El Paso's Sale to Kinder Morgan SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of El Paso's Sale to Kinder Morgan
On October 16, 2011, El Paso agreed to sell itself to Kinder Morgan for just over $21 billion. Shareholders filed suit, arguing that the process was tainted by conflict and that a higher price could be obtained. Delaware Chancellor Leo Strine agreed with the plaintiffs on the conflicts, and in his opinion expressed serious concerns with how El Paso advisor Goldman Sachs and El Paso CEO Douglas Foshee conducted themselves in the process. The case examines these conflicts, Strine's view of their effects on the outcome, and the reason he was unable to grant the plaintiff's request, instead allowing the merger vote to proceed. The case is a companion case to "Barclays Capital and the Sale of Del Monte Foods," HBS No. 313-036. Examines conflicts of interest among financial advisors and management in the 2011 sale of El Paso to Kinder Morgan.
Swot Analysis of "El Paso's Sale to Kinder Morgan" written by John Coates, Clayton Rose, David Lane includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Paso El facing as an external strategic factors. Some of the topics covered in El Paso's Sale to Kinder Morgan case study are - Strategic Management Strategies, Conflict, Corporate governance, Regulation and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the El Paso's Sale to Kinder Morgan casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google,
talent flight as more people leaving formal jobs, technology disruption, etc
Introduction to SWOT Analysis of El Paso's Sale to Kinder Morgan
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in El Paso's Sale to Kinder Morgan case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Paso El, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Paso El 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 El Paso's Sale to Kinder Morgan can be done for the following purposes –
1. Strategic planning using facts provided in El Paso's Sale to Kinder Morgan case study
2. Improving business portfolio management of Paso El
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Paso El
Strengths El Paso's Sale to Kinder Morgan | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Paso El in El Paso's Sale to Kinder Morgan Harvard Business Review case study are -
Ability to recruit top talent
– Paso El is one of the leading recruiters in the industry. Managers in the El Paso's Sale to Kinder Morgan are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the El Paso's Sale to Kinder Morgan 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.
Innovation driven organization
– Paso El is one of the most innovative firm in sector. Manager in El Paso's Sale to Kinder Morgan Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Paso El 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 Paso El is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in El Paso's Sale to Kinder Morgan Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Paso El 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.
Low bargaining power of suppliers
– Suppliers of Paso El in the sector have low bargaining power. El Paso's Sale to Kinder Morgan has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Paso El to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Paso El 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 El Paso's Sale to Kinder Morgan - 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
– Paso El is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Paso El 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.
Ability to lead change in Leadership & Managing People field
– Paso El 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 Paso El in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Paso El 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 John Coates, Clayton Rose, David Lane 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.
Successful track record of launching new products
– Paso El has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Paso El 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.
Weaknesses El Paso's Sale to Kinder Morgan | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of El Paso's Sale to Kinder Morgan are -
Workers concerns about automation
– As automation is fast increasing in the segment, Paso El 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study El Paso's Sale to Kinder Morgan, it seems that the employees of Paso El 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study El Paso's Sale to Kinder Morgan, is just above the industry average. Paso El 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 dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Paso El supply chain. Even after few cautionary changes mentioned in the HBR case study - El Paso's Sale to Kinder Morgan, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Paso El vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Paso El 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
Paso El 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.
Skills based hiring
– The stress on hiring functional specialists at Paso El 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.
Aligning sales with marketing
– It come across in the case study El Paso's Sale to Kinder Morgan 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 El Paso's Sale to Kinder Morgan can leverage the sales team experience to cultivate customer relationships as Paso El is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study El Paso's Sale to Kinder Morgan, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People 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.
Interest costs
– Compare to the competition, Paso El 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 operating costs
– Compare to the competitors, firm in the HBR case study El Paso's Sale to Kinder Morgan 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 Paso El 's lucrative customers.
Opportunities El Paso's Sale to Kinder Morgan | 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 El Paso's Sale to Kinder Morgan are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Paso El can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Paso El 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. Paso El 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Paso El in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Paso El 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 Leadership & Managing People segment.
Manufacturing automation
– Paso El can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
Creating value in data economy
– The success of analytics program of Paso El has opened avenues for new revenue streams for the organization in the industry. This can help Paso El to build a more holistic ecosystem as suggested in the El Paso's Sale to Kinder Morgan case study. Paso El can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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 Paso El 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.
Leveraging digital technologies
– Paso El 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Paso El 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, El Paso's Sale to Kinder Morgan, 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
– Paso El 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.
Learning at scale
– Online learning technologies has now opened space for Paso El 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Paso El 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 Paso El to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Paso El can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. El Paso's Sale to Kinder Morgan 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.
Threats El Paso's Sale to Kinder Morgan External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study El Paso's Sale to Kinder Morgan are -
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 Paso El.
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. Paso El 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.
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 Paso El in the Leadership & Managing People sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study El Paso's Sale to Kinder Morgan, Paso El may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Increasing wage structure of Paso El
– 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 Paso El.
Consumer confidence and its impact on Paso El 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.
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.
Stagnating economy with rate increase
– Paso El 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.
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.
Environmental challenges
– Paso El 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. Paso El can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Shortening product life cycle
– it is one of the major threat that Paso El is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Paso El 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.
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 Paso El business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of El Paso's Sale to Kinder Morgan 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 El Paso's Sale to Kinder Morgan 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 El Paso's Sale to Kinder Morgan 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 El Paso's Sale to Kinder Morgan 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 El Paso's Sale to Kinder Morgan 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 Paso El needs to make to build a sustainable competitive advantage.
