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 - – there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, central banks are concerned over increasing inflation, there is increasing trade war between United States & China,
wage bills are increasing, challanges to central banks by blockchain based private currencies, 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 -
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.
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.
Superior customer experience
– The customer experience strategy of Kinder Morgan in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Sustainable margins compare to other players in Finance & Accounting industry
– Kinder Morgan, Inc.--Management Buyout firm has clearly differentiated products in the market place. This has enabled Kinder Morgan to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Kinder Morgan to invest into research and development (R&D) and innovation.
Organizational Resilience of Kinder Morgan
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Kinder Morgan does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Kinder Morgan is one of the most innovative firm in sector. Manager in Kinder Morgan, Inc.--Management Buyout 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 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.
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.
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.
Ability to lead change in Finance & Accounting field
– Kinder Morgan 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 Kinder Morgan in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Kinder Morgan in the sector have low bargaining power. Kinder Morgan, Inc.--Management Buyout has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Kinder Morgan to manage not only supply disruptions but also source products at highly competitive prices.
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 -
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Kinder Morgan, Inc.--Management Buyout 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 Kinder Morgan has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Kinder Morgan 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.
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.
Low market penetration in new markets
– Outside its home market of Kinder Morgan, firm in the HBR case study Kinder Morgan, Inc.--Management Buyout needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
No frontier risks strategy
– After analyzing the HBR case study Kinder Morgan, Inc.--Management Buyout, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
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.
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.
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.
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 -
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.
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. Kinder Morgan can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Creating value in data economy
– The success of analytics program of Kinder Morgan has opened avenues for new revenue streams for the organization in the industry. This can help Kinder Morgan to build a more holistic ecosystem as suggested in the Kinder Morgan, Inc.--Management Buyout case study. Kinder Morgan can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
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.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Kinder Morgan 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 Kinder Morgan to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kinder Morgan 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.
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 -
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.
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.
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 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 .
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.
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 .
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Kinder Morgan with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Kinder Morgan 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Kinder Morgan 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.
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.
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.
