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 - – there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion,
challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
Innovation driven organization
– Stelco Restructuring is one of the most innovative firm in sector. Manager in Stelco Inc.: Bankruptcy and Restructuring Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Stelco Restructuring 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 Stelco Restructuring is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Stelco Inc.: Bankruptcy and Restructuring Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
Strong track record of project management
– Stelco Restructuring is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Sustainable margins compare to other players in Finance & Accounting industry
– Stelco Inc.: Bankruptcy and Restructuring firm has clearly differentiated products in the market place. This has enabled Stelco Restructuring to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Stelco Restructuring to invest into research and development (R&D) and innovation.
Training and development
– Stelco Restructuring has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Stelco Inc.: Bankruptcy and Restructuring 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.
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.
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.
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 -
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.
Low market penetration in new markets
– Outside its home market of Stelco Restructuring, firm in the HBR case study Stelco Inc.: Bankruptcy and Restructuring needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Stelco Restructuring 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.
Skills based hiring
– The stress on hiring functional specialists at Stelco Restructuring 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.
Increasing silos among functional specialists
– The organizational structure of Stelco Restructuring is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Stelco Restructuring needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Stelco Restructuring to focus more on services rather than just following the product oriented approach.
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.
High bargaining power of channel partners
– Because of the regulatory requirements, Erika Chamberlain, Michael R King suggests that, Stelco Restructuring 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 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.
Aligning sales with marketing
– It come across in the case study Stelco Inc.: Bankruptcy and Restructuring 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 Stelco Inc.: Bankruptcy and Restructuring can leverage the sales team experience to cultivate customer relationships as Stelco Restructuring is planning to shift buying processes online.
Interest costs
– Compare to the competition, Stelco Restructuring 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.
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.
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 -
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Stelco Restructuring to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Stelco Restructuring to hire the very best people irrespective of their geographical location.
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Stelco Restructuring 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, Stelco Inc.: Bankruptcy and Restructuring, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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 Stelco Restructuring 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.
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.
Using analytics as competitive advantage
– Stelco Restructuring 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 Stelco Inc.: Bankruptcy and Restructuring - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Stelco Restructuring to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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 -
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 .
Stagnating economy with rate increase
– Stelco Restructuring 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 Stelco Restructuring in the Finance & Accounting sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Stelco Restructuring is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for 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.
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.
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.
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. Stelco Restructuring needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Stelco Inc.: Bankruptcy and Restructuring, Stelco Restructuring 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 .
Regulatory challenges
– Stelco Restructuring 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
– 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.