Louis Gerstner and Lotus Development (A) 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 (A)
This case deals with the acquisitions 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 strategic 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 (A)" 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 (A) 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 (A) casestudy better are - – talent flight as more people leaving formal jobs, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, there is backlash against globalization, increasing commodity prices,
technology disruption, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Louis Gerstner and Lotus Development (A)
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 (A) 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 (A) can be done for the following purposes –
1. Strategic planning using facts provided in Louis Gerstner and Lotus Development (A) 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 (A) | 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 (A) Harvard Business Review case study are -
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Gerstner Lotus digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Gerstner Lotus 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.
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.
Operational resilience
– The operational resilience strategy in the Louis Gerstner and Lotus Development (A) 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.
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.
Sustainable margins compare to other players in Leadership & Managing People industry
– Louis Gerstner and Lotus Development (A) 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.
Low bargaining power of suppliers
– Suppliers of Gerstner Lotus in the sector have low bargaining power. Louis Gerstner and Lotus Development (A) 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.
Innovation driven organization
– Gerstner Lotus is one of the most innovative firm in sector. Manager in Louis Gerstner and Lotus Development (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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 (A) 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 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.
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.
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 (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Gerstner Lotus 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.
Weaknesses Louis Gerstner and Lotus Development (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Louis Gerstner and Lotus Development (A) are -
No frontier risks strategy
– After analyzing the HBR case study Louis Gerstner and Lotus Development (A), 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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Gerstner Lotus 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 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 (A), 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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Louis Gerstner and Lotus Development (A), 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.
Increasing silos among functional specialists
– The organizational structure of Gerstner Lotus is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Gerstner Lotus needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Gerstner Lotus to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Gerstner Lotus, firm in the HBR case study Louis Gerstner and Lotus Development (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Gerstner Lotus has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Gerstner Lotus even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Louis Gerstner and Lotus Development (A), 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.
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.
Opportunities Louis Gerstner and Lotus Development (A) | 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 (A) are -
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.
Leveraging digital technologies
– Gerstner Lotus 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.
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.
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 (A) 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.
Building a culture of innovation
– managers at Gerstner Lotus 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.
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.
Learning at scale
– Online learning technologies has now opened space for Gerstner Lotus 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 Gerstner Lotus 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 Gerstner Lotus to hire the very best people irrespective of their geographical location.
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 (A) 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.
Loyalty marketing
– Gerstner Lotus 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.
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.
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.
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.
Threats Louis Gerstner and Lotus Development (A) 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 (A) are -
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.
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.
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 (A), 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 .
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. Gerstner Lotus 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.
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 (A) .
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 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.
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.
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 Gerstner Lotus in the Leadership & Managing People sector and impact the bottomline 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 Gerstner Lotus 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.
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.
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.
Environmental challenges
– Gerstner Lotus 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. Gerstner Lotus can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Weighted SWOT Analysis of Louis Gerstner and Lotus Development (A) 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 (A) 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 (A) 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 (A) 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 (A) 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.