp Convertible supply chain. Even after few cautionary changes mentioned in the HBR case study - Molycorp: Issuing the ''Happy Meal'' Securities (B), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Molycorp Convertible vulnerable to further global disruptions in South East Asia.
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.
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.
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.
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.
Skills based hiring
– The stress on hiring functional specialists at Molycorp Convertible 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 Molycorp: Issuing the ''Happy Meal'' Securities (B) 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 Molycorp Convertible 's lucrative customers.
Slow to strategic competitive environment developments
– As Molycorp: Issuing the ''Happy Meal'' Securities (B) HBR case study mentions - Molycorp Convertible 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Molycorp: Issuing the ''Happy Meal'' Securities (B), in the dynamic environment Molycorp Convertible has struggled to respond to the nimble upstart competition. Molycorp Convertible has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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 -
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.
Learning at scale
– Online learning technologies has now opened space for Molycorp Convertible 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.
Buying journey improvements
– Molycorp Convertible can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Molycorp: Issuing the ''Happy Meal'' Securities (B) 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Molycorp Convertible 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 Molycorp Convertible to hire the very best people irrespective of their geographical location.
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.
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.
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 Molycorp Convertible in the consumer business. Now Molycorp Convertible can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Molycorp Convertible is facing challenges because of the dominance of functional experts in the organization. Molycorp: Issuing the ''Happy Meal'' Securities (B) 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.
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.
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.
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. Molycorp Convertible 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. Molycorp Convertible 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.
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 -
Shortening product life cycle
– it is one of the major threat that Molycorp Convertible is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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. Molycorp Convertible 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.
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.
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.
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.
High dependence on third party suppliers
– Molycorp Convertible 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 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) .
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Molycorp Convertible with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
