This is an MIT Sloan Management Review article. Business leaders have a choice in how they want to compete. "High-road"companies, author Thomas A. Kochan argues, are managed for the long term, seeking to compete through a combination of high productivity, innovation, and quality customer service that both requires and supports high wages and good job and career opportunities for employees. "Low-road"companies, by contrast, seek profits and shareholder returns by minimizing costs and controlling labor in ways that keep wages low for most employees and/or contractors.A prototypical high-road company the author cites is Southwest Airlines Co., which has been the most profitable airline in the U.S. over the past 30 years and has also often been rated as one of the best places in the U.S. to work. Also mentioned is Market Basket, a family-owned grocery store chain headquartered in Tewksbury, Massachusetts. In the summer of 2014, Market Basket's legacy of low prices, good customer service, and good-quality jobs was highlighted when a family feud broke out among members of its board of directors and the family member who had been serving as CEO and was popular among employees was fired. After a six-week "strike"by nonunion employees and managers that had broad community and media support (it caused an astounding 92% reduction in the company's revenues), the board agreed to sell the business to the ousted CEO, whose reinstatement employees had sought. Standard economics argues that the higher labor costs are as a proportion of total costs, the more important it is to control these costs. However, the author explains, high-road companies take another view, relying heavily on practices including screening employees for their strong technical, problem-solving, and collaborative skills; investment in training and development of the full workforce; compensation systems that align employee and company interests through profit sharing and/or payment for attaining higher levels of skills; and labor-management partnerships. Despite the effectiveness of high-road practices and their attractiveness to young employees, they are not widely followed by managers. "Few MBAs learn about high-road strategies in their economics, finance, and operations courses,"the author writes. "They don't learn that, as business leaders, they will have distinct choices to make about how to compete."He argues that academics, business and labor leaders, and employees themselves need to educate current and next-generation business leaders about the choices before them.
Swot Analysis of "The Leader's Choice" written by Thomas A Kochan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Road Employees facing as an external strategic factors. Some of the topics covered in The Leader's Choice case study are - Strategic Management Strategies, and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the The Leader's Choice casestudy better are - – challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, increasing transportation and logistics costs,
banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of The Leader's Choice
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The Leader's Choice case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Road Employees, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Road Employees 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 The Leader's Choice can be done for the following purposes –
1. Strategic planning using facts provided in The Leader's Choice case study
2. Improving business portfolio management of Road Employees
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 Road Employees
Strengths The Leader's Choice | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Road Employees in The Leader's Choice Harvard Business Review case study are -
High switching costs
– The high switching costs that Road Employees 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.
Operational resilience
– The operational resilience strategy in the The Leader's Choice 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.
Superior customer experience
– The customer experience strategy of Road Employees in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Road Employees has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The Leader's Choice 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.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Road Employees digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Road Employees 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.
Learning organization
- Road Employees 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 Road Employees is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The Leader's Choice Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Road Employees 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.
Highly skilled collaborators
– Road Employees 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 The Leader's Choice HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Road Employees is one of the leading recruiters in the industry. Managers in the The Leader's Choice are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Leadership & Managing People industry
– The Leader's Choice firm has clearly differentiated products in the market place. This has enabled Road Employees to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Road Employees to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Road Employees in the sector have low bargaining power. The Leader's Choice has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Road Employees to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Road Employees 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 The Leader's Choice - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses The Leader's Choice | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Leader's Choice are -
Lack of clear differentiation of Road Employees products
– To increase the profitability and margins on the products, Road Employees needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Road Employees 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 - The Leader's Choice should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Road Employees 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.
Interest costs
– Compare to the competition, Road Employees 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.
Slow decision making process
– As mentioned earlier in the report, Road Employees 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. Road Employees 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the The Leader's Choice 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 Road Employees has relatively successful track record of launching new products.
Skills based hiring
– The stress on hiring functional specialists at Road Employees has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Thomas A Kochan suggests that, Road Employees 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.
Need for greater diversity
– Road Employees 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The Leader's Choice, is just above the industry average. Road Employees 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.
Increasing silos among functional specialists
– The organizational structure of Road Employees is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Road Employees needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Road Employees to focus more on services rather than just following the product oriented approach.
Opportunities The Leader's Choice | 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 The Leader's Choice are -
Better consumer reach
– The expansion of the 5G network will help Road Employees to increase its market reach. Road Employees 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.
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 Road Employees in the consumer business. Now Road Employees can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Road Employees 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.
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. Road Employees 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. Road Employees 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.
Building a culture of innovation
– managers at Road Employees 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, Road Employees 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.
Loyalty marketing
– Road Employees 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.
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 Road Employees 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Road Employees can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Road Employees 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, The Leader's Choice, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Road Employees can develop new processes and procedures in Leadership & Managing People industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Using analytics as competitive advantage
– Road Employees 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 The Leader's Choice - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Road Employees to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Road Employees can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats The Leader's Choice External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The Leader's Choice are -
Technology acceleration in Forth Industrial Revolution
– Road Employees has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Road Employees 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.
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. Road Employees 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.
Regulatory challenges
– Road Employees 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.
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 Road Employees.
High dependence on third party suppliers
– Road Employees 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
– Road Employees 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. Road Employees can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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. Road Employees can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Road Employees
– 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 Road Employees.
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 Road Employees business can come under increasing regulations regarding data privacy, data security, 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.
Consumer confidence and its impact on Road Employees 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Road Employees 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.
Stagnating economy with rate increase
– Road Employees 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.
Weighted SWOT Analysis of The Leader's Choice 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 The Leader's Choice 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 The Leader's Choice 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 The Leader's Choice 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 The Leader's Choice 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 Road Employees needs to make to build a sustainable competitive advantage.
