Case Study Description of Safeway, Inc.'s Leveraged Buyout (A)
After years of deteriorating financial performance and eroding market position, Safeway, Inc., the largest public grocery store chain in the United States, found itself the target of a hostile takeover offer. Management decided to take the company private in a $4.3 billion leveraged buyout sponsored by Kohlberg Kravis and Roberts. This case begins with the controversy surrounding Safeway's sale of its Dallas division as a result of the LBO and retraces the events leading up to the LBO. Continues with a discussion of the challenges facing management in restructuring the company--including the renegotiation of uncompetitive labor contracts and the intense pressure from the capital markets (through hostile takeover offers) to relinquish control of the company.
Swot Analysis of "Safeway, Inc.'s Leveraged Buyout (A)" written by Karen H. Wruck, Steve-Anna Stephens includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Safeway Lbo facing as an external strategic factors. Some of the topics covered in Safeway, Inc.'s Leveraged Buyout (A) case study are - Strategic Management Strategies, Corporate governance, Labor, Mergers & acquisitions, Public relations, Reorganization and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Safeway, Inc.'s Leveraged Buyout (A) casestudy better are - – technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, increasing energy prices, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion,
increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Safeway, Inc.'s Leveraged Buyout (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Safeway, Inc.'s Leveraged Buyout (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Safeway Lbo, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Safeway Lbo 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 Safeway, Inc.'s Leveraged Buyout (A) can be done for the following purposes –
1. Strategic planning using facts provided in Safeway, Inc.'s Leveraged Buyout (A) case study
2. Improving business portfolio management of Safeway Lbo
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 Safeway Lbo
Strengths Safeway, Inc.'s Leveraged Buyout (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Safeway Lbo in Safeway, Inc.'s Leveraged Buyout (A) Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Safeway Lbo 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.
Learning organization
- Safeway Lbo 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 Safeway Lbo is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Safeway, Inc.'s Leveraged Buyout (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Safeway Lbo has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Safeway Lbo to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Finance & Accounting field
– Safeway Lbo 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 Safeway Lbo in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Safeway Lbo is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Safeway Lbo 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 Karen H. Wruck, Steve-Anna Stephens 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.
Superior customer experience
– The customer experience strategy of Safeway Lbo in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Safeway Lbo is one of the leading recruiters in the industry. Managers in the Safeway, Inc.'s Leveraged Buyout (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.
Successful track record of launching new products
– Safeway Lbo has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Safeway Lbo 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.
Highly skilled collaborators
– Safeway Lbo 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 Safeway, Inc.'s Leveraged Buyout (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Safeway Lbo in the sector have low bargaining power. Safeway, Inc.'s Leveraged Buyout (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Safeway Lbo to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Safeway Lbo has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Safeway, Inc.'s Leveraged Buyout (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.
Weaknesses Safeway, Inc.'s Leveraged Buyout (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Safeway, Inc.'s Leveraged Buyout (A) are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Safeway, Inc.'s Leveraged Buyout (A), in the dynamic environment Safeway Lbo has struggled to respond to the nimble upstart competition. Safeway Lbo has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Safeway Lbo 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. Safeway Lbo 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.
Increasing silos among functional specialists
– The organizational structure of Safeway Lbo is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Safeway Lbo needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Safeway Lbo to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Safeway Lbo 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.
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 Safeway Lbo supply chain. Even after few cautionary changes mentioned in the HBR case study - Safeway, Inc.'s Leveraged Buyout (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Safeway Lbo vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Safeway Lbo 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Safeway, Inc.'s Leveraged Buyout (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 Safeway Lbo has relatively successful track record of launching new products.
Lack of clear differentiation of Safeway Lbo products
– To increase the profitability and margins on the products, Safeway Lbo needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Safeway, Inc.'s Leveraged Buyout (A) HBR case study mentions - Safeway Lbo 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Safeway, Inc.'s Leveraged Buyout (A), it seems that the employees of Safeway Lbo 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 Safeway Lbo 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 - Safeway, Inc.'s Leveraged Buyout (A) should strive to include more intangible value offerings along with its core products and services.
Opportunities Safeway, Inc.'s Leveraged Buyout (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 Safeway, Inc.'s Leveraged Buyout (A) are -
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. Safeway Lbo 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. Safeway Lbo 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.
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. Safeway Lbo 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 Safeway Lbo can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Safeway Lbo 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.
Buying journey improvements
– Safeway Lbo can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Safeway, Inc.'s Leveraged Buyout (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Safeway Lbo 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 Safeway Lbo to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Safeway Lbo is facing challenges because of the dominance of functional experts in the organization. Safeway, Inc.'s Leveraged Buyout (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.
Learning at scale
– Online learning technologies has now opened space for Safeway Lbo 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. Safeway Lbo can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Safeway Lbo 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.
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 Safeway Lbo 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Safeway Lbo 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.
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 Safeway Lbo in the consumer business. Now Safeway Lbo can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Safeway, Inc.'s Leveraged Buyout (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Safeway, Inc.'s Leveraged Buyout (A) are -
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. Safeway Lbo can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Safeway Lbo 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.
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. Safeway Lbo 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Safeway Lbo 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 Safeway, Inc.'s Leveraged Buyout (A) .
Environmental challenges
– Safeway Lbo 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. Safeway Lbo can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Stagnating economy with rate increase
– Safeway Lbo 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.
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 Safeway Lbo.
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 Safeway Lbo in the Finance & Accounting sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Safeway, Inc.'s Leveraged Buyout (A), Safeway Lbo 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 .
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. Safeway Lbo needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing wage structure of Safeway Lbo
– 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 Safeway Lbo.
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 Safeway Lbo business can come under increasing regulations regarding data privacy, data security, etc.
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.
Weighted SWOT Analysis of Safeway, Inc.'s Leveraged Buyout (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 Safeway, Inc.'s Leveraged Buyout (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 Safeway, Inc.'s Leveraged Buyout (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 Safeway, Inc.'s Leveraged Buyout (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 Safeway, Inc.'s Leveraged Buyout (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 Safeway Lbo needs to make to build a sustainable competitive advantage.