Case Study Description of International Paper: Longwood Woodyard Plant
This case and the companion case, International Paper: Alternatives to the Longwood Woodyard Plant are designed to present the student with the challenge of formulating a discounted cash flow analysis for a capital investment decision. Students are asked to estimate the cost of capital and to conduct a sensitivity of their NPV estimates with respect to inflation, the annual savings figures, and the number of years over which the savings are received. The cases are designed for students who are learning or need a refresher on DCF analysis. Because of the basic issues covered, the cases work well with undergraduate, MBA, and executive education audiences. The cases also afford the opportunity to explore a variety of issues related to capital investment including: manager-owner agency problems, risk adjustment for discount rates, design of a capital budgeting system, the challenges of a cyclical capital intensive industry, and capital structure management
Swot Analysis of "International Paper: Longwood Woodyard Plant" written by Kenneth Eades, Brian Kannry includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Longwood Woodyard facing as an external strategic factors. Some of the topics covered in International Paper: Longwood Woodyard Plant case study are - Strategic Management Strategies, Budgeting and Finance & Accounting.
Some of the macro environment factors that can be used to understand the International Paper: Longwood Woodyard Plant casestudy better are - – talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, increasing commodity prices,
competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, etc
Introduction to SWOT Analysis of International Paper: Longwood Woodyard Plant
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in International Paper: Longwood Woodyard Plant case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Longwood Woodyard, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Longwood Woodyard 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 International Paper: Longwood Woodyard Plant can be done for the following purposes –
1. Strategic planning using facts provided in International Paper: Longwood Woodyard Plant case study
2. Improving business portfolio management of Longwood Woodyard
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 Longwood Woodyard
Strengths International Paper: Longwood Woodyard Plant | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Longwood Woodyard in International Paper: Longwood Woodyard Plant Harvard Business Review case study are -
Training and development
– Longwood Woodyard has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in International Paper: Longwood Woodyard Plant 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.
Superior customer experience
– The customer experience strategy of Longwood Woodyard in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Longwood Woodyard
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Longwood Woodyard does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Longwood Woodyard 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.
Effective Research and Development (R&D)
– Longwood Woodyard 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 International Paper: Longwood Woodyard Plant - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Longwood Woodyard 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 Longwood Woodyard is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in International Paper: Longwood Woodyard Plant Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Longwood Woodyard is present in almost all the verticals within the industry. This has provided firm in International Paper: Longwood Woodyard Plant 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.
Analytics focus
– Longwood Woodyard 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 Kenneth Eades, Brian Kannry 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.
Low bargaining power of suppliers
– Suppliers of Longwood Woodyard in the sector have low bargaining power. International Paper: Longwood Woodyard Plant has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Longwood Woodyard to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Longwood Woodyard digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Longwood Woodyard 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.
Cross disciplinary teams
– Horizontal connected teams at the Longwood Woodyard 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.
Ability to lead change in Finance & Accounting field
– Longwood Woodyard 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 Longwood Woodyard in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses International Paper: Longwood Woodyard Plant | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of International Paper: Longwood Woodyard Plant are -
Lack of clear differentiation of Longwood Woodyard products
– To increase the profitability and margins on the products, Longwood Woodyard needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study International Paper: Longwood Woodyard Plant, is just above the industry average. Longwood Woodyard 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
Longwood Woodyard 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 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 Longwood Woodyard supply chain. Even after few cautionary changes mentioned in the HBR case study - International Paper: Longwood Woodyard Plant, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Longwood Woodyard vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As International Paper: Longwood Woodyard Plant HBR case study mentions - Longwood Woodyard 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.
Low market penetration in new markets
– Outside its home market of Longwood Woodyard, firm in the HBR case study International Paper: Longwood Woodyard Plant needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Longwood Woodyard 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.
Increasing silos among functional specialists
– The organizational structure of Longwood Woodyard is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Longwood Woodyard needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Longwood Woodyard to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study International Paper: Longwood Woodyard Plant, it seems that the employees of Longwood Woodyard 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.
Capital Spending Reduction
– Even during the low interest decade, Longwood Woodyard 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, Longwood Woodyard 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.
Opportunities International Paper: Longwood Woodyard Plant | 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 International Paper: Longwood Woodyard Plant are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Longwood Woodyard 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Longwood Woodyard 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.
Loyalty marketing
– Longwood Woodyard 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 Longwood Woodyard in the consumer business. Now Longwood Woodyard can target international markets with far fewer capital restrictions requirements than the existing system.
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 Longwood Woodyard 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.
Manufacturing automation
– Longwood Woodyard 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.
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. Longwood Woodyard 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. Longwood Woodyard 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.
Using analytics as competitive advantage
– Longwood Woodyard 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 International Paper: Longwood Woodyard Plant - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Longwood Woodyard to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Longwood Woodyard to increase its market reach. Longwood Woodyard 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.
Learning at scale
– Online learning technologies has now opened space for Longwood Woodyard 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.
Buying journey improvements
– Longwood Woodyard can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. International Paper: Longwood Woodyard Plant 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Longwood Woodyard 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 Longwood Woodyard to hire the very best people irrespective of their geographical location.
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. Longwood Woodyard can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats International Paper: Longwood Woodyard Plant External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study International Paper: Longwood Woodyard Plant are -
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 Longwood Woodyard 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. Longwood Woodyard 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 Longwood Woodyard with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Longwood Woodyard in the Finance & Accounting sector and impact the bottomline of the organization.
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. Longwood Woodyard can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Longwood Woodyard.
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. Longwood Woodyard needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Longwood Woodyard has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Longwood Woodyard needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Longwood Woodyard 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 International Paper: Longwood Woodyard Plant .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Regulatory challenges
– Longwood Woodyard 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.
Increasing wage structure of Longwood Woodyard
– 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 Longwood Woodyard.
Weighted SWOT Analysis of International Paper: Longwood Woodyard Plant 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 International Paper: Longwood Woodyard Plant 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 International Paper: Longwood Woodyard Plant 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 International Paper: Longwood Woodyard Plant 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 International Paper: Longwood Woodyard Plant 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 Longwood Woodyard needs to make to build a sustainable competitive advantage.