Case Study Description of Foreign Direct Investment
Briefly reviews motivations and trends behind foreign direct investment and multinational corporations as well as the policy debate that surrounds them.
Swot Analysis of "Foreign Direct Investment" written by Laura Alfaro, Esteban Clavell includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Direct Foreign facing as an external strategic factors. Some of the topics covered in Foreign Direct Investment case study are - Strategic Management Strategies, Economic development, Financial management, International business, Policy and Global Business.
Some of the macro environment factors that can be used to understand the Foreign Direct Investment casestudy better are - – central banks are concerned over increasing inflation, technology disruption, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google,
there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Foreign Direct Investment
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Foreign Direct Investment case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Direct Foreign, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Direct Foreign 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 Foreign Direct Investment can be done for the following purposes –
1. Strategic planning using facts provided in Foreign Direct Investment case study
2. Improving business portfolio management of Direct Foreign
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 Direct Foreign
Strengths Foreign Direct Investment | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Direct Foreign in Foreign Direct Investment Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Direct Foreign in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Direct Foreign is one of the leading recruiters in the industry. Managers in the Foreign Direct Investment are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Direct Foreign 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 Direct Foreign is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Foreign Direct Investment Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Direct Foreign in the sector have low bargaining power. Foreign Direct Investment has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Direct Foreign to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Direct Foreign has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Foreign Direct Investment 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.
Successful track record of launching new products
– Direct Foreign has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Direct Foreign has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Innovation driven organization
– Direct Foreign is one of the most innovative firm in sector. Manager in Foreign Direct Investment Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Global Business field
– Direct Foreign 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 Direct Foreign in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Direct Foreign
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Direct Foreign does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Direct Foreign is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Direct Foreign 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 Foreign Direct Investment - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Direct Foreign has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Direct Foreign to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Foreign Direct Investment | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Foreign Direct Investment are -
High operating costs
– Compare to the competitors, firm in the HBR case study Foreign Direct Investment 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 Direct Foreign 's lucrative customers.
Products dominated business model
– Even though Direct Foreign has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Foreign Direct Investment should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Direct Foreign 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Laura Alfaro, Esteban Clavell suggests that, Direct Foreign 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.
Need for greater diversity
– Direct Foreign 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Foreign Direct Investment, is just above the industry average. Direct Foreign 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Foreign Direct Investment 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 Direct Foreign has relatively successful track record of launching new products.
High cash cycle compare to competitors
Direct Foreign 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.
Low market penetration in new markets
– Outside its home market of Direct Foreign, firm in the HBR case study Foreign Direct Investment needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Foreign Direct Investment, it seems that the employees of Direct Foreign 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.
Increasing silos among functional specialists
– The organizational structure of Direct Foreign is dominated by functional specialists. It is not different from other players in the Global Business segment. Direct Foreign needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Direct Foreign to focus more on services rather than just following the product oriented approach.
Opportunities Foreign Direct Investment | 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 Foreign Direct Investment are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Direct Foreign 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, Foreign Direct Investment, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Direct Foreign can develop new processes and procedures in Global Business 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.
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 Direct Foreign 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.
Using analytics as competitive advantage
– Direct Foreign 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 Foreign Direct Investment - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Direct Foreign to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Direct Foreign can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Foreign Direct Investment 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Direct Foreign can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Direct Foreign has opened avenues for new revenue streams for the organization in the industry. This can help Direct Foreign to build a more holistic ecosystem as suggested in the Foreign Direct Investment case study. Direct Foreign can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Direct Foreign 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.
Learning at scale
– Online learning technologies has now opened space for Direct Foreign 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.
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. Direct Foreign 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. Direct Foreign 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Direct Foreign 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Direct Foreign can use these opportunities to build new business models that can help the communities that Direct Foreign operates in. Secondly it can use opportunities from government spending in Global Business sector.
Loyalty marketing
– Direct Foreign 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.
Threats Foreign Direct Investment External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Foreign Direct Investment are -
Technology acceleration in Forth Industrial Revolution
– Direct Foreign has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Direct Foreign 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Direct Foreign 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 Foreign Direct Investment .
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.
High dependence on third party suppliers
– Direct Foreign 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.
Environmental challenges
– Direct Foreign 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. Direct Foreign can take advantage of this fund but it will also bring new competitors in the Global Business industry.
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 Direct Foreign.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Direct Foreign with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Direct Foreign 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 Foreign Direct Investment, Direct Foreign 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 wage structure of Direct Foreign
– 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 Direct Foreign.
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. Direct Foreign needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Direct Foreign 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.
Consumer confidence and its impact on Direct Foreign 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.
Weighted SWOT Analysis of Foreign Direct Investment 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 Foreign Direct Investment 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 Foreign Direct Investment 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 Foreign Direct Investment 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 Foreign Direct Investment 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 Direct Foreign needs to make to build a sustainable competitive advantage.
