Senior managers in Parmalat SpA's U.S. subsidiary (Parmalat USA)-many of whom were from the Italian parent company or other Parmalat entities-uprooted, cleaned out their offices, and left as the magnitude of the parent company's fraud became known in late 2003. Parmalat USA had filed for bankruptcy in October 2003. With urgency and desperation, Enrico Bondi, the Extraordinary Commissioner of Parmalat SpA, had contacted the Milan office of AlixPartners, a global restructuring, consulting, and financial advisory firm. Bondi requested AlixPartners' assistance in determining the cash situation at the U.S. subsidiary and helping lead the struggling division, which was now void of senior management. Jim Mesterharm, a managing director in AlixPartners' Chicago office, was asked to lead this initiative as the chief restructuring officer. Parmalat SpA, often referred to as the Enron of Italy, was a trophy turnaround assignment at the outset for AlixPartners: for them, the worse the economic problem, the better the assignment. Ninety days was enough time for Mesterharm and his team to determine what could be cut off and what discussions were needed with the U.S. vendors, customers, and employees. Mesterharm's team changed the accounting methods from GAAP basis to cash basis. They constructed a 13-week cash flow model. Aggressive efforts were made to delay payables and to accelerate receivables to create cash. The battle to keep Parmalat USA afloat had begun.
Authors :: James Shein, Nathan Haines, Matthew Horstmann, Tobias Kaulfuss
Swot Analysis of "Parmalat USA Turnaround" written by James Shein, Nathan Haines, Matthew Horstmann, Tobias Kaulfuss includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Parmalat Alixpartners facing as an external strategic factors. Some of the topics covered in Parmalat USA Turnaround case study are - Strategic Management Strategies, Entrepreneurship, Ethics, Financial management, Manufacturing, Strategy and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Parmalat USA Turnaround casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, wage bills are increasing, there is backlash against globalization, technology disruption, increasing energy prices, increasing household debt because of falling income levels,
talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Parmalat USA Turnaround
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Parmalat USA Turnaround case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Parmalat Alixpartners, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Parmalat Alixpartners 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 Parmalat USA Turnaround can be done for the following purposes –
1. Strategic planning using facts provided in Parmalat USA Turnaround case study
2. Improving business portfolio management of Parmalat Alixpartners
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Parmalat Alixpartners
Strengths Parmalat USA Turnaround | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Parmalat Alixpartners in Parmalat USA Turnaround Harvard Business Review case study are -
Sustainable margins compare to other players in Finance & Accounting industry
– Parmalat USA Turnaround firm has clearly differentiated products in the market place. This has enabled Parmalat Alixpartners to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Parmalat Alixpartners to invest into research and development (R&D) and innovation.
Learning organization
- Parmalat Alixpartners 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 Parmalat Alixpartners is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Parmalat USA Turnaround Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Parmalat Alixpartners in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management
– Parmalat Alixpartners 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
– Parmalat Alixpartners 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 Parmalat USA Turnaround HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Parmalat Alixpartners has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Parmalat Alixpartners to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Parmalat Alixpartners is one of the leading recruiters in the industry. Managers in the Parmalat USA Turnaround are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Parmalat Alixpartners has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Parmalat USA Turnaround Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Organizational Resilience of Parmalat Alixpartners
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Parmalat Alixpartners does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Parmalat Alixpartners has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Parmalat Alixpartners 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.
Operational resilience
– The operational resilience strategy in the Parmalat USA Turnaround 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.
Low bargaining power of suppliers
– Suppliers of Parmalat Alixpartners in the sector have low bargaining power. Parmalat USA Turnaround has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Parmalat Alixpartners to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Parmalat USA Turnaround | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Parmalat USA Turnaround are -
High bargaining power of channel partners
– Because of the regulatory requirements, James Shein, Nathan Haines, Matthew Horstmann, Tobias Kaulfuss suggests that, Parmalat Alixpartners 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.
Slow to strategic competitive environment developments
– As Parmalat USA Turnaround HBR case study mentions - Parmalat Alixpartners 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.
Increasing silos among functional specialists
– The organizational structure of Parmalat Alixpartners is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Parmalat Alixpartners needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Parmalat Alixpartners to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Parmalat Alixpartners 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Parmalat Alixpartners 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Parmalat USA Turnaround, in the dynamic environment Parmalat Alixpartners has struggled to respond to the nimble upstart competition. Parmalat Alixpartners has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Parmalat Alixpartners, firm in the HBR case study Parmalat USA Turnaround needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Parmalat Alixpartners 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 Parmalat USA Turnaround 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 Parmalat Alixpartners has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study Parmalat USA Turnaround 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 Parmalat USA Turnaround can leverage the sales team experience to cultivate customer relationships as Parmalat Alixpartners is planning to shift buying processes online.
Lack of clear differentiation of Parmalat Alixpartners products
– To increase the profitability and margins on the products, Parmalat Alixpartners needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Parmalat USA Turnaround | 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 Parmalat USA Turnaround are -
Using analytics as competitive advantage
– Parmalat Alixpartners 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 Parmalat USA Turnaround - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Parmalat Alixpartners to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Parmalat Alixpartners can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
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 Parmalat Alixpartners in the consumer business. Now Parmalat Alixpartners can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Parmalat Alixpartners can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Parmalat Alixpartners can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Parmalat Alixpartners 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.
Loyalty marketing
– Parmalat Alixpartners 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.
Developing new processes and practices
– Parmalat Alixpartners can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Learning at scale
– Online learning technologies has now opened space for Parmalat Alixpartners 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Parmalat Alixpartners 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. Parmalat Alixpartners 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Parmalat Alixpartners can use these opportunities to build new business models that can help the communities that Parmalat Alixpartners operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Parmalat Alixpartners is facing challenges because of the dominance of functional experts in the organization. Parmalat USA Turnaround case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Better consumer reach
– The expansion of the 5G network will help Parmalat Alixpartners to increase its market reach. Parmalat Alixpartners 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.
Threats Parmalat USA Turnaround External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Parmalat USA Turnaround 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 Parmalat Alixpartners.
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 Parmalat Alixpartners in the Finance & Accounting sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Parmalat Alixpartners has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Parmalat Alixpartners needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Parmalat Alixpartners with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Parmalat Alixpartners 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.
Consumer confidence and its impact on Parmalat Alixpartners 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
– Parmalat Alixpartners 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. Parmalat Alixpartners can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Regulatory challenges
– Parmalat Alixpartners needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Parmalat Alixpartners in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High dependence on third party suppliers
– Parmalat Alixpartners 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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Parmalat Alixpartners 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 Parmalat USA Turnaround .
Weighted SWOT Analysis of Parmalat USA Turnaround 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 Parmalat USA Turnaround 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 Parmalat USA Turnaround 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 Parmalat USA Turnaround 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 Parmalat USA Turnaround 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 Parmalat Alixpartners needs to make to build a sustainable competitive advantage.