Case Study Description of Stelco Inc.: Bankruptcy and Restructuring
In late 2003, the managing directors of Quantum Investors Inc., a private equity firm that specialized in distressed investing, needed to decide whether their firm should take action in the restructuring of Stelco Inc., a Canadian steel company on the verge of bankruptcy. Stelco had been unable to adapt to the changing dynamics of the steel industry, due to its high cost structure and low efficiency. Its share values had declined sharply and it had a deteriorating cash position. The managing directors of the private equity firm needed to decide on a potential approach to restructuring, including which securities to purchase, and a strategy for dealing with stakeholders to ensure a successful outcome for its investment.
Swot Analysis of "Stelco Inc.: Bankruptcy and Restructuring" written by Erika Chamberlain, Michael R King includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Stelco Restructuring facing as an external strategic factors. Some of the topics covered in Stelco Inc.: Bankruptcy and Restructuring case study are - Strategic Management Strategies, Reorganization and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Stelco Inc.: Bankruptcy and Restructuring casestudy better are - – supply chains are disrupted by pandemic , increasing energy prices, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies,
digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Stelco Inc.: Bankruptcy and Restructuring
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Stelco Inc.: Bankruptcy and Restructuring case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Stelco Restructuring, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Stelco Restructuring 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 Stelco Inc.: Bankruptcy and Restructuring can be done for the following purposes –
1. Strategic planning using facts provided in Stelco Inc.: Bankruptcy and Restructuring case study
2. Improving business portfolio management of Stelco Restructuring
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 Stelco Restructuring
Strengths Stelco Inc.: Bankruptcy and Restructuring | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Stelco Restructuring in Stelco Inc.: Bankruptcy and Restructuring Harvard Business Review case study are -
Diverse revenue streams
– Stelco Restructuring is present in almost all the verticals within the industry. This has provided firm in Stelco Inc.: Bankruptcy and Restructuring 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.
Highly skilled collaborators
– Stelco Restructuring 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 Stelco Inc.: Bankruptcy and Restructuring HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Stelco Restructuring has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Stelco Inc.: Bankruptcy and Restructuring - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Stelco Restructuring in the sector have low bargaining power. Stelco Inc.: Bankruptcy and Restructuring has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Stelco Restructuring to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Stelco Restructuring has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Stelco Restructuring 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 Stelco Restructuring has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Analytics focus
– Stelco Restructuring 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 Erika Chamberlain, Michael R King 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.
Cross disciplinary teams
– Horizontal connected teams at the Stelco Restructuring 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.
Operational resilience
– The operational resilience strategy in the Stelco Inc.: Bankruptcy and Restructuring 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
– Stelco Restructuring 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 Stelco Restructuring in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Stelco Restructuring has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Stelco Restructuring to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Stelco Restructuring is one of the leading recruiters in the industry. Managers in the Stelco Inc.: Bankruptcy and Restructuring are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Stelco Inc.: Bankruptcy and Restructuring | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Stelco Inc.: Bankruptcy and Restructuring are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Stelco Inc.: Bankruptcy and Restructuring, is just above the industry average. Stelco Restructuring 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Stelco Restructuring is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Stelco Inc.: Bankruptcy and Restructuring can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Stelco Restructuring 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Stelco Inc.: Bankruptcy and Restructuring 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 Stelco Restructuring 's lucrative customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Stelco Inc.: Bankruptcy and Restructuring 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 Stelco Restructuring has relatively successful track record of launching new products.
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 Stelco Restructuring supply chain. Even after few cautionary changes mentioned in the HBR case study - Stelco Inc.: Bankruptcy and Restructuring, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Stelco Restructuring vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Stelco Inc.: Bankruptcy and Restructuring, it seems that the employees of Stelco Restructuring 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.
Slow decision making process
– As mentioned earlier in the report, Stelco Restructuring 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. Stelco Restructuring 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.
Lack of clear differentiation of Stelco Restructuring products
– To increase the profitability and margins on the products, Stelco Restructuring needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Stelco Inc.: Bankruptcy and Restructuring, in the dynamic environment Stelco Restructuring has struggled to respond to the nimble upstart competition. Stelco Restructuring has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Stelco Restructuring 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.
Opportunities Stelco Inc.: Bankruptcy and Restructuring | 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 Stelco Inc.: Bankruptcy and Restructuring are -
Developing new processes and practices
– Stelco Restructuring 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.
Loyalty marketing
– Stelco Restructuring 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Stelco Restructuring can use these opportunities to build new business models that can help the communities that Stelco Restructuring 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 Stelco Restructuring in the consumer business. Now Stelco Restructuring can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Stelco Restructuring 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.
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. Stelco Restructuring 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. Stelco Restructuring 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.
Building a culture of innovation
– managers at Stelco Restructuring 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.
Learning at scale
– Online learning technologies has now opened space for Stelco Restructuring 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.
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. Stelco Restructuring can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Stelco Restructuring to increase its market reach. Stelco Restructuring 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.
Buying journey improvements
– Stelco Restructuring can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Stelco Inc.: Bankruptcy and Restructuring 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.
Leveraging digital technologies
– Stelco Restructuring 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.
Creating value in data economy
– The success of analytics program of Stelco Restructuring has opened avenues for new revenue streams for the organization in the industry. This can help Stelco Restructuring to build a more holistic ecosystem as suggested in the Stelco Inc.: Bankruptcy and Restructuring case study. Stelco Restructuring can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Stelco Inc.: Bankruptcy and Restructuring External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Stelco Inc.: Bankruptcy and Restructuring are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Stelco Restructuring 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Stelco Restructuring with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Stelco Restructuring 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 wage structure of Stelco Restructuring
– 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 Stelco Restructuring.
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 Stelco Restructuring.
Technology acceleration in Forth Industrial Revolution
– Stelco Restructuring has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Stelco Restructuring 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.
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 Stelco Restructuring business can come under increasing regulations regarding data privacy, data security, etc.
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 Stelco Restructuring 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. Stelco Restructuring 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, Stelco Restructuring 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 Stelco Inc.: Bankruptcy and Restructuring .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Stelco Restructuring 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.
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.
High dependence on third party suppliers
– Stelco Restructuring 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 Stelco Inc.: Bankruptcy and Restructuring 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 Stelco Inc.: Bankruptcy and Restructuring 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 Stelco Inc.: Bankruptcy and Restructuring 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 Stelco Inc.: Bankruptcy and Restructuring 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 Stelco Inc.: Bankruptcy and Restructuring 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 Stelco Restructuring needs to make to build a sustainable competitive advantage.