In 2008, the U.S. financial system was in a state of crisis and Lehman Brothers went from a major Wall Street investment bank to an insolvent institution. It was a swift end for a firm that had its beginnings over 150 years prior. What would be the firm's legacy? And how, if at all, had its activities changed the course of American history?
Swot Analysis of "Lehman Brothers" written by Tom Nicholas, David Chen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lehman Brothers facing as an external strategic factors. Some of the topics covered in Lehman Brothers case study are - Strategic Management Strategies, Financial management and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Lehman Brothers casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing energy prices, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing transportation and logistics costs, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lehman Brothers case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lehman Brothers, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lehman Brothers 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 Lehman Brothers can be done for the following purposes –
1. Strategic planning using facts provided in Lehman Brothers case study
2. Improving business portfolio management of Lehman Brothers
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lehman Brothers
Strengths Lehman Brothers | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lehman Brothers in Lehman Brothers Harvard Business Review case study are -
Diverse revenue streams
– Lehman Brothers is present in almost all the verticals within the industry. This has provided firm in Lehman Brothers 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.
High switching costs
– The high switching costs that Lehman Brothers 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.
Superior customer experience
– The customer experience strategy of Lehman Brothers in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Lehman Brothers in the sector have low bargaining power. Lehman Brothers has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lehman Brothers to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Lehman Brothers is one of the leading recruiters in the industry. Managers in the Lehman Brothers are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the Lehman Brothers 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.
Learning organization
- Lehman Brothers 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 Lehman Brothers is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lehman Brothers Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Innovation & Entrepreneurship field
– Lehman Brothers 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 Lehman Brothers in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Lehman Brothers 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 Lehman Brothers HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Lehman Brothers digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lehman Brothers has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Effective Research and Development (R&D)
– Lehman Brothers 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 Lehman Brothers - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Lehman Brothers 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 Tom Nicholas, David Chen 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.
Weaknesses Lehman Brothers | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lehman Brothers are -
Workers concerns about automation
– As automation is fast increasing in the segment, Lehman Brothers 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.
Interest costs
– Compare to the competition, Lehman Brothers has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Skills based hiring
– The stress on hiring functional specialists at Lehman Brothers 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.
Products dominated business model
– Even though Lehman Brothers 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 - Lehman Brothers should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Lehman Brothers HBR case study mentions - Lehman Brothers takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Low market penetration in new markets
– Outside its home market of Lehman Brothers, firm in the HBR case study Lehman Brothers needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Lehman Brothers 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.
Slow decision making process
– As mentioned earlier in the report, Lehman Brothers 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. Lehman Brothers 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.
Aligning sales with marketing
– It come across in the case study Lehman Brothers 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 Lehman Brothers can leverage the sales team experience to cultivate customer relationships as Lehman Brothers is planning to shift buying processes online.
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 Lehman Brothers supply chain. Even after few cautionary changes mentioned in the HBR case study - Lehman Brothers, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lehman Brothers vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Lehman Brothers 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.
Opportunities Lehman Brothers | 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 Lehman Brothers are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lehman Brothers can use these opportunities to build new business models that can help the communities that Lehman Brothers operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Creating value in data economy
– The success of analytics program of Lehman Brothers has opened avenues for new revenue streams for the organization in the industry. This can help Lehman Brothers to build a more holistic ecosystem as suggested in the Lehman Brothers case study. Lehman Brothers can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lehman Brothers 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, Lehman Brothers, 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
– Lehman Brothers can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Lehman Brothers 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.
Leveraging digital technologies
– Lehman Brothers 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.
Better consumer reach
– The expansion of the 5G network will help Lehman Brothers to increase its market reach. Lehman Brothers 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.
Developing new processes and practices
– Lehman Brothers can develop new processes and procedures in Innovation & Entrepreneurship 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.
Building a culture of innovation
– managers at Lehman Brothers 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 Innovation & Entrepreneurship segment.
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. Lehman Brothers can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lehman Brothers is facing challenges because of the dominance of functional experts in the organization. Lehman Brothers 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lehman Brothers can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Lehman Brothers can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lehman Brothers 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. Lehman Brothers 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.
Threats Lehman Brothers External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lehman Brothers are -
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. Lehman Brothers needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lehman Brothers can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Lehman Brothers 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. Lehman Brothers can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
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 Lehman Brothers business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Lehman Brothers
– 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 Lehman Brothers.
Consumer confidence and its impact on Lehman Brothers 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.
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 Lehman Brothers in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lehman Brothers in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
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 Lehman Brothers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Lehman Brothers, Lehman Brothers may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High dependence on third party suppliers
– Lehman Brothers 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.
Weighted SWOT Analysis of Lehman Brothers 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 Lehman Brothers 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 Lehman Brothers 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 Lehman Brothers 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 Lehman Brothers 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 Lehman Brothers needs to make to build a sustainable competitive advantage.