Case Study Description of Premier Foods Plc: Interest Rate Swaps
A vice-president of a hedge fund must determine whether his fund will take a 5 per cent equity stake in Premier Foods Plc (Premier). At the time of the case, Premier, a publicly listed U.K. food and beverage company, was heavily indebted following a period of aggressive acquisition growth. Moreover, Premier had issued interest rate swaps on the majority of its debt. As the financial crisis unraveled, interest rates dramatically declined, and Premier's interest rate swaps appeared to be further draining the firm. Against this backdrop, the case sets its ultimate objective, which is to simulate the vice-president's analysis of the firm's debt, interest rate swaps, caps and floors before deciding whether to invest in Premier.
Swot Analysis of "Premier Foods Plc: Interest Rate Swaps" written by Jumana Zahalka, Anand Srinivasan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Premier Swaps facing as an external strategic factors. Some of the topics covered in Premier Foods Plc: Interest Rate Swaps case study are - Strategic Management Strategies, Financial markets, International business, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Premier Foods Plc: Interest Rate Swaps casestudy better are - – talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, wage bills are increasing, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google,
increasing commodity prices, there is backlash against globalization, etc
Introduction to SWOT Analysis of Premier Foods Plc: Interest Rate Swaps
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Premier Foods Plc: Interest Rate Swaps case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Premier Swaps, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Premier Swaps 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 Premier Foods Plc: Interest Rate Swaps can be done for the following purposes –
1. Strategic planning using facts provided in Premier Foods Plc: Interest Rate Swaps case study
2. Improving business portfolio management of Premier Swaps
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Premier Swaps
Strengths Premier Foods Plc: Interest Rate Swaps | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Premier Swaps in Premier Foods Plc: Interest Rate Swaps Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Premier Foods Plc: Interest Rate Swaps 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.
Cross disciplinary teams
– Horizontal connected teams at the Premier Swaps 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.
Training and development
– Premier Swaps has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Premier Foods Plc: Interest Rate Swaps 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.
Learning organization
- Premier Swaps 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 Premier Swaps is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Premier Foods Plc: Interest Rate Swaps Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Premier Swaps in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Premier Swaps has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Premier Swaps to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Premier Swaps
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Premier Swaps does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Premier Swaps is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Jumana Zahalka, Anand Srinivasan can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Premier Swaps digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Premier Swaps 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.
Effective Research and Development (R&D)
– Premier Swaps 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 Premier Foods Plc: Interest Rate Swaps - 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
– Premier Swaps 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 Premier Foods Plc: Interest Rate Swaps HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Finance & Accounting industry
– Premier Foods Plc: Interest Rate Swaps firm has clearly differentiated products in the market place. This has enabled Premier Swaps to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Premier Swaps to invest into research and development (R&D) and innovation.
Weaknesses Premier Foods Plc: Interest Rate Swaps | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Premier Foods Plc: Interest Rate Swaps are -
Increasing silos among functional specialists
– The organizational structure of Premier Swaps is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Premier Swaps needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Premier Swaps to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Premier Swaps products
– To increase the profitability and margins on the products, Premier Swaps needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Jumana Zahalka, Anand Srinivasan suggests that, Premier Swaps 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.
Skills based hiring
– The stress on hiring functional specialists at Premier Swaps 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Premier Foods Plc: Interest Rate Swaps 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 Premier Swaps has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Premier Foods Plc: Interest Rate Swaps, in the dynamic environment Premier Swaps has struggled to respond to the nimble upstart competition. Premier Swaps has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Premier Swaps supply chain. Even after few cautionary changes mentioned in the HBR case study - Premier Foods Plc: Interest Rate Swaps, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Premier Swaps vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study Premier Foods Plc: Interest Rate Swaps 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 Premier Swaps 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Premier Swaps, firm in the HBR case study Premier Foods Plc: Interest Rate Swaps needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Premier Swaps 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. Premier Swaps 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.
Products dominated business model
– Even though Premier Swaps 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 - Premier Foods Plc: Interest Rate Swaps should strive to include more intangible value offerings along with its core products and services.
Opportunities Premier Foods Plc: Interest Rate Swaps | 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 Premier Foods Plc: Interest Rate Swaps are -
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 Premier Swaps in the consumer business. Now Premier Swaps can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Premier Swaps can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Premier Swaps 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Premier Swaps in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Premier Swaps 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 Premier Swaps to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Premier Swaps 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Premier Swaps 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.
Building a culture of innovation
– managers at Premier Swaps 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 Finance & Accounting segment.
Loyalty marketing
– Premier Swaps 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.
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. Premier Swaps can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Premier Swaps 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. Premier Swaps 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.
Using analytics as competitive advantage
– Premier Swaps 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 Premier Foods Plc: Interest Rate Swaps - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Premier Swaps to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Premier Swaps can develop new processes and procedures in Finance & Accounting 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.
Threats Premier Foods Plc: Interest Rate Swaps External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Premier Foods Plc: Interest Rate Swaps are -
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 Premier Swaps in the Finance & Accounting sector and impact the bottomline of the organization.
Increasing wage structure of Premier Swaps
– 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 Premier Swaps.
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 Premier Swaps.
Consumer confidence and its impact on Premier Swaps 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.
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. Premier Swaps 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Premier Foods Plc: Interest Rate Swaps, Premier Swaps may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Regulatory challenges
– Premier Swaps 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 Finance & Accounting industry regulations.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Premier Swaps 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. Premier Swaps needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 Premier Swaps business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Premier Swaps can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Premier Swaps 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.
Weighted SWOT Analysis of Premier Foods Plc: Interest Rate Swaps 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 Premier Foods Plc: Interest Rate Swaps 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 Premier Foods Plc: Interest Rate Swaps 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 Premier Foods Plc: Interest Rate Swaps 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 Premier Foods Plc: Interest Rate Swaps 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 Premier Swaps needs to make to build a sustainable competitive advantage.
