Case Study Description of Summit Partners--The FleetCor Investment (A)
Part of a 3-case series in which students get to see the unfolding of due diligence on private equity (buy out) deal. In this, the A case, the deal team has negotiated a letter of intent with FleetCor, a firm that operates a fuel payment network for vehicle fleets. Presents the basic investment thesis and analysis that the team has done to get to this stage. Asks students to not only come to a point of view on whether this looks like a good opportunity at the price and financial structure proposed, but what due diligence needs to be done prior to actually writing the check.
Swot Analysis of "Summit Partners--The FleetCor Investment (A)" written by Michael J. Roberts includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Fleetcor Diligence facing as an external strategic factors. Some of the topics covered in Summit Partners--The FleetCor Investment (A) case study are - Strategic Management Strategies, Financial management, Mergers & acquisitions, Negotiations, Supply chain and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Summit Partners--The FleetCor Investment (A) casestudy better are - – there is increasing trade war between United States & China, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion,
supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Summit Partners--The FleetCor Investment (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Summit Partners--The FleetCor Investment (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fleetcor Diligence, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fleetcor Diligence 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 Summit Partners--The FleetCor Investment (A) can be done for the following purposes –
1. Strategic planning using facts provided in Summit Partners--The FleetCor Investment (A) case study
2. Improving business portfolio management of Fleetcor Diligence
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 Fleetcor Diligence
Strengths Summit Partners--The FleetCor Investment (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fleetcor Diligence in Summit Partners--The FleetCor Investment (A) Harvard Business Review case study are -
Analytics focus
– Fleetcor Diligence 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 Michael J. Roberts 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.
Innovation driven organization
– Fleetcor Diligence is one of the most innovative firm in sector. Manager in Summit Partners--The FleetCor Investment (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Fleetcor Diligence is one of the leading recruiters in the industry. Managers in the Summit Partners--The FleetCor Investment (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Fleetcor Diligence 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Summit Partners--The FleetCor Investment (A) firm has clearly differentiated products in the market place. This has enabled Fleetcor Diligence to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Fleetcor Diligence to invest into research and development (R&D) and innovation.
Organizational Resilience of Fleetcor Diligence
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Fleetcor Diligence does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Fleetcor Diligence 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 Summit Partners--The FleetCor Investment (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Fleetcor Diligence is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Fleetcor Diligence in the sector have low bargaining power. Summit Partners--The FleetCor Investment (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fleetcor Diligence 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 Fleetcor Diligence digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fleetcor Diligence 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.
Training and development
– Fleetcor Diligence has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Summit Partners--The FleetCor Investment (A) 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.
Highly skilled collaborators
– Fleetcor Diligence 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 Summit Partners--The FleetCor Investment (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Summit Partners--The FleetCor Investment (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Summit Partners--The FleetCor Investment (A) are -
Capital Spending Reduction
– Even during the low interest decade, Fleetcor Diligence 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 cash cycle compare to competitors
Fleetcor Diligence has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, firm in the HBR case study Summit Partners--The FleetCor Investment (A) 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 Fleetcor Diligence 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Fleetcor Diligence 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. Fleetcor Diligence 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Summit Partners--The FleetCor Investment (A), in the dynamic environment Fleetcor Diligence has struggled to respond to the nimble upstart competition. Fleetcor Diligence has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Fleetcor Diligence products
– To increase the profitability and margins on the products, Fleetcor Diligence needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Fleetcor Diligence 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Michael J. Roberts suggests that, Fleetcor Diligence 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.
Need for greater diversity
– Fleetcor Diligence 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.
Increasing silos among functional specialists
– The organizational structure of Fleetcor Diligence is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Fleetcor Diligence needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fleetcor Diligence to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Summit Partners--The FleetCor Investment (A), it seems that the employees of Fleetcor Diligence 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 Summit Partners--The FleetCor Investment (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 Summit Partners--The FleetCor Investment (A) are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Fleetcor Diligence is facing challenges because of the dominance of functional experts in the organization. Summit Partners--The FleetCor Investment (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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fleetcor Diligence 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.
Building a culture of innovation
– managers at Fleetcor Diligence 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.
Buying journey improvements
– Fleetcor Diligence can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Summit Partners--The FleetCor Investment (A) 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.
Learning at scale
– Online learning technologies has now opened space for Fleetcor Diligence to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Fleetcor Diligence can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Fleetcor Diligence 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 Summit Partners--The FleetCor Investment (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fleetcor Diligence to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fleetcor Diligence 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 Fleetcor Diligence to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Fleetcor Diligence can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Fleetcor Diligence 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.
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 Fleetcor Diligence in the consumer business. Now Fleetcor Diligence can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Fleetcor Diligence 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.
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. Fleetcor Diligence can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Summit Partners--The FleetCor Investment (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Summit Partners--The FleetCor Investment (A) are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Fleetcor Diligence with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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. Fleetcor Diligence can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Fleetcor Diligence in the Finance & Accounting sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Fleetcor Diligence has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Fleetcor Diligence 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fleetcor Diligence 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.
Regulatory challenges
– Fleetcor Diligence needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fleetcor Diligence 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 Summit Partners--The FleetCor Investment (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. Fleetcor Diligence needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Consumer confidence and its impact on Fleetcor Diligence 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.
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 Fleetcor Diligence.
Increasing wage structure of Fleetcor Diligence
– 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 Fleetcor Diligence.
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 Fleetcor Diligence business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Summit Partners--The FleetCor Investment (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 Summit Partners--The FleetCor Investment (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 Summit Partners--The FleetCor Investment (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 Summit Partners--The FleetCor Investment (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 Summit Partners--The FleetCor Investment (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 Fleetcor Diligence needs to make to build a sustainable competitive advantage.