Examines California Public Employees Retirement System (CalPERS), the world's fourth largest pension fund. Dale Hanson, CEO of CalPERS, has a problem; how does he use CalPERS' influence as the holder of a small percentage of 1,300 American companies to put pressure on corporate America to achieve better returns for shareholders? The case discusses the constraints which confront CalPERS as a quasi-state agency and describes their efforts to improve corporate governance to date.
Authors :: Jay O. Light, Jay W. Lorsch, James E. Sailer
Swot Analysis of "California PERS (A)" written by Jay O. Light, Jay W. Lorsch, James E. Sailer includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Calpers Pers facing as an external strategic factors. Some of the topics covered in California PERS (A) case study are - Strategic Management Strategies, Developing employees, Financial management, Government, Labor and Finance & Accounting.
Some of the macro environment factors that can be used to understand the California PERS (A) casestudy better are - – technology disruption, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , there is backlash against globalization, wage bills are increasing, increasing household debt because of falling income levels, geopolitical disruptions,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of California PERS (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in California PERS (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Calpers Pers, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Calpers Pers 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 California PERS (A) can be done for the following purposes –
1. Strategic planning using facts provided in California PERS (A) case study
2. Improving business portfolio management of Calpers Pers
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 Calpers Pers
Strengths California PERS (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Calpers Pers in California PERS (A) Harvard Business Review case study are -
Ability to lead change in Finance & Accounting field
– Calpers Pers 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 Calpers Pers in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Calpers Pers is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the California PERS (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.
Organizational Resilience of Calpers Pers
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Calpers Pers does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Calpers Pers is one of the leading recruiters in the industry. Managers in the California PERS (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Finance & Accounting industry
– California PERS (A) firm has clearly differentiated products in the market place. This has enabled Calpers Pers to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Calpers Pers to invest into research and development (R&D) and innovation.
Innovation driven organization
– Calpers Pers is one of the most innovative firm in sector. Manager in California PERS (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Calpers Pers 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.
Successful track record of launching new products
– Calpers Pers has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Calpers Pers 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.
High switching costs
– The high switching costs that Calpers Pers 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.
Diverse revenue streams
– Calpers Pers is present in almost all the verticals within the industry. This has provided firm in California PERS (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.
Low bargaining power of suppliers
– Suppliers of Calpers Pers in the sector have low bargaining power. California PERS (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Calpers Pers to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses California PERS (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of California PERS (A) are -
Lack of clear differentiation of Calpers Pers products
– To increase the profitability and margins on the products, Calpers Pers needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Calpers Pers is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Calpers Pers needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Calpers Pers to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Calpers Pers 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the California PERS (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 Calpers Pers has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Calpers Pers is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study California PERS (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.
Low market penetration in new markets
– Outside its home market of Calpers Pers, firm in the HBR case study California PERS (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Calpers Pers supply chain. Even after few cautionary changes mentioned in the HBR case study - California PERS (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Calpers Pers vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study California PERS (A), 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 bargaining power of channel partners
– Because of the regulatory requirements, Jay O. Light, Jay W. Lorsch, James E. Sailer suggests that, Calpers Pers is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study California PERS (A), is just above the industry average. Calpers Pers needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High cash cycle compare to competitors
Calpers Pers 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.
Opportunities California PERS (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 California PERS (A) are -
Buying journey improvements
– Calpers Pers can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. California PERS (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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Calpers Pers is facing challenges because of the dominance of functional experts in the organization. California PERS (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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Calpers Pers can use these opportunities to build new business models that can help the communities that Calpers Pers 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 Calpers Pers to increase its market reach. Calpers Pers 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
– Calpers Pers 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 Calpers Pers has opened avenues for new revenue streams for the organization in the industry. This can help Calpers Pers to build a more holistic ecosystem as suggested in the California PERS (A) case study. Calpers Pers 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 Calpers Pers 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.
Manufacturing automation
– Calpers Pers 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.
Leveraging digital technologies
– Calpers Pers 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Calpers Pers 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Calpers Pers 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Calpers Pers 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, California PERS (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.
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 Calpers Pers 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.
Threats California PERS (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study California PERS (A) 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. Calpers Pers needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 Calpers Pers in the Finance & Accounting sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Calpers Pers 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 California PERS (A) .
Technology acceleration in Forth Industrial Revolution
– Calpers Pers has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Calpers Pers 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 wage structure of Calpers Pers
– 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 Calpers Pers.
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.
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 Calpers Pers business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study California PERS (A), Calpers Pers 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. Calpers Pers 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Calpers Pers with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Calpers Pers 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. Calpers Pers can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
High dependence on third party suppliers
– Calpers Pers 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.
Stagnating economy with rate increase
– Calpers Pers 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.
Weighted SWOT Analysis of California PERS (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 California PERS (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 California PERS (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 California PERS (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 California PERS (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 Calpers Pers needs to make to build a sustainable competitive advantage.