Case Study Description of MicroStrategy, Incorporated: PIPE
This is a Darden case study.In mid-June 2000, Michael Saylor, the CEO of MicroStrategy, is considering an investment of $125 million of convertible preferred stock in his firm by a group of private investors including Citadel Investment Group LLC. The offer comes at a difficult time for the company, as only three months earlier, its stock had reached a record price of $300 per share. At that point the company had registered a $1 billion seasoned equity offering. Shortly thereafter, the company was forced to restate its earnings after running afoul of the U.S. Securities and Exchange Commission (SEC) for its revenue-recognition practices. Although the restatement did not change the company's cash-flow position, it did result in an SEC investigation and the cancellation of the stock offering. In order to meet Saylor's ambitious plans for MicroStrategy, additional funding must be obtained. With public-market funding sources shut off, students must evaluate what the best course of action is for the firm at this moment. Students are asked to evaluate a new form of venture financing called private investments in public enterprises (PIPE). PIPEs differ from conventional floating-rate convertibles in that the conversion price in most cases can only be adjusted downward. The case considers both the pros and cons of these investments.
Swot Analysis of "MicroStrategy, Incorporated: PIPE" written by Susan Chaplinsky includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Microstrategy Pipe facing as an external strategic factors. Some of the topics covered in MicroStrategy, Incorporated: PIPE case study are - Strategic Management Strategies, Entrepreneurial finance, Financial markets and Finance & Accounting.
Some of the macro environment factors that can be used to understand the MicroStrategy, Incorporated: PIPE casestudy better are - – technology disruption, increasing transportation and logistics costs, there is increasing trade war between United States & China, geopolitical disruptions, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies,
wage bills are increasing, there is backlash against globalization, etc
Introduction to SWOT Analysis of MicroStrategy, Incorporated: PIPE
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in MicroStrategy, Incorporated: PIPE case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Microstrategy Pipe, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Microstrategy Pipe 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 MicroStrategy, Incorporated: PIPE can be done for the following purposes –
1. Strategic planning using facts provided in MicroStrategy, Incorporated: PIPE case study
2. Improving business portfolio management of Microstrategy Pipe
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 Microstrategy Pipe
Strengths MicroStrategy, Incorporated: PIPE | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Microstrategy Pipe in MicroStrategy, Incorporated: PIPE Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Microstrategy Pipe 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.
Low bargaining power of suppliers
– Suppliers of Microstrategy Pipe in the sector have low bargaining power. MicroStrategy, Incorporated: PIPE has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Microstrategy Pipe to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Microstrategy Pipe digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Microstrategy Pipe 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.
Superior customer experience
– The customer experience strategy of Microstrategy Pipe in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management
– Microstrategy Pipe is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Microstrategy Pipe 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 Susan Chaplinsky 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.
Training and development
– Microstrategy Pipe has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in MicroStrategy, Incorporated: PIPE 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
– Microstrategy Pipe is present in almost all the verticals within the industry. This has provided firm in MicroStrategy, Incorporated: PIPE 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 Microstrategy Pipe 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 lead change in Finance & Accounting field
– Microstrategy Pipe 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 Microstrategy Pipe in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Microstrategy Pipe 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 MicroStrategy, Incorporated: PIPE HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Microstrategy Pipe is one of the most innovative firm in sector. Manager in MicroStrategy, Incorporated: PIPE Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses MicroStrategy, Incorporated: PIPE | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of MicroStrategy, Incorporated: PIPE are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Microstrategy Pipe is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study MicroStrategy, Incorporated: PIPE can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study MicroStrategy, Incorporated: PIPE, in the dynamic environment Microstrategy Pipe has struggled to respond to the nimble upstart competition. Microstrategy Pipe has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Microstrategy Pipe is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Microstrategy Pipe needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Microstrategy Pipe to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study MicroStrategy, Incorporated: PIPE 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 MicroStrategy, Incorporated: PIPE can leverage the sales team experience to cultivate customer relationships as Microstrategy Pipe is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Microstrategy Pipe 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. Microstrategy Pipe 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Microstrategy Pipe 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.
No frontier risks strategy
– After analyzing the HBR case study MicroStrategy, Incorporated: PIPE, 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 MicroStrategy, Incorporated: PIPE 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 Microstrategy Pipe 's lucrative customers.
High cash cycle compare to competitors
Microstrategy Pipe 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.
Capital Spending Reduction
– Even during the low interest decade, Microstrategy Pipe 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study MicroStrategy, Incorporated: PIPE, it seems that the employees of Microstrategy Pipe 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.
Opportunities MicroStrategy, Incorporated: PIPE | 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 MicroStrategy, Incorporated: PIPE are -
Creating value in data economy
– The success of analytics program of Microstrategy Pipe has opened avenues for new revenue streams for the organization in the industry. This can help Microstrategy Pipe to build a more holistic ecosystem as suggested in the MicroStrategy, Incorporated: PIPE case study. Microstrategy Pipe can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Microstrategy Pipe 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 Finance & Accounting segment.
Leveraging digital technologies
– Microstrategy Pipe 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.
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 Microstrategy Pipe in the consumer business. Now Microstrategy Pipe can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Microstrategy Pipe 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 MicroStrategy, Incorporated: PIPE - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Microstrategy Pipe to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Microstrategy Pipe can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. MicroStrategy, Incorporated: PIPE 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.
Manufacturing automation
– Microstrategy Pipe 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.
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 Microstrategy Pipe 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 Microstrategy Pipe can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Microstrategy Pipe can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Microstrategy Pipe in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Loyalty marketing
– Microstrategy Pipe 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. Microstrategy Pipe 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. Microstrategy Pipe 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 MicroStrategy, Incorporated: PIPE External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study MicroStrategy, Incorporated: PIPE 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study MicroStrategy, Incorporated: PIPE, Microstrategy Pipe 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 .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Microstrategy Pipe 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.
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.
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. Microstrategy Pipe 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.
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 Microstrategy Pipe in the Finance & Accounting sector and impact the bottomline of the organization.
Consumer confidence and its impact on Microstrategy Pipe 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.
Technology acceleration in Forth Industrial Revolution
– Microstrategy Pipe has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Microstrategy Pipe needs to keep up with the evolution of technology in the Finance & Accounting 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 Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Microstrategy Pipe can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Microstrategy Pipe is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Microstrategy Pipe business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Microstrategy Pipe 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 MicroStrategy, Incorporated: PIPE .
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. Microstrategy Pipe needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of MicroStrategy, Incorporated: PIPE 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 MicroStrategy, Incorporated: PIPE 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 MicroStrategy, Incorporated: PIPE 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 MicroStrategy, Incorporated: PIPE 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 MicroStrategy, Incorporated: PIPE 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 Microstrategy Pipe needs to make to build a sustainable competitive advantage.
