Case Study Description of Hexcel Turnaround--2001 (A)
Hexcel's new CEO is faced with deciding how to "take out" $60 million in cash costs in fiscal 2002, as two of the company's end markets--electronics and commercial aerospace--are expected to decline precipitously. Options include closing plants, exiting a business, or undertaking a major headcount reduction. Includes a description of Hexcel's private equity relationship with Goldman Sach's Capital Partners and presents the financial challenges of renegotiating bank lending covenants and managing maturing debt. Focuses on selecting a turnaround approach from the point of view of a general manager (the CEO).
Authors :: Paul W. Marshall, James Quinn, Reed Martin
Swot Analysis of "Hexcel Turnaround--2001 (A)" written by Paul W. Marshall, James Quinn, Reed Martin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hexcel's Hexcel facing as an external strategic factors. Some of the topics covered in Hexcel Turnaround--2001 (A) case study are - Strategic Management Strategies, Crisis management, Downsizing, Entrepreneurial finance, Leadership, Leading teams, Negotiations and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Hexcel Turnaround--2001 (A) casestudy better are - – increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, increasing energy prices, central banks are concerned over increasing inflation, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google,
talent flight as more people leaving formal jobs, increasing commodity prices, etc
Introduction to SWOT Analysis of Hexcel Turnaround--2001 (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hexcel Turnaround--2001 (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hexcel's Hexcel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hexcel's Hexcel 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 Hexcel Turnaround--2001 (A) can be done for the following purposes –
1. Strategic planning using facts provided in Hexcel Turnaround--2001 (A) case study
2. Improving business portfolio management of Hexcel's Hexcel
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 Hexcel's Hexcel
Strengths Hexcel Turnaround--2001 (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hexcel's Hexcel in Hexcel Turnaround--2001 (A) Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Hexcel's Hexcel 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
– Hexcel's Hexcel has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hexcel's Hexcel 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.
Ability to lead change in Leadership & Managing People field
– Hexcel's Hexcel 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 Hexcel's Hexcel in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Hexcel's Hexcel in the sector have low bargaining power. Hexcel Turnaround--2001 (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hexcel's Hexcel to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Hexcel's Hexcel is one of the most innovative firm in sector. Manager in Hexcel Turnaround--2001 (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Hexcel's Hexcel has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hexcel's Hexcel to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Hexcel's Hexcel
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Hexcel's Hexcel does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Hexcel's Hexcel is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Leadership & Managing People industry
– Hexcel Turnaround--2001 (A) firm has clearly differentiated products in the market place. This has enabled Hexcel's Hexcel to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Hexcel's Hexcel to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Hexcel Turnaround--2001 (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.
Superior customer experience
– The customer experience strategy of Hexcel's Hexcel in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Hexcel's Hexcel 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 Hexcel Turnaround--2001 (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Hexcel Turnaround--2001 (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hexcel Turnaround--2001 (A) are -
Aligning sales with marketing
– It come across in the case study Hexcel Turnaround--2001 (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Hexcel Turnaround--2001 (A) can leverage the sales team experience to cultivate customer relationships as Hexcel's Hexcel is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Hexcel's Hexcel 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. Hexcel's Hexcel 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 cash cycle compare to competitors
Hexcel's Hexcel 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.
Capital Spending Reduction
– Even during the low interest decade, Hexcel's Hexcel 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.
Skills based hiring
– The stress on hiring functional specialists at Hexcel's Hexcel 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.
Slow to strategic competitive environment developments
– As Hexcel Turnaround--2001 (A) HBR case study mentions - Hexcel's Hexcel 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.
Products dominated business model
– Even though Hexcel's Hexcel 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 - Hexcel Turnaround--2001 (A) should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners
– Because of the regulatory requirements, Paul W. Marshall, James Quinn, Reed Martin suggests that, Hexcel's Hexcel 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Hexcel Turnaround--2001 (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 Hexcel's Hexcel 's lucrative customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Hexcel Turnaround--2001 (A), it seems that the employees of Hexcel's Hexcel don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Hexcel Turnaround--2001 (A), is just above the industry average. Hexcel's Hexcel 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 Hexcel Turnaround--2001 (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 Hexcel Turnaround--2001 (A) are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hexcel's Hexcel 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 Hexcel's Hexcel to hire the very best people irrespective of their geographical location.
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. Hexcel's Hexcel 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. Hexcel's Hexcel 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.
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. Hexcel's Hexcel can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Hexcel's Hexcel has opened avenues for new revenue streams for the organization in the industry. This can help Hexcel's Hexcel to build a more holistic ecosystem as suggested in the Hexcel Turnaround--2001 (A) case study. Hexcel's Hexcel can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Hexcel's Hexcel 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hexcel's Hexcel 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.
Building a culture of innovation
– managers at Hexcel's Hexcel 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.
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 Hexcel's Hexcel in the consumer business. Now Hexcel's Hexcel can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hexcel's Hexcel 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hexcel's Hexcel 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, Hexcel Turnaround--2001 (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.
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 Hexcel's Hexcel 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.
Buying journey improvements
– Hexcel's Hexcel can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Hexcel Turnaround--2001 (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.
Better consumer reach
– The expansion of the 5G network will help Hexcel's Hexcel to increase its market reach. Hexcel's Hexcel will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats Hexcel Turnaround--2001 (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hexcel Turnaround--2001 (A) are -
Environmental challenges
– Hexcel's Hexcel 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. Hexcel's Hexcel can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Technology acceleration in Forth Industrial Revolution
– Hexcel's Hexcel has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Hexcel's Hexcel 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.
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 Hexcel's Hexcel in the Leadership & Managing People sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Hexcel's Hexcel 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.
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 Hexcel's Hexcel.
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. Hexcel's Hexcel can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hexcel's Hexcel 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 Hexcel Turnaround--2001 (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.
Regulatory challenges
– Hexcel's Hexcel 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 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. Hexcel's Hexcel needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Increasing wage structure of Hexcel's Hexcel
– 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 Hexcel's Hexcel.
Shortening product life cycle
– it is one of the major threat that Hexcel's Hexcel 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 Hexcel's Hexcel business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Hexcel Turnaround--2001 (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 Hexcel Turnaround--2001 (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 Hexcel Turnaround--2001 (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 Hexcel Turnaround--2001 (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 Hexcel Turnaround--2001 (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 Hexcel's Hexcel needs to make to build a sustainable competitive advantage.