Case Study Description of Murphy Stores: Capital Projects
Murphy Stores is a field case involving a major retailer deciding whether to allocate $7 million of its remaining (and limited) capital budget to either an investment in RFID technology to reduce merchandise theft from stores, or to invest in new energy-efficient store lighting to reduce operating costs and be better for the environment, or some combination of the two. The two alternative investments focus on making financial improvements in two different aspects of Murphy Stores' operations: decreasing "shrink" due to theft and saving on electricity costs. The case offers the opportunity to learn about retail industry operations as well as to make multiple full NPV discounted cash flow analyses. This case offers the opportunity to discuss trade-offs between selecting lower-risk capital projects and higher risk projects with higher expected returns but more variability in potential outcomes. The case illustrates the importance of sensitivity and scenario analysis in project evaluation.
Swot Analysis of "Murphy Stores: Capital Projects" written by John S. Strong includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Murphy Stores facing as an external strategic factors. Some of the topics covered in Murphy Stores: Capital Projects case study are - Strategic Management Strategies, Project management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Murphy Stores: Capital Projects casestudy better are - – increasing commodity prices, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, wage bills are increasing, central banks are concerned over increasing inflation,
there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Murphy Stores: Capital Projects
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Murphy Stores: Capital Projects case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Murphy Stores, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Murphy Stores 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 Murphy Stores: Capital Projects can be done for the following purposes –
1. Strategic planning using facts provided in Murphy Stores: Capital Projects case study
2. Improving business portfolio management of Murphy Stores
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 Murphy Stores
Strengths Murphy Stores: Capital Projects | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Murphy Stores in Murphy Stores: Capital Projects Harvard Business Review case study are -
Successful track record of launching new products
– Murphy Stores has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Murphy Stores 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.
Strong track record of project management
– Murphy Stores is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Murphy Stores 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.
Ability to recruit top talent
– Murphy Stores is one of the leading recruiters in the industry. Managers in the Murphy Stores: Capital Projects are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Murphy Stores 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 Murphy Stores: Capital Projects HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Murphy Stores in the sector have low bargaining power. Murphy Stores: Capital Projects has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Murphy Stores to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Murphy Stores has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Murphy Stores to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Murphy Stores in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Murphy Stores 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 John S. Strong 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.
Ability to lead change in Finance & Accounting field
– Murphy Stores 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 Murphy Stores in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Murphy Stores
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Murphy Stores does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Murphy Stores is one of the most innovative firm in sector. Manager in Murphy Stores: Capital Projects Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Murphy Stores: Capital Projects | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Murphy Stores: Capital Projects are -
Aligning sales with marketing
– It come across in the case study Murphy Stores: Capital Projects 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 Murphy Stores: Capital Projects can leverage the sales team experience to cultivate customer relationships as Murphy Stores is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study Murphy Stores: Capital Projects, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow decision making process
– As mentioned earlier in the report, Murphy Stores 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. Murphy Stores 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Murphy Stores 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.
Slow to strategic competitive environment developments
– As Murphy Stores: Capital Projects HBR case study mentions - Murphy Stores 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Murphy Stores: Capital Projects 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 Murphy Stores has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Murphy Stores 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 operating costs
– Compare to the competitors, firm in the HBR case study Murphy Stores: Capital Projects 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 Murphy Stores 's lucrative customers.
Need for greater diversity
– Murphy Stores 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.
High bargaining power of channel partners
– Because of the regulatory requirements, John S. Strong suggests that, Murphy Stores 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.
Capital Spending Reduction
– Even during the low interest decade, Murphy Stores 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.
Opportunities Murphy Stores: Capital Projects | 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 Murphy Stores: Capital Projects are -
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 Murphy Stores to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Leveraging digital technologies
– Murphy Stores 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.
Buying journey improvements
– Murphy Stores can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Murphy Stores: Capital Projects 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.
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. Murphy Stores 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. Murphy Stores 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Murphy Stores is facing challenges because of the dominance of functional experts in the organization. Murphy Stores: Capital Projects 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Murphy Stores can use these opportunities to build new business models that can help the communities that Murphy Stores operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Learning at scale
– Online learning technologies has now opened space for Murphy Stores 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.
Creating value in data economy
– The success of analytics program of Murphy Stores has opened avenues for new revenue streams for the organization in the industry. This can help Murphy Stores to build a more holistic ecosystem as suggested in the Murphy Stores: Capital Projects case study. Murphy Stores can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Murphy Stores 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Murphy Stores 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, Murphy Stores: Capital Projects, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Murphy Stores can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Murphy Stores 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.
Using analytics as competitive advantage
– Murphy Stores 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 Murphy Stores: Capital Projects - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Murphy Stores to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Murphy Stores: Capital Projects External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Murphy Stores: Capital Projects are -
Technology acceleration in Forth Industrial Revolution
– Murphy Stores has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Murphy Stores 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.
Increasing wage structure of Murphy Stores
– 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 Murphy Stores.
Regulatory challenges
– Murphy Stores 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 Murphy Stores.
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. Murphy Stores can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Consumer confidence and its impact on Murphy Stores 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.
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.
Environmental challenges
– Murphy Stores needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Murphy Stores can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Murphy Stores 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 Murphy Stores: Capital Projects .
Stagnating economy with rate increase
– Murphy Stores 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Murphy Stores with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Murphy Stores 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.
Weighted SWOT Analysis of Murphy Stores: Capital Projects 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 Murphy Stores: Capital Projects 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 Murphy Stores: Capital Projects 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 Murphy Stores: Capital Projects 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 Murphy Stores: Capital Projects 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 Murphy Stores needs to make to build a sustainable competitive advantage.
