Case Study Description of Negotiating Equity Splits at UpDown
Michael Reich is having severe doubts about how he split the equity with his co-founders two months ago, when they completed a one-page "November Agreement." Since then, Michael has found an angel investor and has worked non-stop on the business, while one co-founder was off enjoying the winter break with his family and the other worked on lucrative consulting contracts for other companies. Michael has just sent his co-founders a proposal that would re-allocate the equity within their founding team, and all three founders are getting ready to reopen a negotiation they thought had been finalized.
Swot Analysis of "Negotiating Equity Splits at UpDown" written by Noam Wasserman, Deepak Malhotra includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Michael Founders facing as an external strategic factors. Some of the topics covered in Negotiating Equity Splits at UpDown case study are - Strategic Management Strategies, Compensation, Entrepreneurial finance, IT, Negotiations and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Negotiating Equity Splits at UpDown casestudy better are - – geopolitical disruptions, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google,
cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Negotiating Equity Splits at UpDown
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Negotiating Equity Splits at UpDown case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Michael Founders, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Michael Founders 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 Negotiating Equity Splits at UpDown can be done for the following purposes –
1. Strategic planning using facts provided in Negotiating Equity Splits at UpDown case study
2. Improving business portfolio management of Michael Founders
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 Michael Founders
Strengths Negotiating Equity Splits at UpDown | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Michael Founders in Negotiating Equity Splits at UpDown Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Michael Founders in the sector have low bargaining power. Negotiating Equity Splits at UpDown has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Michael Founders to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Innovation & Entrepreneurship field
– Michael Founders 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 Michael Founders in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Michael Founders has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Michael Founders 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.
Innovation driven organization
– Michael Founders is one of the most innovative firm in sector. Manager in Negotiating Equity Splits at UpDown Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Michael Founders in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Michael Founders 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 Negotiating Equity Splits at UpDown HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the Negotiating Equity Splits at UpDown 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.
Ability to recruit top talent
– Michael Founders is one of the leading recruiters in the industry. Managers in the Negotiating Equity Splits at UpDown are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Michael Founders is present in almost all the verticals within the industry. This has provided firm in Negotiating Equity Splits at UpDown 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.
Cross disciplinary teams
– Horizontal connected teams at the Michael Founders 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.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Michael Founders digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Michael Founders 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.
Strong track record of project management
– Michael Founders 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 Negotiating Equity Splits at UpDown | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Negotiating Equity Splits at UpDown are -
High operating costs
– Compare to the competitors, firm in the HBR case study Negotiating Equity Splits at UpDown 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 Michael Founders 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Negotiating Equity Splits at UpDown, is just above the industry average. Michael Founders 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.
Slow decision making process
– As mentioned earlier in the report, Michael Founders 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. Michael Founders 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.
Aligning sales with marketing
– It come across in the case study Negotiating Equity Splits at UpDown 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 Negotiating Equity Splits at UpDown can leverage the sales team experience to cultivate customer relationships as Michael Founders is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Negotiating Equity Splits at UpDown, it seems that the employees of Michael Founders 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.
Low market penetration in new markets
– Outside its home market of Michael Founders, firm in the HBR case study Negotiating Equity Splits at UpDown needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners
– Because of the regulatory requirements, Noam Wasserman, Deepak Malhotra suggests that, Michael Founders 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 cash cycle compare to competitors
Michael Founders has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, Michael Founders 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.
No frontier risks strategy
– After analyzing the HBR case study Negotiating Equity Splits at UpDown, 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.
Products dominated business model
– Even though Michael Founders has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Negotiating Equity Splits at UpDown should strive to include more intangible value offerings along with its core products and services.
Opportunities Negotiating Equity Splits at UpDown | 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 Negotiating Equity Splits at UpDown are -
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. Michael Founders can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Michael Founders 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 Negotiating Equity Splits at UpDown - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Michael Founders to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Michael Founders 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Michael Founders 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, Negotiating Equity Splits at UpDown, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Michael Founders 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Michael Founders can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Michael Founders has opened avenues for new revenue streams for the organization in the industry. This can help Michael Founders to build a more holistic ecosystem as suggested in the Negotiating Equity Splits at UpDown case study. Michael Founders can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Michael Founders 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.
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. Michael Founders 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. Michael Founders 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.
Learning at scale
– Online learning technologies has now opened space for Michael Founders 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Michael Founders can use these opportunities to build new business models that can help the communities that Michael Founders operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Developing new processes and practices
– Michael Founders 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.
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 Michael Founders in the consumer business. Now Michael Founders can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Negotiating Equity Splits at UpDown External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Negotiating Equity Splits at UpDown are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Negotiating Equity Splits at UpDown, Michael Founders 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 .
Shortening product life cycle
– it is one of the major threat that Michael Founders is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Michael Founders 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.
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 Michael Founders business can come under increasing regulations regarding data privacy, data security, etc.
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. Michael Founders 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 Michael Founders 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.
Environmental challenges
– Michael Founders 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. Michael Founders can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Stagnating economy with rate increase
– Michael Founders 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.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Michael Founders can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Michael Founders.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Michael Founders 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 Negotiating Equity Splits at UpDown .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Michael Founders 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 dependence on third party suppliers
– Michael Founders 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.
Weighted SWOT Analysis of Negotiating Equity Splits at UpDown 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 Negotiating Equity Splits at UpDown 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 Negotiating Equity Splits at UpDown 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 Negotiating Equity Splits at UpDown 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 Negotiating Equity Splits at UpDown 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 Michael Founders needs to make to build a sustainable competitive advantage.
