Dennis Kozlowski took over the helm of Tyco International, Ltd. (Tyco) in 1992. By the end of its 2001 fiscal year, Kozlowski's Tyco had made over 100 announced acquisitions with total revenues in excess of $30 billion (Exhibit 1). Kozlowski's strategy, called "growth on growth," fueled Tyco's aggressive approach toward acquisitions and took the company from just over $3 billion of sales in 1992 to $36 billion in 2001. Investors supported Tyco's strategy as evidenced by the tenfold increase in Tyco's stock price over the same period (Exhibit 2). Analysts also lauded Tyco, issuing reports with titles like, "The Proof Is in the Great Numbers! Buy." But was the proof really there? This case describes Tyco Corporation's mergers and acquisitions activity from its founding through the Kozlowski era. In particular, it focuses on accounting practices used in concert with M&A activity that served to manipulate Tyco's earnings. It goes into detail regarding the CIT acquisition.
Swot Analysis of "TYCO: M&A Machine" written by Maureen McNichols, Nathan T. Blair includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tyco Tyco's facing as an external strategic factors. Some of the topics covered in TYCO: M&A Machine case study are - Strategic Management Strategies, Financial management, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the TYCO: M&A Machine casestudy better are - – increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, increasing commodity prices, central banks are concerned over increasing inflation,
there is backlash against globalization, technology disruption, etc
Introduction to SWOT Analysis of TYCO: M&A Machine
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in TYCO: M&A Machine case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tyco Tyco's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tyco Tyco's 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 TYCO: M&A Machine can be done for the following purposes –
1. Strategic planning using facts provided in TYCO: M&A Machine case study
2. Improving business portfolio management of Tyco Tyco's
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 Tyco Tyco's
Strengths TYCO: M&A Machine | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tyco Tyco's in TYCO: M&A Machine Harvard Business Review case study are -
Organizational Resilience of Tyco Tyco's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Tyco Tyco's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Tyco Tyco's 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 TYCO: M&A Machine - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Finance & Accounting field
– Tyco Tyco's 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 Tyco Tyco's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Finance & Accounting industry
– TYCO: M&A Machine firm has clearly differentiated products in the market place. This has enabled Tyco Tyco's to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Tyco Tyco's to invest into research and development (R&D) and innovation.
Training and development
– Tyco Tyco's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in TYCO: M&A Machine Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Learning organization
- Tyco Tyco's 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 Tyco Tyco's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in TYCO: M&A Machine Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Tyco Tyco's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Tyco Tyco's in the sector have low bargaining power. TYCO: M&A Machine has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Tyco Tyco's to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Tyco Tyco's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tyco Tyco's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Tyco Tyco's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Tyco Tyco's 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.
Analytics focus
– Tyco Tyco's 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 Maureen McNichols, Nathan T. Blair 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.
High switching costs
– The high switching costs that Tyco Tyco's 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.
Weaknesses TYCO: M&A Machine | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of TYCO: M&A Machine are -
Capital Spending Reduction
– Even during the low interest decade, Tyco Tyco's 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.
Aligning sales with marketing
– It come across in the case study TYCO: M&A Machine 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 TYCO: M&A Machine can leverage the sales team experience to cultivate customer relationships as Tyco Tyco's is planning to shift buying processes online.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the TYCO: M&A Machine 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 Tyco Tyco's has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Tyco Tyco's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study TYCO: M&A Machine can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study TYCO: M&A Machine, it seems that the employees of Tyco Tyco's 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.
High cash cycle compare to competitors
Tyco Tyco's 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 Tyco Tyco's supply chain. Even after few cautionary changes mentioned in the HBR case study - TYCO: M&A Machine, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Tyco Tyco's vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Tyco Tyco's has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Tyco Tyco's even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Skills based hiring
– The stress on hiring functional specialists at Tyco Tyco's 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.
No frontier risks strategy
– After analyzing the HBR case study TYCO: M&A Machine, it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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.
High operating costs
– Compare to the competitors, firm in the HBR case study TYCO: M&A Machine 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 Tyco Tyco's 's lucrative customers.
Opportunities TYCO: M&A Machine | 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 TYCO: M&A Machine are -
Creating value in data economy
– The success of analytics program of Tyco Tyco's has opened avenues for new revenue streams for the organization in the industry. This can help Tyco Tyco's to build a more holistic ecosystem as suggested in the TYCO: M&A Machine case study. Tyco Tyco's 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 Finance & Accounting industry, but it has also influenced the consumer preferences. Tyco Tyco's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Tyco Tyco's 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tyco Tyco's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Tyco Tyco's can use these opportunities to build new business models that can help the communities that Tyco Tyco's operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Better consumer reach
– The expansion of the 5G network will help Tyco Tyco's to increase its market reach. Tyco Tyco's 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.
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 Tyco Tyco's in the consumer business. Now Tyco Tyco's can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Tyco Tyco's 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.
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. Tyco Tyco's 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. Tyco Tyco's 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.
Developing new processes and practices
– Tyco Tyco's can develop new processes and procedures in Finance & Accounting 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.
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. Tyco Tyco's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Tyco Tyco's 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 TYCO: M&A Machine - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tyco Tyco's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Tyco Tyco's 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.
Threats TYCO: M&A Machine External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study TYCO: M&A Machine 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.
Environmental challenges
– Tyco Tyco's 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. Tyco Tyco's can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Tyco Tyco's 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.
Regulatory challenges
– Tyco Tyco's 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.
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. Tyco Tyco's needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 Tyco Tyco's in the Finance & Accounting sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Tyco Tyco's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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 Tyco Tyco's business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Tyco Tyco's 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Tyco Tyco's in the Finance & Accounting industry. The Finance & Accounting 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study TYCO: M&A Machine, Tyco Tyco's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tyco Tyco's 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 TYCO: M&A Machine .
Weighted SWOT Analysis of TYCO: M&A Machine 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 TYCO: M&A Machine 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 TYCO: M&A Machine 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 TYCO: M&A Machine 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 TYCO: M&A Machine 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 Tyco Tyco's needs to make to build a sustainable competitive advantage.