Case Study Description of Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann
In 2011, Ingersoll-Rand (IR) decided to divest its refrigeration equipment subsidiary, Hussmann International. However, the routine auction process for the non-core asset went awry when both Hussmann's performance and external finance markets weakened significantly during the due diligence period. IR's agent, JP Morgan, sought interest from potential buyers and focused on a few leading buy-out firms that submitted bids. After not seeing eye-to-eye with the initial auction winner, Ingersoll-Rand engaged exclusively with a lower bidder, the private equity firm Clayton, Dubilier & Rice. The challenge for CD&R is to develop a deal structure that can meet both parties' needs, offering enough value to Ingersoll-Rand to keep them from walking away, yet taking into account the increased riskiness of Hussmann's recent performance to justify CD&R's valuation. The student takes the perspective of CD&R. Please visit the dedicated case website http://cases.insead.edu/hussmann to access supplementary material.
Authors :: Peter Goodson, Kimberly McGinnis, Claudia Zeisberger
Swot Analysis of "Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann" written by Peter Goodson, Kimberly McGinnis, Claudia Zeisberger includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hussmann Cd facing as an external strategic factors. Some of the topics covered in Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann case study are - Strategic Management Strategies, Business processes, Costs, Crisis management, Entrepreneurial finance, Mergers & acquisitions, Negotiations, Reorganization, Security & privacy and Global Business.
Some of the macro environment factors that can be used to understand the Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann casestudy better are - – talent flight as more people leaving formal jobs, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, increasing household debt because of falling income levels,
challanges to central banks by blockchain based private currencies, technology disruption, etc
Introduction to SWOT Analysis of Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hussmann Cd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hussmann Cd 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 Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann can be done for the following purposes –
1. Strategic planning using facts provided in Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann case study
2. Improving business portfolio management of Hussmann Cd
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 Hussmann Cd
Strengths Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hussmann Cd in Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Hussmann Cd 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.
Operational resilience
– The operational resilience strategy in the Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann 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.
Training and development
– Hussmann Cd has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann 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.
Organizational Resilience of Hussmann Cd
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Hussmann Cd does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Hussmann Cd is present in almost all the verticals within the industry. This has provided firm in Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann 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.
Highly skilled collaborators
– Hussmann Cd 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 Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Hussmann Cd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hussmann Cd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Global Business field
– Hussmann Cd 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 Hussmann Cd in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Hussmann Cd 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 Peter Goodson, Kimberly McGinnis, Claudia Zeisberger 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.
Sustainable margins compare to other players in Global Business industry
– Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann firm has clearly differentiated products in the market place. This has enabled Hussmann Cd to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Hussmann Cd to invest into research and development (R&D) and innovation.
Innovation driven organization
– Hussmann Cd is one of the most innovative firm in sector. Manager in Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Hussmann Cd 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 Hussmann Cd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hussmann Cd is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Need for greater diversity
– Hussmann Cd 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.
Skills based hiring
– The stress on hiring functional specialists at Hussmann Cd 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.
Low market penetration in new markets
– Outside its home market of Hussmann Cd, firm in the HBR case study Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Hussmann Cd is dominated by functional specialists. It is not different from other players in the Global Business segment. Hussmann Cd needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hussmann Cd to focus more on services rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann, in the dynamic environment Hussmann Cd has struggled to respond to the nimble upstart competition. Hussmann Cd has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann, it seems that the employees of Hussmann Cd 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.
No frontier risks strategy
– After analyzing the HBR case study Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann, 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.
Lack of clear differentiation of Hussmann Cd products
– To increase the profitability and margins on the products, Hussmann Cd needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann 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 Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann can leverage the sales team experience to cultivate customer relationships as Hussmann Cd is planning to shift buying processes online.
High cash cycle compare to competitors
Hussmann Cd has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Opportunities Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann | 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 Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann are -
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 Hussmann Cd in the consumer business. Now Hussmann Cd can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Hussmann Cd 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.
Learning at scale
– Online learning technologies has now opened space for Hussmann Cd 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.
Using analytics as competitive advantage
– Hussmann Cd 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 Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hussmann Cd to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Hussmann Cd can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hussmann Cd 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 Hussmann Cd to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Hussmann Cd 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.
Loyalty marketing
– Hussmann Cd 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.
Manufacturing automation
– Hussmann Cd 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.
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 Hussmann Cd 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hussmann Cd 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, Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Hussmann Cd can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hussmann Cd is facing challenges because of the dominance of functional experts in the organization. Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann 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.
Threats Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann are -
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.
Increasing wage structure of Hussmann Cd
– 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 Hussmann Cd.
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 Hussmann Cd.
Shortening product life cycle
– it is one of the major threat that Hussmann Cd is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hussmann Cd 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hussmann Cd 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 Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann .
Regulatory challenges
– Hussmann Cd 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.
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. Hussmann Cd can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Hussmann Cd 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.
Environmental challenges
– Hussmann Cd 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. Hussmann Cd can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Technology acceleration in Forth Industrial Revolution
– Hussmann Cd has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Hussmann Cd 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.
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 Hussmann Cd business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann 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 Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann 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 Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann 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 Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann 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 Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann 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 Hussmann Cd needs to make to build a sustainable competitive advantage.
