In December 2017, Jacobs Douwe Egberts (JDE, a Dutch coffee company) made an offer to acquire OldTown Berhad (OTB), a Malaysian coffee company. Three large shareholders, representing more than half of the outstanding shares, have agreed to tender their shares and analysts who follow OTB are recommending that investors accept the offer. The remaining shareholders must decide if the acquisition offer is reasonable and whether to tender their shares or not.
Swot Analysis of "OldTown Berhad" written by Benjamin C. Esty, Greg Saldutte includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Oldtown Otb facing as an external strategic factors. Some of the topics covered in OldTown Berhad case study are - Strategic Management Strategies, Financial analysis, Financial management, Growth strategy, Mergers & acquisitions, Negotiations and Finance & Accounting.
Some of the macro environment factors that can be used to understand the OldTown Berhad casestudy better are - – increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, cloud computing is disrupting traditional business models,
increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in OldTown Berhad case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Oldtown Otb, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Oldtown Otb 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 OldTown Berhad can be done for the following purposes –
1. Strategic planning using facts provided in OldTown Berhad case study
2. Improving business portfolio management of Oldtown Otb
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 Oldtown Otb
Strengths OldTown Berhad | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Oldtown Otb in OldTown Berhad Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Oldtown Otb 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.
Highly skilled collaborators
– Oldtown Otb 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 OldTown Berhad HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Oldtown Otb has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Oldtown Otb to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Oldtown Otb is one of the leading recruiters in the industry. Managers in the OldTown Berhad are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Oldtown Otb
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Oldtown Otb does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Oldtown Otb is one of the most innovative firm in sector. Manager in OldTown Berhad Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Oldtown Otb 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 Oldtown Otb is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in OldTown Berhad Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Oldtown Otb is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Oldtown Otb in the sector have low bargaining power. OldTown Berhad has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Oldtown Otb to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the OldTown Berhad 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.
Ability to lead change in Finance & Accounting field
– Oldtown Otb 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 Oldtown Otb in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Finance & Accounting industry
– OldTown Berhad firm has clearly differentiated products in the market place. This has enabled Oldtown Otb to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Oldtown Otb to invest into research and development (R&D) and innovation.
Weaknesses OldTown Berhad | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of OldTown Berhad are -
High bargaining power of channel partners
– Because of the regulatory requirements, Benjamin C. Esty, Greg Saldutte suggests that, Oldtown Otb 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.
Lack of clear differentiation of Oldtown Otb products
– To increase the profitability and margins on the products, Oldtown Otb needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Oldtown Otb 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study OldTown Berhad, is just above the industry average. Oldtown Otb 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study OldTown Berhad, it seems that the employees of Oldtown Otb 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.
Low market penetration in new markets
– Outside its home market of Oldtown Otb, firm in the HBR case study OldTown Berhad needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Oldtown Otb 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.
Need for greater diversity
– Oldtown Otb 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Oldtown Otb 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.
Aligning sales with marketing
– It come across in the case study OldTown Berhad 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 OldTown Berhad can leverage the sales team experience to cultivate customer relationships as Oldtown Otb is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Oldtown Otb is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study OldTown Berhad can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities OldTown Berhad | 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 OldTown Berhad are -
Building a culture of innovation
– managers at Oldtown Otb 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. Oldtown Otb can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Oldtown Otb can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Oldtown Otb 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, OldTown Berhad, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Oldtown Otb 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 OldTown Berhad - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Oldtown Otb to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Oldtown Otb 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.
Better consumer reach
– The expansion of the 5G network will help Oldtown Otb to increase its market reach. Oldtown Otb will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Oldtown Otb 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 Oldtown Otb to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Oldtown Otb has opened avenues for new revenue streams for the organization in the industry. This can help Oldtown Otb to build a more holistic ecosystem as suggested in the OldTown Berhad case study. Oldtown Otb 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, Oldtown Otb can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Oldtown Otb in the consumer business. Now Oldtown Otb can target international markets with far fewer capital restrictions requirements than the existing system.
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. Oldtown Otb can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Oldtown Otb 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.
Threats OldTown Berhad External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study OldTown Berhad are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study OldTown Berhad, Oldtown Otb may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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 Oldtown Otb in the Finance & Accounting sector and impact the bottomline of the organization.
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. Oldtown Otb 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, Oldtown Otb 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 OldTown Berhad .
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. Oldtown Otb needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.
Shortening product life cycle
– it is one of the major threat that Oldtown Otb is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Oldtown Otb 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.
Regulatory challenges
– Oldtown Otb 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
– Oldtown Otb has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Oldtown Otb 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Oldtown Otb 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
– Oldtown Otb 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.
Consumer confidence and its impact on Oldtown Otb 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.
Weighted SWOT Analysis of OldTown Berhad 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 OldTown Berhad 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 OldTown Berhad 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 OldTown Berhad 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 OldTown Berhad 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 Oldtown Otb needs to make to build a sustainable competitive advantage.