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, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic ,
increasing energy prices, central banks are concerned over increasing inflation, 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 -
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.
Diverse revenue streams
– Gerstner Lotus is present in almost all the verticals within the industry. This has provided firm in Louis Gerstner and Lotus Development (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to lead change in Leadership & Managing People field
– Gerstner Lotus 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 Gerstner Lotus in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Gerstner Lotus is one of the leading recruiters in the industry. Managers in the Louis Gerstner and Lotus Development (A) 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 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.
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 (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Gerstner Lotus 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 Louis Gerstner and Lotus Development (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
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.
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.
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 -
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.
Slow to strategic competitive environment developments
– As Louis Gerstner and Lotus Development (A) HBR case study mentions - Gerstner Lotus 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Louis Gerstner and Lotus Development (A) 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.
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.
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.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Louis Gerstner and Lotus Development (A) 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 Gerstner Lotus 's lucrative customers.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Gerstner Lotus is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Louis Gerstner and Lotus Development (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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 (A) should strive to include more intangible value offerings along with its core products and services.
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.
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 -
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.
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.
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 (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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 (A) case study. Gerstner Lotus can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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. Gerstner Lotus 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. Gerstner Lotus 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.
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. Gerstner Lotus can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
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.
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.
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 -
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.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Gerstner Lotus can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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.
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.
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.
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.
Stagnating economy with rate increase
– Gerstner Lotus 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.
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) .
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.
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.
