Kent Dauten, a former general partner at the Chicago private equity firm of Madison Dearborn Partners, has engaged in a search to personally sponsor a buyout in which he can play an active management role. He has received a selling memorandum for Record Masters, a records storage company providing management and retrieval services for active medical records to health care institutions. The case presents excerpts from the selling memorandum and asks students to assess the attractiveness of the opportunity, key risks, valuation, and deal structuring.
Authors :: William A. Sahlman, Michael J. Roberts, Laurence E. Katz
Swot Analysis of "Record Masters" written by William A. Sahlman, Michael J. Roberts, Laurence E. Katz includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Masters Memorandum facing as an external strategic factors. Some of the topics covered in Record Masters case study are - Strategic Management Strategies, Financial analysis, Mergers & acquisitions, Negotiations and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Record Masters casestudy better are - – increasing commodity prices, geopolitical disruptions, there is increasing trade war between United States & China, increasing household debt because of falling income levels, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation,
digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Record Masters case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Masters Memorandum, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Masters Memorandum 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 Record Masters can be done for the following purposes –
1. Strategic planning using facts provided in Record Masters case study
2. Improving business portfolio management of Masters Memorandum
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 Masters Memorandum
Strengths Record Masters | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Masters Memorandum in Record Masters Harvard Business Review case study are -
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Masters Memorandum digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Masters Memorandum 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.
Highly skilled collaborators
– Masters Memorandum 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 Record Masters HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Masters Memorandum 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.
Operational resilience
– The operational resilience strategy in the Record Masters 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.
Organizational Resilience of Masters Memorandum
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Masters Memorandum does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Masters Memorandum is present in almost all the verticals within the industry. This has provided firm in Record Masters 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.
Low bargaining power of suppliers
– Suppliers of Masters Memorandum in the sector have low bargaining power. Record Masters has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Masters Memorandum to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Record Masters firm has clearly differentiated products in the market place. This has enabled Masters Memorandum to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Masters Memorandum to invest into research and development (R&D) and innovation.
Ability to lead change in Innovation & Entrepreneurship field
– Masters Memorandum 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 Masters Memorandum in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Masters Memorandum 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 William A. Sahlman, Michael J. Roberts, Laurence E. Katz 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.
Learning organization
- Masters Memorandum 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 Masters Memorandum is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Record Masters Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Masters Memorandum is one of the leading recruiters in the industry. Managers in the Record Masters are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Record Masters | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Record Masters are -
Slow decision making process
– As mentioned earlier in the report, Masters Memorandum 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. Masters Memorandum 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.
Lack of clear differentiation of Masters Memorandum products
– To increase the profitability and margins on the products, Masters Memorandum needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Masters Memorandum 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Record Masters, is just above the industry average. Masters Memorandum needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High bargaining power of channel partners
– Because of the regulatory requirements, William A. Sahlman, Michael J. Roberts, Laurence E. Katz suggests that, Masters Memorandum 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Record Masters 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 Masters Memorandum 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Masters Memorandum 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 Record Masters, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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.
Need for greater diversity
– Masters Memorandum 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.
High cash cycle compare to competitors
Masters Memorandum 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.
Low market penetration in new markets
– Outside its home market of Masters Memorandum, firm in the HBR case study Record Masters needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Record Masters | 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 Record Masters 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, Masters Memorandum can use these opportunities to build new business models that can help the communities that Masters Memorandum operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Better consumer reach
– The expansion of the 5G network will help Masters Memorandum to increase its market reach. Masters Memorandum 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Masters Memorandum 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, Record Masters, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Masters Memorandum to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Masters Memorandum to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Masters Memorandum 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.
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 Masters Memorandum 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.
Building a culture of innovation
– managers at Masters Memorandum 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Masters Memorandum is facing challenges because of the dominance of functional experts in the organization. Record Masters 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.
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. Masters Memorandum 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. Masters Memorandum 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.
Manufacturing automation
– Masters Memorandum can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
Using analytics as competitive advantage
– Masters Memorandum 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 Record Masters - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Masters Memorandum to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Masters Memorandum 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Masters Memorandum can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Record Masters External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Record Masters are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Masters Memorandum 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.
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.
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. Masters Memorandum needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Masters Memorandum 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.
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. Masters Memorandum 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
– Masters Memorandum 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.
Technology acceleration in Forth Industrial Revolution
– Masters Memorandum has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Masters Memorandum needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
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 Masters Memorandum.
Environmental challenges
– Masters Memorandum 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. Masters Memorandum can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Record Masters, Masters Memorandum 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 .
Stagnating economy with rate increase
– Masters Memorandum 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.
Shortening product life cycle
– it is one of the major threat that Masters Memorandum is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Masters Memorandum 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 Record Masters .
Weighted SWOT Analysis of Record Masters 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 Record Masters 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 Record Masters 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 Record Masters 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 Record Masters 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 Masters Memorandum needs to make to build a sustainable competitive advantage.
