Fernando del Sol, president of F. S. Inversiones in Chile, had just bought himself a headache as a New Year's present. On December 31, 2001, he purchased a Chilean electricity generation and transmission company called Edelnor that was in danger of becoming insolvent within months. del Sol had six months to restructure the company before it would become completely insolvent, and his headache was compounded by the fact that the process for company reorganization in Chile typically dragged on in the courts, often for two or more years. Any debtor, no matter how small, could hold up the process at any point by issuing written complaints to the court. del Sol needed to figure out whether the company was worth saving, whether it had a business strategy that could succeed if the company's debt was restructured, and whether he could find some means of saving the company in time.
Swot Analysis of "Edelnor (A)" written by Jordan Siegel includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sol Edelnor facing as an external strategic factors. Some of the topics covered in Edelnor (A) case study are - Strategic Management Strategies, Financial management, Financial markets, Globalization, Reorganization, Strategy and Global Business.
Some of the macro environment factors that can be used to understand the Edelnor (A) casestudy better are - – there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, geopolitical disruptions, challanges to central banks by blockchain based private currencies,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Edelnor (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sol Edelnor, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sol Edelnor 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 Edelnor (A) can be done for the following purposes –
1. Strategic planning using facts provided in Edelnor (A) case study
2. Improving business portfolio management of Sol Edelnor
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sol Edelnor
Strengths Edelnor (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sol Edelnor in Edelnor (A) Harvard Business Review case study are -
Innovation driven organization
– Sol Edelnor is one of the most innovative firm in sector. Manager in Edelnor (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Sol Edelnor 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 Sol Edelnor is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Edelnor (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Sol Edelnor is one of the leading recruiters in the industry. Managers in the Edelnor (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.
High switching costs
– The high switching costs that Sol Edelnor 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.
Sustainable margins compare to other players in Global Business industry
– Edelnor (A) firm has clearly differentiated products in the market place. This has enabled Sol Edelnor to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Sol Edelnor to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Sol Edelnor 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.
High brand equity
– Sol Edelnor has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sol Edelnor to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Sol Edelnor 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 Jordan Siegel 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 Edelnor (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.
Strong track record of project management
– Sol Edelnor is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Sol Edelnor 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)
– Sol Edelnor 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 Edelnor (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.
Weaknesses Edelnor (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Edelnor (A) are -
Interest costs
– Compare to the competition, Sol Edelnor has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Skills based hiring
– The stress on hiring functional specialists at Sol Edelnor 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Edelnor (A), is just above the industry average. Sol Edelnor 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sol Edelnor is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Edelnor (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.
Lack of clear differentiation of Sol Edelnor products
– To increase the profitability and margins on the products, Sol Edelnor needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Sol Edelnor supply chain. Even after few cautionary changes mentioned in the HBR case study - Edelnor (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sol Edelnor vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study Edelnor (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 Sol Edelnor 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Sol Edelnor, firm in the HBR case study Edelnor (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Sol Edelnor 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.
Increasing silos among functional specialists
– The organizational structure of Sol Edelnor is dominated by functional specialists. It is not different from other players in the Global Business segment. Sol Edelnor needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sol Edelnor to focus more on services rather than just following the product oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Edelnor (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 Sol Edelnor has relatively successful track record of launching new products.
Opportunities Edelnor (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 Edelnor (A) are -
Building a culture of innovation
– managers at Sol Edelnor 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 Global Business segment.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sol Edelnor in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sol Edelnor 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. Sol Edelnor 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Sol Edelnor can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Sol Edelnor 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.
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 Sol Edelnor in the consumer business. Now Sol Edelnor can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Sol Edelnor has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Edelnor (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sol Edelnor to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sol Edelnor 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sol Edelnor can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sol Edelnor is facing challenges because of the dominance of functional experts in the organization. Edelnor (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.
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 Sol Edelnor 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.
Buying journey improvements
– Sol Edelnor can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Edelnor (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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sol Edelnor 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, Edelnor (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.
Threats Edelnor (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Edelnor (A) are -
Regulatory challenges
– Sol Edelnor 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 Global Business industry regulations.
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 Sol Edelnor business can come under increasing regulations regarding data privacy, data security, etc.
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. Sol Edelnor 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.
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 Sol Edelnor in the Global Business industry. The Global Business 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.
Stagnating economy with rate increase
– Sol Edelnor 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sol Edelnor with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sol Edelnor can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Edelnor (A), Sol Edelnor may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sol Edelnor 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 Edelnor (A) .
Increasing wage structure of Sol Edelnor
– 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 Sol Edelnor.
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 Sol Edelnor in the Global Business sector and impact the bottomline of the organization.
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.
Weighted SWOT Analysis of Edelnor (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 Edelnor (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 Edelnor (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 Edelnor (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 Edelnor (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 Sol Edelnor needs to make to build a sustainable competitive advantage.