Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study SWOT Analysis Solution
Case Study Description of Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz
Private equity firm Clayton, Dubilier & Rice (CD&R) is preparing a bid for leading US car rental agency Hertz. By replacing Hertz's top managers, improving capital management and driving down operating costs, CD&R sees an opportunity to nearly double EBITDA. However, the turnaround involves significant risks, which CD&R must weigh in preparing its bidding stategy. Students are required to assess and value the business, evaluate a post-acquisition operating turnaround plan requiring new leadership, select a financial structure to mitigate significant cyclicality, and craft a winning bidding strategy in the context of a competitive auction. Please visit the dedicated case website "https://cases.insead.edu/turnaround-of-hertz/" to access supplementary material.
Authors :: Dickson L. Louie, Claudia Zeisberger, Peter Goodson, Nicholas Shannahan
Swot Analysis of "Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz" written by Dickson L. Louie, Claudia Zeisberger, Peter Goodson, Nicholas Shannahan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cd Hertz facing as an external strategic factors. Some of the topics covered in Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz case study are - Strategic Management Strategies, Entrepreneurial finance, Financial analysis, Financial management, Mergers & acquisitions, Negotiations, Organizational structure and Global Business.
Some of the macro environment factors that can be used to understand the Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz casestudy better are - – supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy,
digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cd Hertz, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cd Hertz 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 Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz can be done for the following purposes –
1. Strategic planning using facts provided in Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz case study
2. Improving business portfolio management of Cd Hertz
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Cd Hertz
Strengths Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cd Hertz in Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz Harvard Business Review case study are -
Training and development
– Cd Hertz has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Innovation driven organization
– Cd Hertz is one of the most innovative firm in sector. Manager in Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz 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 Global Business field
– Cd Hertz 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 Cd Hertz in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Cd Hertz 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 Cd Hertz is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz 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.
Organizational Resilience of Cd Hertz
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Cd Hertz does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Cd Hertz in the sector have low bargaining power. Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Cd Hertz to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Cd Hertz 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
– Cd Hertz 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 Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Cd Hertz has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Cd Hertz to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Cd Hertz in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Cd Hertz digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Cd Hertz 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.
Weaknesses Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz are -
Interest costs
– Compare to the competition, Cd Hertz 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.
Increasing silos among functional specialists
– The organizational structure of Cd Hertz is dominated by functional specialists. It is not different from other players in the Global Business segment. Cd Hertz needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Cd Hertz to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Dickson L. Louie, Claudia Zeisberger, Peter Goodson, Nicholas Shannahan suggests that, Cd Hertz 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 Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz HBR case study mentions - Cd Hertz 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 operating costs
– Compare to the competitors, firm in the HBR case study Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz 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 Cd Hertz 's lucrative customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz 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 Cd Hertz has relatively successful track record of launching new products.
Skills based hiring
– The stress on hiring functional specialists at Cd Hertz 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz, is just above the industry average. Cd Hertz 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.
Aligning sales with marketing
– It come across in the case study Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz 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 Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz can leverage the sales team experience to cultivate customer relationships as Cd Hertz 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, Cd Hertz is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz, in the dynamic environment Cd Hertz has struggled to respond to the nimble upstart competition. Cd Hertz has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz | 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 Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cd Hertz can use these opportunities to build new business models that can help the communities that Cd Hertz operates in. Secondly it can use opportunities from government spending in Global Business sector.
Better consumer reach
– The expansion of the 5G network will help Cd Hertz to increase its market reach. Cd Hertz 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Cd Hertz can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Cd Hertz 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, Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Cd Hertz can develop new processes and procedures in Global Business 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Cd Hertz 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. Cd Hertz 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.
Leveraging digital technologies
– Cd Hertz 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
– Cd Hertz can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz 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.
Loyalty marketing
– Cd Hertz 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.
Building a culture of innovation
– managers at Cd Hertz 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 Global Business 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. Cd Hertz can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Cd Hertz is facing challenges because of the dominance of functional experts in the organization. Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz 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.
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 Cd Hertz 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.
Threats Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz are -
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
– Cd Hertz 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. Cd Hertz can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Cd Hertz can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Cd Hertz business can come under increasing regulations regarding data privacy, data security, etc.
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. Cd Hertz needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Cd Hertz in the Global Business industry. The Global Business 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Cd Hertz with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Stagnating economy with rate increase
– Cd Hertz can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Cd Hertz 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.
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 Cd Hertz.
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 Cd Hertz in the Global Business sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Cd Hertz 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 Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz 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 Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz 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 Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz 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 Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz 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 Private Equity Achieves Returns through Operating Improvements: CD&R's Acquisition and Turnaround of Hertz 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 Cd Hertz needs to make to build a sustainable competitive advantage.
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