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 energy prices, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, increasing commodity prices, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%,
technology disruption, central banks are concerned over increasing inflation, 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 -
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Microcomp Microcomp's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Microcomp Microcomp's 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.
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.
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.
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.
Successful track record of launching new products
– Microcomp Microcomp's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Microcomp Microcomp's 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.
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.
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.
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.
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.
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.
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.
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 -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Sleepless in L.A., is just above the industry average. Microcomp Microcomp's 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.
Increasing silos among functional specialists
– The organizational structure of Microcomp Microcomp's is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Microcomp Microcomp's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Microcomp Microcomp's to focus more on services rather than just following the product oriented approach.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Microcomp Microcomp's 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.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Sleepless in L.A., in the dynamic environment Microcomp Microcomp's has struggled to respond to the nimble upstart competition. Microcomp Microcomp's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Microcomp Microcomp's supply chain. Even after few cautionary changes mentioned in the HBR case study - Sleepless in L.A., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Microcomp Microcomp's vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As Sleepless in L.A. HBR case study mentions - Microcomp Microcomp's 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.
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.
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 -
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Microcomp Microcomp's 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.
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.
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.
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.
Developing new processes and practices
– Microcomp Microcomp's 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.
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.
Leveraging digital technologies
– Microcomp Microcomp's can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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.
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 Microcomp Microcomp's in the consumer business. Now Microcomp Microcomp's can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Microcomp Microcomp's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Microcomp Microcomp's 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 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 -
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 .
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.
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.
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.
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. Microcomp Microcomp's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Microcomp Microcomp's needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.
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 Microcomp Microcomp's in the Finance & Accounting sector and impact the bottomline of the organization.
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.
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.
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 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, 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. .
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.
