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, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, wage bills are increasing, increasing commodity prices, central banks are concerned over increasing inflation,
competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
Strong track record of project management
– Hussmann Cd is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
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.
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.
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.
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.
Effective Research and Development (R&D)
– Hussmann Cd 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 Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 switching costs
– The high switching costs that Hussmann Cd 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.
Ability to recruit top talent
– Hussmann Cd is one of the leading recruiters in the industry. Managers in the Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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 -
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Hussmann Cd 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.
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.
Slow to strategic competitive environment developments
– As Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann HBR case study mentions - Hussmann Cd 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.
Products dominated business model
– Even though Hussmann Cd 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 - Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann should strive to include more intangible value offerings along with its core products and services.
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.
Capital Spending Reduction
– Even during the low interest decade, Hussmann Cd 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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann, is just above the industry average. Hussmann Cd 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 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 Hussmann Cd supply chain. Even after few cautionary changes mentioned in the HBR case study - Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hussmann Cd vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Peter Goodson, Kimberly McGinnis, Claudia Zeisberger suggests that, Hussmann Cd 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.
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 -
Building a culture of innovation
– managers at Hussmann Cd 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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hussmann Cd can use these opportunities to build new business models that can help the communities that Hussmann Cd operates in. Secondly it can use opportunities from government spending in Global Business sector.
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.
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.
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.
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.
Creating value in data economy
– The success of analytics program of Hussmann Cd has opened avenues for new revenue streams for the organization in the industry. This can help Hussmann Cd to build a more holistic ecosystem as suggested in the Differentiation Beyond Price: CD&R's Strategy in Acquiring Hussmann case study. Hussmann Cd can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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. Hussmann Cd can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hussmann Cd can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hussmann Cd 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.
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.
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 -
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, 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 .
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.
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.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Hussmann Cd 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 Hussmann Cd in the Global Business sector and impact the bottomline of the organization.
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.
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. Hussmann Cd 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
– Hussmann Cd 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.
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.
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.