A first year business school student has obtained a summer job as an analyst at a top investment bank in Los Angeles, California. His first assignment was the pricing of MicroComp's junk-bonds in the market place. Looking at the market value balance sheets, it was very clear that MicroComp was in financial distress. MicroComp's dept totaled $150 million, while the market value of its assets were $80 million. If MicroComp was required to repay its debt immediately, it would be forced into bankruptcy. Clearly, MicroComp was in "effective" default, why did its market capitalization remain at $5 million? Why had it not fallen to zero? Students will use option theory to answer these questions.
Swot Analysis of "Sleepless in L.A." written by Walid Busaba, Zeigham Khokher, Elliott Weinstein includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Microcomp Microcomp's facing as an external strategic factors. Some of the topics covered in Sleepless in L.A. case study are - Strategic Management Strategies, Financial markets and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Sleepless in L.A. casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies,
digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Sleepless in L.A.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Sleepless in L.A. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Microcomp Microcomp's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Microcomp Microcomp's 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 Sleepless in L.A. can be done for the following purposes –
1. Strategic planning using facts provided in Sleepless in L.A. case study
2. Improving business portfolio management of Microcomp Microcomp's
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 Microcomp Microcomp's
Strengths Sleepless in L.A. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Microcomp Microcomp's in Sleepless in L.A. Harvard Business Review case study are -
Innovation driven organization
– Microcomp Microcomp's is one of the most innovative firm in sector. Manager in Sleepless in L.A. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Finance & Accounting industry
– Sleepless in L.A. firm has clearly differentiated products in the market place. This has enabled Microcomp Microcomp's to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Microcomp Microcomp's to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Microcomp Microcomp's is present in almost all the verticals within the industry. This has provided firm in Sleepless in L.A. 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 switching costs
– The high switching costs that Microcomp Microcomp's 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.
Highly skilled collaborators
– Microcomp Microcomp's 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 Sleepless in L.A. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Microcomp Microcomp's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Sleepless in L.A. Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Effective Research and Development (R&D)
– Microcomp Microcomp's 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 Sleepless in L.A. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Microcomp Microcomp's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Sleepless in L.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.
Analytics focus
– Microcomp Microcomp's 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 Walid Busaba, Zeigham Khokher, Elliott Weinstein 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.
Learning organization
- Microcomp Microcomp's 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 Microcomp Microcomp's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Sleepless in L.A. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Microcomp Microcomp's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Microcomp Microcomp's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Sleepless in L.A. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sleepless in L.A. are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Sleepless in L.A., it seems that the employees of Microcomp Microcomp's 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.
Low market penetration in new markets
– Outside its home market of Microcomp Microcomp's, firm in the HBR case study Sleepless in L.A. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Microcomp Microcomp's 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.
Skills based hiring
– The stress on hiring functional specialists at Microcomp Microcomp's 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.
Slow decision making process
– As mentioned earlier in the report, Microcomp Microcomp's 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. Microcomp Microcomp's 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.
Aligning sales with marketing
– It come across in the case study Sleepless in L.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 Sleepless in L.A. can leverage the sales team experience to cultivate customer relationships as Microcomp Microcomp's is planning to shift buying processes online.
Lack of clear differentiation of Microcomp Microcomp's products
– To increase the profitability and margins on the products, Microcomp Microcomp's needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Microcomp Microcomp's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Sleepless in L.A. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Sleepless in L.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 Microcomp Microcomp's has relatively successful track record of launching new products.
Need for greater diversity
– Microcomp Microcomp's 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 operating costs
– Compare to the competitors, firm in the HBR case study Sleepless in L.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 Microcomp Microcomp's 's lucrative customers.
Opportunities Sleepless in L.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 Sleepless in L.A. are -
Building a culture of innovation
– managers at Microcomp Microcomp's 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Microcomp Microcomp's 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, Sleepless in L.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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Microcomp Microcomp's can use these opportunities to build new business models that can help the communities that Microcomp Microcomp's operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Buying journey improvements
– Microcomp Microcomp's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Sleepless in L.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.
Learning at scale
– Online learning technologies has now opened space for Microcomp Microcomp's 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.
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. Microcomp Microcomp's 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. Microcomp Microcomp's 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.
Manufacturing automation
– Microcomp Microcomp's 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.
Creating value in data economy
– The success of analytics program of Microcomp Microcomp's has opened avenues for new revenue streams for the organization in the industry. This can help Microcomp Microcomp's to build a more holistic ecosystem as suggested in the Sleepless in L.A. case study. Microcomp Microcomp's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Microcomp Microcomp's 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 Microcomp Microcomp's to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Microcomp Microcomp's 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.
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 Microcomp Microcomp's 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.
Better consumer reach
– The expansion of the 5G network will help Microcomp Microcomp's to increase its market reach. Microcomp Microcomp's 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Microcomp Microcomp's is facing challenges because of the dominance of functional experts in the organization. Sleepless in L.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.
Threats Sleepless in L.A. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Sleepless in L.A. are -
Consumer confidence and its impact on Microcomp Microcomp's 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.
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 Microcomp Microcomp's business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Microcomp Microcomp's 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Sleepless in L.A., Microcomp Microcomp's 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 .
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. Microcomp Microcomp's 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.
Environmental challenges
– Microcomp Microcomp's 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. Microcomp Microcomp's can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 Microcomp Microcomp's.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Microcomp Microcomp's has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Microcomp Microcomp's 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Microcomp Microcomp's 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 Sleepless in L.A. .
Shortening product life cycle
– it is one of the major threat that Microcomp Microcomp's is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Microcomp Microcomp's 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.
Weighted SWOT Analysis of Sleepless in L.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 Sleepless in L.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 Sleepless in L.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 Sleepless in L.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 Sleepless in L.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 Microcomp Microcomp's needs to make to build a sustainable competitive advantage.