Case Study Description of National Railroad Passenger Corporation ("Amtrak"): Acela Financing
This is a Darden case study.In the late 1990s, the National Railroad Passenger Corporation (Amtrak) faced a rude awakening as Congress stipulated that it eliminate its reliance on federal subsidies by 2002. In response, Amtrak drew up a plan for self-sufficiency, the centerpiece of which was a new high-speed passenger service that, it was hoped, would boost revenue enough to make Amtrak self-sufficient by 2002. To run this new service, Amtrak needed to purchase $750 million worth of new locomotives and train sets in 1999. Three alternatives were available for funding the purchase: debt financing, lease financing, or reliance on federal sources. The case opens with Amtrak's CFO instructing her staff in April 1999 to review a leveraged-lease proposal that has just been submitted by BNY Capital Funding LLC. The objectives of the case are to introduce students to financial leases as a financing alternative, explore the lease-versus-buy decision and the conditions under which financial lease arrangements make sense, and exercise skills in the valuation of financial leases.
Swot Analysis of "National Railroad Passenger Corporation ("Amtrak"): Acela Financing" written by Robert F. Bruner, Jessica Chan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Amtrak Lease facing as an external strategic factors. Some of the topics covered in National Railroad Passenger Corporation ("Amtrak"): Acela Financing case study are - Strategic Management Strategies, Financial analysis, Strategic planning and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the National Railroad Passenger Corporation ("Amtrak"): Acela Financing casestudy better are - – challanges to central banks by blockchain based private currencies, geopolitical disruptions, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, wage bills are increasing,
central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of National Railroad Passenger Corporation ("Amtrak"): Acela Financing
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in National Railroad Passenger Corporation ("Amtrak"): Acela Financing case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Amtrak Lease, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Amtrak Lease 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 National Railroad Passenger Corporation ("Amtrak"): Acela Financing can be done for the following purposes –
1. Strategic planning using facts provided in National Railroad Passenger Corporation ("Amtrak"): Acela Financing case study
2. Improving business portfolio management of Amtrak Lease
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 Amtrak Lease
Strengths National Railroad Passenger Corporation ("Amtrak"): Acela Financing | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Amtrak Lease in National Railroad Passenger Corporation ("Amtrak"): Acela Financing Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Amtrak Lease 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.
Low bargaining power of suppliers
– Suppliers of Amtrak Lease in the sector have low bargaining power. National Railroad Passenger Corporation ("Amtrak"): Acela Financing has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Amtrak Lease to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Amtrak Lease 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 Amtrak Lease is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in National Railroad Passenger Corporation ("Amtrak"): Acela Financing Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Amtrak Lease 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.
Ability to lead change in Leadership & Managing People field
– Amtrak Lease 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 Amtrak Lease in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Amtrak Lease is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Amtrak Lease 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 National Railroad Passenger Corporation ("Amtrak"): Acela Financing HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Amtrak Lease is one of the leading recruiters in the industry. Managers in the National Railroad Passenger Corporation ("Amtrak"): Acela Financing are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Amtrak Lease has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Amtrak Lease to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Amtrak Lease in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Amtrak Lease 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 National Railroad Passenger Corporation ("Amtrak"): Acela Financing - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Amtrak Lease digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Amtrak Lease 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.
Weaknesses National Railroad Passenger Corporation ("Amtrak"): Acela Financing | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of National Railroad Passenger Corporation ("Amtrak"): Acela Financing are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study National Railroad Passenger Corporation ("Amtrak"): Acela Financing, in the dynamic environment Amtrak Lease has struggled to respond to the nimble upstart competition. Amtrak Lease 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 Amtrak Lease products
– To increase the profitability and margins on the products, Amtrak Lease needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Amtrak Lease supply chain. Even after few cautionary changes mentioned in the HBR case study - National Railroad Passenger Corporation ("Amtrak"): Acela Financing, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Amtrak Lease vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study National Railroad Passenger Corporation ("Amtrak"): Acela Financing, it seems that the employees of Amtrak Lease 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.
Skills based hiring
– The stress on hiring functional specialists at Amtrak Lease 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.
High operating costs
– Compare to the competitors, firm in the HBR case study National Railroad Passenger Corporation ("Amtrak"): Acela Financing 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 Amtrak Lease 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Amtrak Lease 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Robert F. Bruner, Jessica Chan suggests that, Amtrak Lease 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study National Railroad Passenger Corporation ("Amtrak"): Acela Financing, is just above the industry average. Amtrak Lease 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.
Low market penetration in new markets
– Outside its home market of Amtrak Lease, firm in the HBR case study National Railroad Passenger Corporation ("Amtrak"): Acela Financing needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the National Railroad Passenger Corporation ("Amtrak"): Acela Financing 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 Amtrak Lease has relatively successful track record of launching new products.
Opportunities National Railroad Passenger Corporation ("Amtrak"): Acela Financing | 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 National Railroad Passenger Corporation ("Amtrak"): Acela Financing are -
Buying journey improvements
– Amtrak Lease can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. National Railroad Passenger Corporation ("Amtrak"): Acela Financing 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.
Creating value in data economy
– The success of analytics program of Amtrak Lease has opened avenues for new revenue streams for the organization in the industry. This can help Amtrak Lease to build a more holistic ecosystem as suggested in the National Railroad Passenger Corporation ("Amtrak"): Acela Financing case study. Amtrak Lease can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Amtrak Lease 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.
Developing new processes and practices
– Amtrak Lease can develop new processes and procedures in Leadership & Managing People 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.
Using analytics as competitive advantage
– Amtrak Lease 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 National Railroad Passenger Corporation ("Amtrak"): Acela Financing - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Amtrak Lease to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Amtrak Lease 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 Amtrak Lease 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.
Better consumer reach
– The expansion of the 5G network will help Amtrak Lease to increase its market reach. Amtrak Lease 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 Amtrak Lease 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.
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 Amtrak Lease in the consumer business. Now Amtrak Lease can target international markets with far fewer capital restrictions requirements than the existing system.
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. Amtrak Lease 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. Amtrak Lease 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 Amtrak Lease 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Amtrak Lease can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats National Railroad Passenger Corporation ("Amtrak"): Acela Financing External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study National Railroad Passenger Corporation ("Amtrak"): Acela Financing are -
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 Amtrak Lease in the Leadership & Managing People sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Amtrak Lease is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study National Railroad Passenger Corporation ("Amtrak"): Acela Financing, Amtrak Lease 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 .
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. Amtrak Lease 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.
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. Amtrak Lease needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
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 Amtrak Lease business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Amtrak Lease 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.
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 Amtrak Lease.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Amtrak Lease 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 National Railroad Passenger Corporation ("Amtrak"): Acela Financing .
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.
Technology acceleration in Forth Industrial Revolution
– Amtrak Lease has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Amtrak Lease needs to keep up with the evolution of technology in the Leadership & Managing People 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.
Regulatory challenges
– Amtrak Lease 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 Leadership & Managing People industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Amtrak Lease in the Leadership & Managing People industry. The Leadership & Managing People 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.
Weighted SWOT Analysis of National Railroad Passenger Corporation ("Amtrak"): Acela Financing 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 National Railroad Passenger Corporation ("Amtrak"): Acela Financing 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 National Railroad Passenger Corporation ("Amtrak"): Acela Financing 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 National Railroad Passenger Corporation ("Amtrak"): Acela Financing 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 National Railroad Passenger Corporation ("Amtrak"): Acela Financing 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 Amtrak Lease needs to make to build a sustainable competitive advantage.
