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 - – technology disruption, there is backlash against globalization, talent flight as more people leaving formal jobs, increasing energy prices, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
High switching costs
– The high switching costs that Oldtown Otb 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.
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.
Diverse revenue streams
– Oldtown Otb is present in almost all the verticals within the industry. This has provided firm in OldTown Berhad 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.
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.
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.
Analytics focus
– Oldtown Otb 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, Greg Saldutte 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.
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.
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.
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.
Successful track record of launching new products
– Oldtown Otb has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Oldtown Otb 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.
Weaknesses OldTown Berhad | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of OldTown Berhad are -
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.
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.
Slow decision making process
– As mentioned earlier in the report, Oldtown Otb 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. Oldtown Otb 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.
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.
Interest costs
– Compare to the competition, Oldtown Otb 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.
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.
No frontier risks strategy
– After analyzing the HBR case study OldTown Berhad, 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the OldTown Berhad 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 Oldtown Otb has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study OldTown Berhad, in the dynamic environment Oldtown Otb has struggled to respond to the nimble upstart competition. Oldtown Otb has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
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 -
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Oldtown Otb can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Oldtown Otb is facing challenges because of the dominance of functional experts in the organization. OldTown Berhad 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.
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.
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. Oldtown Otb 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. Oldtown Otb 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Oldtown Otb can use these opportunities to build new business models that can help the communities that Oldtown Otb operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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.
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.
Leveraging digital technologies
– Oldtown Otb 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.
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.
Buying journey improvements
– Oldtown Otb can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. OldTown Berhad 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.
Learning at scale
– Online learning technologies has now opened space for Oldtown Otb 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.
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 -
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.
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. Oldtown Otb 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.
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
– Oldtown Otb 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. Oldtown Otb can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 .
Stagnating economy with rate increase
– Oldtown Otb 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.
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.
Increasing wage structure of Oldtown Otb
– 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 Oldtown Otb.
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.
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.
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.
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.
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 .
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.
