Case Study Description of Oaktree: Pierre Foods Investment
This case is a setting to discuss "loan to own" investment strategy that is often pursued by distressed investors. The aftermath of the 2007 financial crisis left many companies with poor liquidity and limited ability to obtain credit. One of these companies was Pierre Foods, a producer and distributor of processed and precooked protein products that had experienced several years of promising sales growth and held a leading market position. Despite this, 2007 saw Pierre foods adversely affected by a spike in production costs and unsustainably high leverage. This made Pierre Foods an attractive opportunity for Oaktree Capital Management, allowing them to employ its strategy of investing in distressed debt securities with the goal of leading a restructuring during which their debt investment would be converted into a controlling equity stake. The challenge of executing "loan to own" strategy is being able to identify ahead of the restructuring the debt layer that stands to becoming equity (the so called "fulcrum security"). Overall, this case can be used to understand unique elements of a representative distressed investment. It can also be used as a platform for discussing sources of value and risks associated with distressed investing.
Swot Analysis of "Oaktree: Pierre Foods Investment" written by Victoria Ivashina, Mike Harmon includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Distressed Pierre facing as an external strategic factors. Some of the topics covered in Oaktree: Pierre Foods Investment case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Oaktree: Pierre Foods Investment casestudy better are - – central banks are concerned over increasing inflation, geopolitical disruptions, technology disruption, there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings,
challanges to central banks by blockchain based private currencies, wage bills are increasing, etc
Introduction to SWOT Analysis of Oaktree: Pierre Foods Investment
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Oaktree: Pierre Foods Investment case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Distressed Pierre, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Distressed Pierre 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 Oaktree: Pierre Foods Investment can be done for the following purposes –
1. Strategic planning using facts provided in Oaktree: Pierre Foods Investment case study
2. Improving business portfolio management of Distressed Pierre
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 Distressed Pierre
Strengths Oaktree: Pierre Foods Investment | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Distressed Pierre in Oaktree: Pierre Foods Investment Harvard Business Review case study are -
Ability to lead change in Finance & Accounting field
– Distressed Pierre 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 Distressed Pierre in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the Oaktree: Pierre Foods Investment 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.
Highly skilled collaborators
– Distressed Pierre 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 Oaktree: Pierre Foods Investment HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Distressed Pierre digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Distressed Pierre 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.
Innovation driven organization
– Distressed Pierre is one of the most innovative firm in sector. Manager in Oaktree: Pierre Foods Investment Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Distressed Pierre has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Distressed Pierre to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Distressed Pierre 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.
Analytics focus
– Distressed Pierre 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 Victoria Ivashina, Mike Harmon 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.
Low bargaining power of suppliers
– Suppliers of Distressed Pierre in the sector have low bargaining power. Oaktree: Pierre Foods Investment has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Distressed Pierre to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Distressed Pierre is present in almost all the verticals within the industry. This has provided firm in Oaktree: Pierre Foods Investment 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.
Superior customer experience
– The customer experience strategy of Distressed Pierre in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Distressed Pierre has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Distressed Pierre 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 Oaktree: Pierre Foods Investment | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Oaktree: Pierre Foods Investment are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Distressed Pierre is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Oaktree: Pierre Foods Investment can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Oaktree: Pierre Foods Investment, it seems that the employees of Distressed Pierre 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.
Products dominated business model
– Even though Distressed Pierre has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Oaktree: Pierre Foods Investment should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Distressed Pierre 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.
Slow to strategic competitive environment developments
– As Oaktree: Pierre Foods Investment HBR case study mentions - Distressed Pierre 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 Oaktree: Pierre Foods Investment 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 Distressed Pierre 's lucrative customers.
Interest costs
– Compare to the competition, Distressed Pierre 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.
Lack of clear differentiation of Distressed Pierre products
– To increase the profitability and margins on the products, Distressed Pierre needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the segment, Distressed Pierre 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.
Aligning sales with marketing
– It come across in the case study Oaktree: Pierre Foods Investment 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 Oaktree: Pierre Foods Investment can leverage the sales team experience to cultivate customer relationships as Distressed Pierre is planning to shift buying processes online.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Oaktree: Pierre Foods Investment 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 Distressed Pierre has relatively successful track record of launching new products.
Opportunities Oaktree: Pierre Foods Investment | 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 Oaktree: Pierre Foods Investment are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Distressed Pierre 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 Distressed Pierre to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Distressed Pierre 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Distressed Pierre 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.
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. Distressed Pierre can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Distressed Pierre 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. Distressed Pierre 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Distressed Pierre 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, Oaktree: Pierre Foods Investment, 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 Distressed Pierre to increase its market reach. Distressed Pierre 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.
Manufacturing automation
– Distressed Pierre can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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. Distressed Pierre can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Distressed Pierre can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Distressed Pierre is facing challenges because of the dominance of functional experts in the organization. Oaktree: Pierre Foods Investment 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.
Buying journey improvements
– Distressed Pierre can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Oaktree: Pierre Foods Investment 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.
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 Distressed Pierre 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 Oaktree: Pierre Foods Investment External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Oaktree: Pierre Foods Investment are -
High dependence on third party suppliers
– Distressed Pierre 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.
Environmental challenges
– Distressed Pierre 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. Distressed Pierre can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Distressed Pierre can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Distressed Pierre is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Distressed Pierre 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 Oaktree: Pierre Foods Investment .
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 Distressed Pierre business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Distressed Pierre has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Distressed Pierre 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Distressed Pierre 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.
Stagnating economy with rate increase
– Distressed Pierre 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.
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. Distressed Pierre needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing wage structure of Distressed Pierre
– 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 Distressed Pierre.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Oaktree: Pierre Foods Investment, Distressed Pierre 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 .
Weighted SWOT Analysis of Oaktree: Pierre Foods Investment 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 Oaktree: Pierre Foods Investment 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 Oaktree: Pierre Foods Investment 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 Oaktree: Pierre Foods Investment 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 Oaktree: Pierre Foods Investment 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 Distressed Pierre needs to make to build a sustainable competitive advantage.
