Examines the Thompson's $4.9 billion leveraged buyout of the Southland Corp. in 1987. As the original founders of Southland, the Thompsons were concerned about losing control over the company upon learning of the Belzberg family's acquiring interest. The teaching objectives are: to explore the characteristics of an LBO candidate, to examine the dynamics of the corporate control process when insiders are substantial stockholders, and therefore serve as both buyer and seller, and to evaluate the cash flow forecasts in an LBO and use them to analyze bidding behavior.
Swot Analysis of "Southland Corp. (A)" written by Richard S. Ruback, Elizabeth H. McNair includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Southland Lbo facing as an external strategic factors. Some of the topics covered in Southland Corp. (A) case study are - Strategic Management Strategies, Corporate governance, Financial analysis, Forecasting, Mergers & acquisitions, Negotiations, Reorganization and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Southland Corp. (A) casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, wage bills are increasing, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies,
talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Southland Corp. (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Southland Corp. (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Southland Lbo, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Southland 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 Southland Corp. (A) can be done for the following purposes –
1. Strategic planning using facts provided in Southland Corp. (A) case study
2. Improving business portfolio management of Southland 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 Southland Lbo
Strengths Southland Corp. (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Southland Lbo in Southland Corp. (A) Harvard Business Review case study are -
Organizational Resilience of Southland Lbo
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Southland Lbo does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Southland Lbo digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Southland Lbo 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
– Southland Corp. (A) firm has clearly differentiated products in the market place. This has enabled Southland Lbo to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Southland Lbo to invest into research and development (R&D) and innovation.
Ability to lead change in Finance & Accounting field
– Southland 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 Southland Lbo in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Southland Lbo has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Southland 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.
Training and development
– Southland Lbo has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Southland Corp. (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.
Low bargaining power of suppliers
– Suppliers of Southland Lbo in the sector have low bargaining power. Southland Corp. (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Southland Lbo to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Southland Lbo is one of the most innovative firm in sector. Manager in Southland Corp. (A) 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
– Southland Lbo has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Southland Lbo to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Southland 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 Southland Lbo is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Southland Corp. (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Southland Lbo in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Southland 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.
Weaknesses Southland Corp. (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Southland Corp. (A) are -
Lack of clear differentiation of Southland Lbo products
– To increase the profitability and margins on the products, Southland Lbo needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study Southland Corp. (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 Southland Lbo 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Southland Lbo, firm in the HBR case study Southland Corp. (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Southland Lbo 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Southland Lbo 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 Southland Corp. (A) 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 Southland Corp. (A) can leverage the sales team experience to cultivate customer relationships as Southland Lbo is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Southland Corp. (A), in the dynamic environment Southland Lbo has struggled to respond to the nimble upstart competition. Southland 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, Southland 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. Southland 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.
Products dominated business model
– Even though Southland 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 - Southland Corp. (A) should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Southland Corp. (A), is just above the industry average. Southland Lbo 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Richard S. Ruback, Elizabeth H. McNair suggests that, Southland Lbo 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.
Opportunities Southland Corp. (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 Southland Corp. (A) are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Southland Lbo is facing challenges because of the dominance of functional experts in the organization. Southland Corp. (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.
Developing new processes and practices
– Southland Lbo 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.
Better consumer reach
– The expansion of the 5G network will help Southland Lbo to increase its market reach. Southland Lbo 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.
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 Southland Lbo in the consumer business. Now Southland Lbo can target international markets with far fewer capital restrictions requirements than the existing system.
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. Southland 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. Southland 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Southland Lbo can use these opportunities to build new business models that can help the communities that Southland Lbo operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Southland 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.
Manufacturing automation
– Southland 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Southland 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.
Creating value in data economy
– The success of analytics program of Southland Lbo has opened avenues for new revenue streams for the organization in the industry. This can help Southland Lbo to build a more holistic ecosystem as suggested in the Southland Corp. (A) case study. Southland Lbo can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Southland Lbo 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 Southland Corp. (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Southland Lbo to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Southland Lbo 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, Southland Corp. (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.
Loyalty marketing
– Southland 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.
Threats Southland Corp. (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Southland Corp. (A) are -
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 Southland Lbo business can come under increasing regulations regarding data privacy, data security, etc.
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. Southland Lbo can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Southland Lbo 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.
Increasing wage structure of Southland 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 Southland Lbo.
Technology acceleration in Forth Industrial Revolution
– Southland Lbo has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Southland Lbo 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.
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. Southland 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, Southland 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 Southland Corp. (A) .
Regulatory challenges
– Southland 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Southland Lbo with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Southland Lbo in the Finance & Accounting sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Southland Lbo 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.
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 Southland Lbo.
Weighted SWOT Analysis of Southland Corp. (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 Southland Corp. (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 Southland Corp. (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 Southland Corp. (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 Southland Corp. (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 Southland Lbo needs to make to build a sustainable competitive advantage.