In the aftermath of World War II, the countries of the industrialized world engaged in an unprecedented round of institution-building, through which historical barriers to international trade, especially tariffs, came tumbling down. The GATT has reshaped the environment of world trade to such an extent that international trade flows have exploded. Even as global trade has become more integrated, however, a second round of institutions, regional rather than global, has emerged. The most recent and largest of the major regional institutions, NAFTA, was signed on December 17, 1992, and took effect in early 1994. This case examines the effect of this radically new institutional context on three different firms, each representing a different industry and country.
Swot Analysis of "Regarding NAFTA" written by Elizabeth B. Stein, Debora L. Spar includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Nafta Trade facing as an external strategic factors. Some of the topics covered in Regarding NAFTA case study are - Strategic Management Strategies, International business and Global Business.
Some of the macro environment factors that can be used to understand the Regarding NAFTA casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, increasing commodity prices,
customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Regarding NAFTA case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nafta Trade, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nafta Trade 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 Regarding NAFTA can be done for the following purposes –
1. Strategic planning using facts provided in Regarding NAFTA case study
2. Improving business portfolio management of Nafta Trade
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 Nafta Trade
Strengths Regarding NAFTA | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nafta Trade in Regarding NAFTA Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Nafta Trade in the sector have low bargaining power. Regarding NAFTA has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nafta Trade to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Nafta Trade 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 Regarding NAFTA HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Nafta Trade 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 Elizabeth B. Stein, Debora L. Spar 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.
Cross disciplinary teams
– Horizontal connected teams at the Nafta Trade 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
– Nafta Trade has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nafta Trade to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Nafta Trade is one of the leading recruiters in the industry. Managers in the Regarding NAFTA are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Global Business field
– Nafta Trade 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 Nafta Trade in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Nafta Trade
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Nafta Trade does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Nafta Trade is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Nafta Trade has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Regarding NAFTA 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.
Learning organization
- Nafta Trade 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 Nafta Trade is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Regarding NAFTA Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Nafta Trade is present in almost all the verticals within the industry. This has provided firm in Regarding NAFTA 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.
Weaknesses Regarding NAFTA | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Regarding NAFTA are -
Capital Spending Reduction
– Even during the low interest decade, Nafta Trade 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Nafta Trade 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.
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 Nafta Trade supply chain. Even after few cautionary changes mentioned in the HBR case study - Regarding NAFTA, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nafta Trade vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Regarding NAFTA 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 Regarding NAFTA can leverage the sales team experience to cultivate customer relationships as Nafta Trade is planning to shift buying processes online.
High cash cycle compare to competitors
Nafta Trade has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, firm in the HBR case study Regarding NAFTA 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 Nafta Trade 's lucrative customers.
Interest costs
– Compare to the competition, Nafta Trade 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.
No frontier risks strategy
– After analyzing the HBR case study Regarding NAFTA, it seems that company is thinking about the frontier risks that can impact Global Business 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Regarding NAFTA, in the dynamic environment Nafta Trade has struggled to respond to the nimble upstart competition. Nafta Trade has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Nafta Trade 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. Nafta Trade 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.
Skills based hiring
– The stress on hiring functional specialists at Nafta Trade 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.
Opportunities Regarding NAFTA | 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 Regarding NAFTA are -
Buying journey improvements
– Nafta Trade can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Regarding NAFTA 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.
Better consumer reach
– The expansion of the 5G network will help Nafta Trade to increase its market reach. Nafta Trade 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nafta Trade can use these opportunities to build new business models that can help the communities that Nafta Trade operates in. Secondly it can use opportunities from government spending in Global Business sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Nafta Trade can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Nafta Trade 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.
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. Nafta Trade can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Nafta Trade 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nafta Trade 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.
Manufacturing automation
– Nafta Trade can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
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 Nafta Trade in the consumer business. Now Nafta Trade 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 Nafta Trade has opened avenues for new revenue streams for the organization in the industry. This can help Nafta Trade to build a more holistic ecosystem as suggested in the Regarding NAFTA case study. Nafta Trade 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 Nafta Trade 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.
Building a culture of innovation
– managers at Nafta Trade 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.
Threats Regarding NAFTA External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Regarding NAFTA are -
Technology acceleration in Forth Industrial Revolution
– Nafta Trade has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Nafta Trade needs to keep up with the evolution of technology in the Global Business 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.
Consumer confidence and its impact on Nafta Trade 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Nafta Trade with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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, Nafta Trade 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 Regarding NAFTA .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Regarding NAFTA, Nafta Trade 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 .
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 Nafta Trade business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Nafta Trade 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.
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 Nafta Trade.
Increasing wage structure of Nafta Trade
– 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 Nafta Trade.
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. Nafta Trade can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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 Nafta Trade in the Global Business sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Regarding NAFTA 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 Regarding NAFTA 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 Regarding NAFTA 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 Regarding NAFTA 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 Regarding NAFTA 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 Nafta Trade needs to make to build a sustainable competitive advantage.
