Case Study Description of Precision Parts, Inc. (A)
Contains a description of a decision confronting two entrepreneurs in mid-1981. They are considering purchasing a small manufacturer of precision electromechanical parts. Among the issues in the case are the following: 1) Should Taylor and Grayson buy Precision Parts, Inc.? 2) Should Shawmut Bank provide the loan? 3) Should the venture capital firms invest? 4) What should Taylor and Grayson do? The case is designed to expose students to a different kind of opportunity. Also, students will have to ask and answer the questions: What can go wrong and what can go right? They must develop a plan for managing the risk-reward ratio in their favor.
Swot Analysis of "Precision Parts, Inc. (A)" written by William A. Sahlman, Helen M. Soussou includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Grayson Precision facing as an external strategic factors. Some of the topics covered in Precision Parts, Inc. (A) case study are - Strategic Management Strategies, Business processes, Financial analysis, Managing uncertainty, Manufacturing, Mergers & acquisitions, Personnel policies, Risk management, Venture capital and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Precision Parts, Inc. (A) casestudy better are - – increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, supply chains are disrupted by pandemic , geopolitical disruptions, technology disruption, central banks are concerned over increasing inflation,
cloud computing is disrupting traditional business models, increasing commodity prices, etc
Introduction to SWOT Analysis of Precision Parts, Inc. (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Precision Parts, Inc. (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Grayson Precision, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Grayson Precision 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 Precision Parts, Inc. (A) can be done for the following purposes –
1. Strategic planning using facts provided in Precision Parts, Inc. (A) case study
2. Improving business portfolio management of Grayson Precision
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 Grayson Precision
Strengths Precision Parts, Inc. (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Grayson Precision in Precision Parts, Inc. (A) Harvard Business Review case study are -
Organizational Resilience of Grayson Precision
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Grayson Precision does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Grayson Precision 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 Precision Parts, Inc. (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Grayson Precision is one of the leading recruiters in the industry. Managers in the Precision Parts, Inc. (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Grayson Precision has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Precision Parts, Inc. (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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Grayson Precision digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Grayson Precision 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Precision Parts, Inc. (A) firm has clearly differentiated products in the market place. This has enabled Grayson Precision to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Grayson Precision to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Grayson Precision 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.
Superior customer experience
– The customer experience strategy of Grayson Precision in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Grayson Precision 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 William A. Sahlman, Helen M. Soussou 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
– Grayson Precision is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Grayson Precision is one of the most innovative firm in sector. Manager in Precision Parts, Inc. (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the Precision Parts, Inc. (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.
Weaknesses Precision Parts, Inc. (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Precision Parts, Inc. (A) are -
Capital Spending Reduction
– Even during the low interest decade, Grayson Precision 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Precision Parts, Inc. (A), in the dynamic environment Grayson Precision has struggled to respond to the nimble upstart competition. Grayson Precision has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Grayson Precision supply chain. Even after few cautionary changes mentioned in the HBR case study - Precision Parts, Inc. (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Grayson Precision vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Grayson Precision 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Precision Parts, Inc. (A) 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 Grayson Precision 's lucrative customers.
Lack of clear differentiation of Grayson Precision products
– To increase the profitability and margins on the products, Grayson Precision needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Grayson Precision 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. Grayson Precision 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.
Products dominated business model
– Even though Grayson Precision 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 - Precision Parts, Inc. (A) should strive to include more intangible value offerings along with its core products and services.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Precision Parts, Inc. (A) 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 Grayson Precision has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Precision Parts, Inc. (A), is just above the industry average. Grayson Precision 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 Grayson Precision is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Grayson Precision needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Grayson Precision to focus more on services rather than just following the product oriented approach.
Opportunities Precision Parts, Inc. (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 Precision Parts, Inc. (A) are -
Better consumer reach
– The expansion of the 5G network will help Grayson Precision to increase its market reach. Grayson Precision 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.
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. Grayson Precision 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 Grayson Precision can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Grayson Precision in the consumer business. Now Grayson Precision 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 Grayson Precision 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Grayson Precision is facing challenges because of the dominance of functional experts in the organization. Precision Parts, Inc. (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.
Leveraging digital technologies
– Grayson Precision 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, Grayson Precision 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.
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 Grayson Precision 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.
Building a culture of innovation
– managers at Grayson Precision 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.
Creating value in data economy
– The success of analytics program of Grayson Precision has opened avenues for new revenue streams for the organization in the industry. This can help Grayson Precision to build a more holistic ecosystem as suggested in the Precision Parts, Inc. (A) case study. Grayson Precision can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Grayson Precision 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Grayson Precision 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, Precision Parts, Inc. (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.
Threats Precision Parts, Inc. (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Precision Parts, Inc. (A) are -
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Grayson Precision has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Grayson Precision 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.
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 Grayson Precision in the Finance & Accounting sector and impact the bottomline of the organization.
Consumer confidence and its impact on Grayson Precision 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.
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.
Shortening product life cycle
– it is one of the major threat that Grayson Precision is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Precision Parts, Inc. (A), Grayson Precision 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 .
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 Grayson Precision business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Grayson Precision 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 Precision Parts, Inc. (A) .
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. Grayson Precision needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Grayson Precision 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Grayson Precision with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Grayson Precision 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.
Weighted SWOT Analysis of Precision Parts, Inc. (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 Precision Parts, Inc. (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 Precision Parts, Inc. (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 Precision Parts, Inc. (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 Precision Parts, Inc. (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 Grayson Precision needs to make to build a sustainable competitive advantage.
