Louis Gerstner and Lotus Development (C) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Louis Gerstner and Lotus Development (C)
This case deals with the acquisition by International Business Machines (IBM) of Lotus Development Corporation. The (A) case lays out some of the strategic issues in the software industry as well as a brief history of IBM, Lotus, and their respective CEOs, Louis Gerstner and Jim Manzi. Issues of strategy and cultural fit can be analyzed. The (A) case ends with Louis Gerstner beginning a speech to Lotus employees, which provides an opportunity for student role-plays. The (B) case is the text of the speech Gerstner actually gave and can be analyzed in terms of content, purpose, and delivery. The (C) case covers some issues around post-merger integration.
Swot Analysis of "Louis Gerstner and Lotus Development (C)" written by Joseph Harder, Tak Kato includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Gerstner Lotus facing as an external strategic factors. Some of the topics covered in Louis Gerstner and Lotus Development (C) case study are - Strategic Management Strategies, Human resource management, Leadership, Mergers & acquisitions, Motivating people, Organizational culture, Technology and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Louis Gerstner and Lotus Development (C) casestudy better are - – there is backlash against globalization, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, technology disruption, increasing government debt because of Covid-19 spendings, increasing commodity prices, geopolitical disruptions,
competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Louis Gerstner and Lotus Development (C)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Louis Gerstner and Lotus Development (C) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Gerstner Lotus, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Gerstner Lotus 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 Louis Gerstner and Lotus Development (C) can be done for the following purposes –
1. Strategic planning using facts provided in Louis Gerstner and Lotus Development (C) case study
2. Improving business portfolio management of Gerstner Lotus
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 Gerstner Lotus
Strengths Louis Gerstner and Lotus Development (C) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gerstner Lotus in Louis Gerstner and Lotus Development (C) Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Gerstner Lotus 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.
Successful track record of launching new products
– Gerstner Lotus has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Gerstner Lotus 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.
Strong track record of project management
– Gerstner Lotus is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Gerstner Lotus has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Louis Gerstner and Lotus Development (C) 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.
Innovation driven organization
– Gerstner Lotus is one of the most innovative firm in sector. Manager in Louis Gerstner and Lotus Development (C) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Gerstner Lotus in the sector have low bargaining power. Louis Gerstner and Lotus Development (C) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Gerstner Lotus to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Gerstner Lotus is one of the leading recruiters in the industry. Managers in the Louis Gerstner and Lotus Development (C) 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
– Gerstner Lotus has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Gerstner Lotus to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Gerstner Lotus 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 Louis Gerstner and Lotus Development (C) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Gerstner Lotus 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 Gerstner Lotus is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Louis Gerstner and Lotus Development (C) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Gerstner Lotus
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Gerstner Lotus does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Leadership & Managing People industry
– Louis Gerstner and Lotus Development (C) firm has clearly differentiated products in the market place. This has enabled Gerstner Lotus to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Gerstner Lotus to invest into research and development (R&D) and innovation.
Weaknesses Louis Gerstner and Lotus Development (C) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Louis Gerstner and Lotus Development (C) are -
High bargaining power of channel partners
– Because of the regulatory requirements, Joseph Harder, Tak Kato suggests that, Gerstner Lotus 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Louis Gerstner and Lotus Development (C), in the dynamic environment Gerstner Lotus has struggled to respond to the nimble upstart competition. Gerstner Lotus has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Louis Gerstner and Lotus Development (C), is just above the industry average. Gerstner Lotus 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.
Need for greater diversity
– Gerstner Lotus 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.
Lack of clear differentiation of Gerstner Lotus products
– To increase the profitability and margins on the products, Gerstner Lotus needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Louis Gerstner and Lotus Development (C) 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 Gerstner Lotus has relatively successful track record of launching new products.
High cash cycle compare to competitors
Gerstner Lotus 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.
Products dominated business model
– Even though Gerstner Lotus 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 - Louis Gerstner and Lotus Development (C) should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Gerstner Lotus 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.
Capital Spending Reduction
– Even during the low interest decade, Gerstner Lotus 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 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 Gerstner Lotus supply chain. Even after few cautionary changes mentioned in the HBR case study - Louis Gerstner and Lotus Development (C), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Gerstner Lotus vulnerable to further global disruptions in South East Asia.
Opportunities Louis Gerstner and Lotus Development (C) | 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 Louis Gerstner and Lotus Development (C) are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Gerstner Lotus 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Gerstner Lotus can use these opportunities to build new business models that can help the communities that Gerstner Lotus operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Gerstner Lotus 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Gerstner Lotus can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Gerstner Lotus can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Gerstner Lotus 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.
Developing new processes and practices
– Gerstner Lotus 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.
Buying journey improvements
– Gerstner Lotus can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Louis Gerstner and Lotus Development (C) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Manufacturing automation
– Gerstner Lotus 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 Gerstner Lotus has opened avenues for new revenue streams for the organization in the industry. This can help Gerstner Lotus to build a more holistic ecosystem as suggested in the Louis Gerstner and Lotus Development (C) case study. Gerstner Lotus can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Gerstner Lotus is facing challenges because of the dominance of functional experts in the organization. Louis Gerstner and Lotus Development (C) 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 Gerstner Lotus to increase its market reach. Gerstner Lotus 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Gerstner Lotus 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, Louis Gerstner and Lotus Development (C), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Louis Gerstner and Lotus Development (C) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Louis Gerstner and Lotus Development (C) are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Gerstner Lotus 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 Louis Gerstner and Lotus Development (C) .
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 Gerstner Lotus.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Louis Gerstner and Lotus Development (C), Gerstner Lotus 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 Gerstner Lotus
– 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 Gerstner Lotus.
Shortening product life cycle
– it is one of the major threat that Gerstner Lotus is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Gerstner Lotus business can come under increasing regulations regarding data privacy, data security, etc.
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.
Regulatory challenges
– Gerstner Lotus 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.
High dependence on third party suppliers
– Gerstner Lotus 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Gerstner Lotus with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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. Gerstner Lotus needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Gerstner Lotus has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Gerstner Lotus 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.
Weighted SWOT Analysis of Louis Gerstner and Lotus Development (C) 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 Louis Gerstner and Lotus Development (C) 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 Louis Gerstner and Lotus Development (C) 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 Louis Gerstner and Lotus Development (C) 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 Louis Gerstner and Lotus Development (C) 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 Gerstner Lotus needs to make to build a sustainable competitive advantage.