Case Study Description of Kinder Morgan, Inc.--Management Buyout
Kinder Morgan, Inc., was a leader in the transportation and distribution of energy throughout North America, managing a master limited partnership with over $35 billion in infrastructure assets. In the summer of 2006, Richard Kinder, the founder and Chairman of Kinder Morgan, led a consortium of buyers to take the company private. The independent board of directors of Kinder Morgan must decide whether or not to accept Kinder's offer and assess the fairness of the proposal, given the conflicts of interest in this management buyout.
Authors :: Nabil N. El-Hage, Ewa Bierbrauer, Francine Chew, Leslie S. Pierson
Swot Analysis of "Kinder Morgan, Inc.--Management Buyout" written by Nabil N. El-Hage, Ewa Bierbrauer, Francine Chew, Leslie S. Pierson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Kinder Morgan facing as an external strategic factors. Some of the topics covered in Kinder Morgan, Inc.--Management Buyout case study are - Strategic Management Strategies, Ethics, Financial management, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Kinder Morgan, Inc.--Management Buyout casestudy better are - – challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation,
there is increasing trade war between United States & China, increasing energy prices, etc
Introduction to SWOT Analysis of Kinder Morgan, Inc.--Management Buyout
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Kinder Morgan, Inc.--Management Buyout case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kinder Morgan, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kinder Morgan 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 Kinder Morgan, Inc.--Management Buyout can be done for the following purposes –
1. Strategic planning using facts provided in Kinder Morgan, Inc.--Management Buyout case study
2. Improving business portfolio management of Kinder Morgan
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 Kinder Morgan
Strengths Kinder Morgan, Inc.--Management Buyout | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kinder Morgan in Kinder Morgan, Inc.--Management Buyout Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Kinder Morgan, Inc.--Management Buyout 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.
Training and development
– Kinder Morgan has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Kinder Morgan, Inc.--Management Buyout 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.
Strong track record of project management
– Kinder Morgan is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Kinder Morgan is present in almost all the verticals within the industry. This has provided firm in Kinder Morgan, Inc.--Management Buyout 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.
High brand equity
– Kinder Morgan has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Kinder Morgan to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Kinder Morgan 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
– Kinder Morgan 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 Nabil N. El-Hage, Ewa Bierbrauer, Francine Chew, Leslie S. Pierson 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.
Effective Research and Development (R&D)
– Kinder Morgan 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 Kinder Morgan, Inc.--Management Buyout - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Kinder Morgan has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kinder Morgan 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Kinder Morgan digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kinder Morgan 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.
Highly skilled collaborators
– Kinder Morgan 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 Kinder Morgan, Inc.--Management Buyout HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Kinder Morgan 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.
Weaknesses Kinder Morgan, Inc.--Management Buyout | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kinder Morgan, Inc.--Management Buyout are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Kinder Morgan, Inc.--Management Buyout, in the dynamic environment Kinder Morgan has struggled to respond to the nimble upstart competition. Kinder Morgan has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Kinder Morgan, Inc.--Management Buyout, it seems that the employees of Kinder Morgan 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 Kinder Morgan 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 - Kinder Morgan, Inc.--Management Buyout should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Kinder Morgan is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Kinder Morgan, Inc.--Management Buyout can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring
– The stress on hiring functional specialists at Kinder Morgan 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 cash cycle compare to competitors
Kinder Morgan 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.
Aligning sales with marketing
– It come across in the case study Kinder Morgan, Inc.--Management Buyout 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 Kinder Morgan, Inc.--Management Buyout can leverage the sales team experience to cultivate customer relationships as Kinder Morgan is planning to shift buying processes online.
High operating costs
– Compare to the competitors, firm in the HBR case study Kinder Morgan, Inc.--Management Buyout 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 Kinder Morgan 's lucrative customers.
Lack of clear differentiation of Kinder Morgan products
– To increase the profitability and margins on the products, Kinder Morgan needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Kinder Morgan, Inc.--Management Buyout HBR case study mentions - Kinder Morgan 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Kinder Morgan 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.
Opportunities Kinder Morgan, Inc.--Management Buyout | 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 Kinder Morgan, Inc.--Management Buyout are -
Using analytics as competitive advantage
– Kinder Morgan 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 Kinder Morgan, Inc.--Management Buyout - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kinder Morgan to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Kinder Morgan 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 Kinder Morgan to increase its market reach. Kinder Morgan 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.
Buying journey improvements
– Kinder Morgan can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Kinder Morgan, Inc.--Management Buyout 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.
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. Kinder Morgan 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. Kinder Morgan 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.
Learning at scale
– Online learning technologies has now opened space for Kinder Morgan 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Kinder Morgan 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, Kinder Morgan, Inc.--Management Buyout, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kinder Morgan can use these opportunities to build new business models that can help the communities that Kinder Morgan operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Kinder Morgan 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.
Building a culture of innovation
– managers at Kinder Morgan 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.
Manufacturing automation
– Kinder Morgan 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Kinder Morgan is facing challenges because of the dominance of functional experts in the organization. Kinder Morgan, Inc.--Management Buyout 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Kinder Morgan can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Kinder Morgan, Inc.--Management Buyout External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Kinder Morgan, Inc.--Management Buyout are -
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. Kinder Morgan needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Kinder Morgan, Inc.--Management Buyout, Kinder Morgan 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 .
Stagnating economy with rate increase
– Kinder Morgan 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.
Environmental challenges
– Kinder Morgan 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. Kinder Morgan can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Kinder Morgan 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 Kinder Morgan, Inc.--Management Buyout .
High dependence on third party suppliers
– Kinder Morgan 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 Kinder Morgan.
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. Kinder Morgan can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Kinder Morgan business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Kinder Morgan 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.
Increasing wage structure of Kinder Morgan
– 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 Kinder Morgan.
Technology acceleration in Forth Industrial Revolution
– Kinder Morgan has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Kinder Morgan 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.
Weighted SWOT Analysis of Kinder Morgan, Inc.--Management Buyout 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 Kinder Morgan, Inc.--Management Buyout 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 Kinder Morgan, Inc.--Management Buyout 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 Kinder Morgan, Inc.--Management Buyout 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 Kinder Morgan, Inc.--Management Buyout 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 Kinder Morgan needs to make to build a sustainable competitive advantage.