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 transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, increasing energy prices, wage bills are increasing, talent flight as more people leaving formal jobs,
there is increasing trade war between United States & China, technology disruption, 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 -
Effective Research and Development (R&D)
– Murphy Stores 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 Murphy Stores: Capital Projects - 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 Murphy Stores 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Murphy Stores digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Murphy Stores 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.
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.
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.
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.
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.
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.
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.
Operational resilience
– The operational resilience strategy in the Murphy Stores: Capital Projects 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.
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.
Learning organization
- Murphy Stores 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 Murphy Stores is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Murphy Stores: Capital Projects Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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 -
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 Murphy Stores supply chain. Even after few cautionary changes mentioned in the HBR case study - Murphy Stores: Capital Projects, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Murphy Stores vulnerable to further global disruptions in South East Asia.
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.
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.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Murphy Stores: Capital Projects, is just above the industry average. Murphy Stores 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 Murphy Stores 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 - Murphy Stores: Capital Projects should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Murphy Stores, firm in the HBR case study Murphy Stores: Capital Projects needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Murphy Stores products
– To increase the profitability and margins on the products, Murphy Stores needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Murphy Stores 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.
Skills based hiring
– The stress on hiring functional specialists at Murphy Stores 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.
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 -
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.
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.
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. Murphy Stores can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Murphy Stores 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Murphy Stores 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 Murphy Stores to hire the very best people irrespective of their geographical location.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Murphy Stores can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Building a culture of innovation
– managers at Murphy Stores 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. Murphy Stores can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
Loyalty marketing
– Murphy Stores 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.
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 -
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. Murphy Stores 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.
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 Murphy Stores business can come under increasing regulations regarding data privacy, data security, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
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.
Shortening product life cycle
– it is one of the major threat that Murphy Stores is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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. Murphy Stores needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 .
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.
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.
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.
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.
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.