EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME
This case assesses Actis' optimal exit route for Umeme, a Ugandan electricity distribution company in their investment portfolio. Actis, a private equity firm that invests exclusively in Africa, Asia, and Latin America, had spent seven years substantially transforming Umeme. In their search for a suitable exit, the partners at Actis weighed their ability to leave Umeme well positioned to continue the operational and financial improvements that Actis had made during their investment period, while also ensuring a robust return for Actis' investors. By exploring the various routes available to Actis, this case demonstrates the factors at play in the creation of social and economic gains through private equity investment.
Authors :: Meaghan Conway, Mark Hartmann, William F Meehan
Swot Analysis of "EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME" written by Meaghan Conway, Mark Hartmann, William F Meehan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Actis Umeme facing as an external strategic factors. Some of the topics covered in EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME case study are - Strategic Management Strategies, Emerging markets, IPO and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME casestudy better are - – increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, talent flight as more people leaving formal jobs,
increasing household debt because of falling income levels, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Actis Umeme, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Actis Umeme 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 EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME can be done for the following purposes –
1. Strategic planning using facts provided in EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME case study
2. Improving business portfolio management of Actis Umeme
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 Actis Umeme
Strengths EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Actis Umeme in EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Actis Umeme 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.
Effective Research and Development (R&D)
– Actis Umeme 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 EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME 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.
Analytics focus
– Actis Umeme 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 Meaghan Conway, Mark Hartmann, William F Meehan 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.
Highly skilled collaborators
– Actis Umeme 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 EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Actis Umeme is present in almost all the verticals within the industry. This has provided firm in EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME 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.
Innovation driven organization
– Actis Umeme is one of the most innovative firm in sector. Manager in EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Innovation & Entrepreneurship field
– Actis Umeme 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 Actis Umeme in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Actis Umeme digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Actis Umeme 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.
High switching costs
– The high switching costs that Actis Umeme 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.
High brand equity
– Actis Umeme has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Actis Umeme to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Actis Umeme is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME are -
Interest costs
– Compare to the competition, Actis Umeme 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.
Slow to strategic competitive environment developments
– As EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME HBR case study mentions - Actis Umeme takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Capital Spending Reduction
– Even during the low interest decade, Actis Umeme 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 EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME 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 Actis Umeme has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Meaghan Conway, Mark Hartmann, William F Meehan suggests that, Actis Umeme 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Actis Umeme 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 Actis Umeme is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Actis Umeme needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Actis Umeme to focus more on services rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME, in the dynamic environment Actis Umeme has struggled to respond to the nimble upstart competition. Actis Umeme 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 Actis Umeme products
– To increase the profitability and margins on the products, Actis Umeme 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 Actis Umeme 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Actis Umeme is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME | 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 EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME are -
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 Actis Umeme 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.
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. Actis Umeme 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. Actis Umeme 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.
Using analytics as competitive advantage
– Actis Umeme 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 EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Actis Umeme to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Actis Umeme can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Actis Umeme 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 Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Actis Umeme can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Actis Umeme 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Actis Umeme 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.
Buying journey improvements
– Actis Umeme can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME 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
– Actis Umeme 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.
Better consumer reach
– The expansion of the 5G network will help Actis Umeme to increase its market reach. Actis Umeme 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.
Building a culture of innovation
– managers at Actis Umeme 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Actis Umeme can use these opportunities to build new business models that can help the communities that Actis Umeme operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Threats EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME are -
Environmental challenges
– Actis Umeme 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. Actis Umeme can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Actis Umeme 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 EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME .
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 Actis Umeme in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Actis Umeme with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Actis Umeme business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Actis Umeme 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME, Actis Umeme 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
– Actis Umeme 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Actis Umeme 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.
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. Actis Umeme needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Consumer confidence and its impact on Actis Umeme 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.
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.
Shortening product life cycle
– it is one of the major threat that Actis Umeme is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME 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 EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME 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 EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME 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 EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME 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 EXITS IN EMERGING MARKETS: ACTIS' INVESTMENT IN UMEME 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 Actis Umeme needs to make to build a sustainable competitive advantage.
