Case Study Description of Apax Partners and Xerium S.A.
In 2002, Apax Partners had to decide whether to accept a less-than-perfect offer for one of its portfolio companies or to refinance it. This company, a maker of paper industry consumables with a global presence, had been purchased in 1999 and performed extremely well since then. Despite being a solid, cash-generative operation, it didn't excite a lot of interest in the market. An early exit at a good multiple would be helpful for Apax's current fund and future fund-raising efforts, whereas refinancing would allow Apax to take some money off the table and share in future upsides. Which is the better choice?
Authors :: G. Felda Hardymon, Josh Lerner, Ann Leamon
Swot Analysis of "Apax Partners and Xerium S.A." written by G. Felda Hardymon, Josh Lerner, Ann Leamon includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Apax Apax's facing as an external strategic factors. Some of the topics covered in Apax Partners and Xerium S.A. case study are - Strategic Management Strategies, Financial management, Mergers & acquisitions and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Apax Partners and Xerium S.A. casestudy better are - – geopolitical disruptions, there is backlash against globalization, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, increasing commodity prices,
challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Apax Partners and Xerium S.A.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Apax Partners and Xerium S.A. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Apax Apax's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Apax Apax'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 Apax Partners and Xerium S.A. can be done for the following purposes –
1. Strategic planning using facts provided in Apax Partners and Xerium S.A. case study
2. Improving business portfolio management of Apax Apax's
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 Apax Apax's
Strengths Apax Partners and Xerium S.A. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Apax Apax's in Apax Partners and Xerium S.A. Harvard Business Review case study are -
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Apax Apax's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Apax Apax's 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.
Operational resilience
– The operational resilience strategy in the Apax Partners and Xerium S.A. 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
– Apax Apax'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.
Ability to lead change in Innovation & Entrepreneurship field
– Apax Apax'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 Apax Apax's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Apax Apax's is present in almost all the verticals within the industry. This has provided firm in Apax Partners and Xerium S.A. 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.
Successful track record of launching new products
– Apax Apax's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Apax Apax'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.
Low bargaining power of suppliers
– Suppliers of Apax Apax's in the sector have low bargaining power. Apax Partners and Xerium S.A. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Apax Apax's to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Apax Apax's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Apax Apax's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Apax Partners and Xerium S.A. firm has clearly differentiated products in the market place. This has enabled Apax Apax's to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Apax Apax's to invest into research and development (R&D) and innovation.
Learning organization
- Apax Apax'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 Apax Apax's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Apax Partners and Xerium S.A. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Apax Apax's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Apax Apax's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Apax Apax'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 Apax Partners and Xerium S.A. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Apax Partners and Xerium S.A. are -
Capital Spending Reduction
– Even during the low interest decade, Apax Apax'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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Apax Partners and Xerium S.A. 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 Apax Apax's has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Apax Partners and Xerium S.A., it seems that the employees of Apax Apax'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.
Lack of clear differentiation of Apax Apax's products
– To increase the profitability and margins on the products, Apax Apax's needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Apax Apax'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.
High cash cycle compare to competitors
Apax Apax'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.
Workers concerns about automation
– As automation is fast increasing in the segment, Apax Apax's 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.
Increasing silos among functional specialists
– The organizational structure of Apax Apax's is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Apax Apax's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Apax Apax's to focus more on services rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Apax Apax's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Apax Partners and Xerium S.A. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– It come across in the case study Apax Partners and Xerium S.A. 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 Apax Partners and Xerium S.A. can leverage the sales team experience to cultivate customer relationships as Apax Apax's is planning to shift buying processes online.
High bargaining power of channel partners
– Because of the regulatory requirements, G. Felda Hardymon, Josh Lerner, Ann Leamon suggests that, Apax Apax's 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 Apax Partners and Xerium S.A. | 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 Apax Partners and Xerium S.A. are -
Using analytics as competitive advantage
– Apax Apax'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 Apax Partners and Xerium S.A. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Apax Apax's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Apax Apax's is facing challenges because of the dominance of functional experts in the organization. Apax Partners and Xerium S.A. 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.
Leveraging digital technologies
– Apax Apax's 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 Apax Apax's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Loyalty marketing
– Apax Apax'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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Apax Apax's can use these opportunities to build new business models that can help the communities that Apax Apax's operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Building a culture of innovation
– managers at Apax Apax's 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.
Better consumer reach
– The expansion of the 5G network will help Apax Apax's to increase its market reach. Apax Apax'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.
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 Apax Apax'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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Apax Apax's 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, Apax Partners and Xerium S.A., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Apax Apax's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Apax Apax's has opened avenues for new revenue streams for the organization in the industry. This can help Apax Apax's to build a more holistic ecosystem as suggested in the Apax Partners and Xerium S.A. case study. Apax Apax's can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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. Apax Apax's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Apax Partners and Xerium S.A. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Apax Partners and Xerium S.A. are -
Environmental challenges
– Apax Apax'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. Apax Apax's can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
High dependence on third party suppliers
– Apax Apax's 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Apax Apax'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 Apax Partners and Xerium S.A. .
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. Apax Apax's needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Increasing wage structure of Apax Apax's
– 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 Apax Apax's.
Shortening product life cycle
– it is one of the major threat that Apax Apax's is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Apax Apax's 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Apax Apax's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Apax Apax's.
Regulatory challenges
– Apax Apax'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 Innovation & Entrepreneurship industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Apax Apax's 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.
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 Apax Apax's in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Consumer confidence and its impact on Apax Apax'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.
Weighted SWOT Analysis of Apax Partners and Xerium S.A. 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 Apax Partners and Xerium S.A. 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 Apax Partners and Xerium S.A. 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 Apax Partners and Xerium S.A. 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 Apax Partners and Xerium S.A. 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 Apax Apax's needs to make to build a sustainable competitive advantage.
