Berkshire Partners: Purchase of Rival Company (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Berkshire Partners: Purchase of Rival Company (A)
Berkshire Partners, a private equity firm in Boston, was pleased with their recent investment in the Holmes Group, a home comfort consumer electronics company. The portfolio company was exceeding key financial targets and Berkshire Partners was confident that it would be another successful investment. Holmes' management team then suggested acquiring a kitchen electronics company, the Rival Company. The management of Holmes believed that Rival would complement their existing portfolio of products and it was the perfect time to buy due to a depressed stock price caused by declining earnings. The investment team at Berkshire now had to decide if the possible returns from an investment in Rival were enough to risk the successful investment in Holmes, or if Rival could be acquired without risking Berkshire's investment in Holmes.
Authors :: Nabil N. El-Hage, Andre Baillargeon, Stephen Parks
Swot Analysis of "Berkshire Partners: Purchase of Rival Company (A)" written by Nabil N. El-Hage, Andre Baillargeon, Stephen Parks includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Holmes Berkshire facing as an external strategic factors. Some of the topics covered in Berkshire Partners: Purchase of Rival Company (A) case study are - Strategic Management Strategies, Financial management, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Berkshire Partners: Purchase of Rival Company (A) casestudy better are - – challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, wage bills are increasing,
increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Berkshire Partners: Purchase of Rival Company (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Berkshire Partners: Purchase of Rival Company (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Holmes Berkshire, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Holmes Berkshire 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 Berkshire Partners: Purchase of Rival Company (A) can be done for the following purposes –
1. Strategic planning using facts provided in Berkshire Partners: Purchase of Rival Company (A) case study
2. Improving business portfolio management of Holmes Berkshire
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 Holmes Berkshire
Strengths Berkshire Partners: Purchase of Rival Company (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Holmes Berkshire in Berkshire Partners: Purchase of Rival Company (A) Harvard Business Review case study are -
Ability to lead change in Finance & Accounting field
– Holmes Berkshire 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 Holmes Berkshire in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Holmes Berkshire digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Holmes Berkshire 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.
Operational resilience
– The operational resilience strategy in the Berkshire Partners: Purchase of Rival Company (A) 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.
Analytics focus
– Holmes Berkshire 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 Nabil N. El-Hage, Andre Baillargeon, Stephen Parks 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
– Holmes Berkshire is one of the most innovative firm in sector. Manager in Berkshire Partners: Purchase of Rival Company (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Holmes Berkshire is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Holmes Berkshire has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Berkshire Partners: Purchase of Rival Company (A) 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.
Successful track record of launching new products
– Holmes Berkshire has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Holmes Berkshire 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.
High switching costs
– The high switching costs that Holmes Berkshire 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.
Cross disciplinary teams
– Horizontal connected teams at the Holmes Berkshire 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.
Low bargaining power of suppliers
– Suppliers of Holmes Berkshire in the sector have low bargaining power. Berkshire Partners: Purchase of Rival Company (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Holmes Berkshire to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Holmes Berkshire has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Holmes Berkshire to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Berkshire Partners: Purchase of Rival Company (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Berkshire Partners: Purchase of Rival Company (A) are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Berkshire Partners: Purchase of Rival Company (A), is just above the industry average. Holmes Berkshire 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.
Increasing silos among functional specialists
– The organizational structure of Holmes Berkshire is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Holmes Berkshire needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Holmes Berkshire to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Berkshire Partners: Purchase of Rival Company (A), it seems that the employees of Holmes Berkshire 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.
High cash cycle compare to competitors
Holmes Berkshire 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Holmes Berkshire 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.
Capital Spending Reduction
– Even during the low interest decade, Holmes Berkshire 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 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 Holmes Berkshire supply chain. Even after few cautionary changes mentioned in the HBR case study - Berkshire Partners: Purchase of Rival Company (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Holmes Berkshire vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Nabil N. El-Hage, Andre Baillargeon, Stephen Parks suggests that, Holmes Berkshire 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 decision making process
– As mentioned earlier in the report, Holmes Berkshire 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. Holmes Berkshire 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 Holmes Berkshire, firm in the HBR case study Berkshire Partners: Purchase of Rival Company (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Holmes Berkshire 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.
Opportunities Berkshire Partners: Purchase of Rival Company (A) | 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 Berkshire Partners: Purchase of Rival Company (A) are -
Leveraging digital technologies
– Holmes Berkshire 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Holmes Berkshire is facing challenges because of the dominance of functional experts in the organization. Berkshire Partners: Purchase of Rival Company (A) 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.
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 Holmes Berkshire in the consumer business. Now Holmes Berkshire can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Holmes Berkshire 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Holmes Berkshire 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, Berkshire Partners: Purchase of Rival Company (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Holmes Berkshire can use these opportunities to build new business models that can help the communities that Holmes Berkshire operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Buying journey improvements
– Holmes Berkshire can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Berkshire Partners: Purchase of Rival Company (A) 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Holmes Berkshire 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.
Using analytics as competitive advantage
– Holmes Berkshire 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 Berkshire Partners: Purchase of Rival Company (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Holmes Berkshire to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Holmes Berkshire 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Holmes Berkshire can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Holmes Berkshire 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.
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. Holmes Berkshire 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. Holmes Berkshire 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.
Threats Berkshire Partners: Purchase of Rival Company (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Berkshire Partners: Purchase of Rival Company (A) are -
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. Holmes Berkshire needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Berkshire Partners: Purchase of Rival Company (A), Holmes Berkshire 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 .
Consumer confidence and its impact on Holmes Berkshire demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Holmes Berkshire has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Holmes Berkshire 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.
Stagnating economy with rate increase
– Holmes Berkshire can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Holmes Berkshire with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Holmes Berkshire 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. Holmes Berkshire can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Holmes Berkshire 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 Berkshire Partners: Purchase of Rival Company (A) .
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 Holmes Berkshire.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Holmes Berkshire 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.
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 Holmes Berkshire business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Holmes Berkshire 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.
High dependence on third party suppliers
– Holmes Berkshire 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 Berkshire Partners: Purchase of Rival Company (A) 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 Berkshire Partners: Purchase of Rival Company (A) 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 Berkshire Partners: Purchase of Rival Company (A) 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 Berkshire Partners: Purchase of Rival Company (A) 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 Berkshire Partners: Purchase of Rival Company (A) 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 Holmes Berkshire needs to make to build a sustainable competitive advantage.