Case Study Description of Valuation of AirThread Connections
This case can be used as a capstone valuation exercise for first-year MBA students in an introductory finance course. A senior associate in the business development group at American Cable Communications, one of the largest cable companies in the U.S., must prepare a preliminary valuation for acquiring AirThread Connections, a regional cellular provider. The acquisition would give American Cable access to wireless technology and the wireless spectrum and enable the company to offer competitive service bundles including wireless, currently a hole in the company's service offering. Students learn the basic valuation concepts including DCF (discounted cash flow) using APV (adjusted present value) and WACC (weighted average cost of capital) and they must choose the appropriate approach for situations in which the capital structure is changing or assumed to be constant. Students must consider the effect of constant debt versus the D/V (debt-to-value ratio) in estimating betas and the costs of capital. In addition, students analyze the effects of non-operating assets on valuation. As an additional assignment, instructors can require students to consider the personal tax disadvantage of debt as well as the synergies American Cable expects to achieve following the acquisition.
Swot Analysis of "Valuation of AirThread Connections" written by Erik Stafford, Joel L. Heilprin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cable Valuation facing as an external strategic factors. Some of the topics covered in Valuation of AirThread Connections case study are - Strategic Management Strategies, Communication, Costs, Financial analysis, Organizational structure, Technology and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Valuation of AirThread Connections casestudy better are - – increasing government debt because of Covid-19 spendings, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies,
central banks are concerned over increasing inflation, increasing commodity prices, etc
Introduction to SWOT Analysis of Valuation of AirThread Connections
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Valuation of AirThread Connections case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cable Valuation, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cable Valuation 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 Valuation of AirThread Connections can be done for the following purposes –
1. Strategic planning using facts provided in Valuation of AirThread Connections case study
2. Improving business portfolio management of Cable Valuation
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 Cable Valuation
Strengths Valuation of AirThread Connections | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cable Valuation in Valuation of AirThread Connections Harvard Business Review case study are -
Learning organization
- Cable Valuation 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 Cable Valuation is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Valuation of AirThread Connections Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Cable Valuation 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.
High switching costs
– The high switching costs that Cable Valuation 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.
Highly skilled collaborators
– Cable Valuation 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 Valuation of AirThread Connections HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Cable Valuation is one of the leading recruiters in the industry. Managers in the Valuation of AirThread Connections are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Cable Valuation has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Valuation of AirThread Connections 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.
Operational resilience
– The operational resilience strategy in the Valuation of AirThread Connections 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Valuation of AirThread Connections firm has clearly differentiated products in the market place. This has enabled Cable Valuation to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Cable Valuation to invest into research and development (R&D) and innovation.
Analytics focus
– Cable Valuation 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 Erik Stafford, Joel L. Heilprin 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.
Low bargaining power of suppliers
– Suppliers of Cable Valuation in the sector have low bargaining power. Valuation of AirThread Connections has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Cable Valuation to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Cable Valuation is present in almost all the verticals within the industry. This has provided firm in Valuation of AirThread Connections 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.
Successful track record of launching new products
– Cable Valuation has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cable Valuation 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.
Weaknesses Valuation of AirThread Connections | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Valuation of AirThread Connections are -
Workers concerns about automation
– As automation is fast increasing in the segment, Cable Valuation needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High bargaining power of channel partners
– Because of the regulatory requirements, Erik Stafford, Joel L. Heilprin suggests that, Cable Valuation 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.
No frontier risks strategy
– After analyzing the HBR case study Valuation of AirThread Connections, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High 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 Cable Valuation supply chain. Even after few cautionary changes mentioned in the HBR case study - Valuation of AirThread Connections, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Cable Valuation vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Valuation of AirThread Connections 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 Cable Valuation has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Cable Valuation is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Valuation of AirThread Connections can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of Cable Valuation, firm in the HBR case study Valuation of AirThread Connections 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 Valuation of AirThread Connections 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 Cable Valuation 's lucrative customers.
Slow to strategic competitive environment developments
– As Valuation of AirThread Connections HBR case study mentions - Cable Valuation 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.
Aligning sales with marketing
– It come across in the case study Valuation of AirThread Connections 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 Valuation of AirThread Connections can leverage the sales team experience to cultivate customer relationships as Cable Valuation is planning to shift buying processes online.
Lack of clear differentiation of Cable Valuation products
– To increase the profitability and margins on the products, Cable Valuation needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Valuation of AirThread Connections | 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 Valuation of AirThread Connections 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 Cable Valuation in the consumer business. Now Cable Valuation can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Cable Valuation 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 Valuation of AirThread Connections - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Cable Valuation to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Cable Valuation can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Cable Valuation can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Cable Valuation 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.
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. Cable Valuation 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. Cable Valuation 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.
Leveraging digital technologies
– Cable Valuation 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Cable Valuation is facing challenges because of the dominance of functional experts in the organization. Valuation of AirThread Connections case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Cable Valuation has opened avenues for new revenue streams for the organization in the industry. This can help Cable Valuation to build a more holistic ecosystem as suggested in the Valuation of AirThread Connections case study. Cable Valuation can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Cable Valuation can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cable Valuation can use these opportunities to build new business models that can help the communities that Cable Valuation operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Cable Valuation 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, Valuation of AirThread Connections, 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 Cable Valuation 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.
Threats Valuation of AirThread Connections External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Valuation of AirThread Connections are -
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. Cable Valuation 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 Valuation of AirThread Connections, Cable Valuation 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 .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Cable Valuation with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Cable Valuation is facing in Finance & Accounting 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 Cable Valuation business can come under increasing regulations regarding data privacy, data security, etc.
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. Cable Valuation needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Cable Valuation has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Cable Valuation needs to keep up with the evolution of technology in the Finance & Accounting 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.
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 Cable Valuation.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Cable Valuation in the Finance & Accounting industry. The Finance & Accounting 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.
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.
Regulatory challenges
– Cable Valuation 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.
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. Cable Valuation 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 Cable Valuation
– 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 Cable Valuation.
Weighted SWOT Analysis of Valuation of AirThread Connections 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 Valuation of AirThread Connections 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 Valuation of AirThread Connections 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 Valuation of AirThread Connections 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 Valuation of AirThread Connections 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 Cable Valuation needs to make to build a sustainable competitive advantage.
