This is a Darden case study.Students must estimate the weighted-average cost of capital (WACC) for two business segments and resolve the debate within a company over the use of a single hurdle rate versus a risk-adjusted hurdle rate performance evaluation system. In January 1996, Phon-Tech's CFO must fashion a recommendation regarding the company's use of segment hurdle rates. Phon-Tech had been the target of an active investor who charged that one segment was not paying its way. The case serves as part of an introduction to estimating investors' required rates of return (ROR). It would best following one or two class sessions introducing techniques for estimating WACC. Although the numerical calculations required are light, some of the subtleties about the use of risk-adjusted hurdle rates will require time for the novice to absorb.
Swot Analysis of "Phon-Tech Corporation" written by Robert F. Bruner includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Phon Hurdle facing as an external strategic factors. Some of the topics covered in Phon-Tech Corporation case study are - Strategic Management Strategies, Diversity, Financial analysis, International business and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Phon-Tech Corporation casestudy better are - – increasing transportation and logistics costs, there is backlash against globalization, challanges to central banks by blockchain based private currencies, 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,
there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Phon-Tech Corporation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Phon-Tech Corporation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Phon Hurdle, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Phon Hurdle 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 Phon-Tech Corporation can be done for the following purposes –
1. Strategic planning using facts provided in Phon-Tech Corporation case study
2. Improving business portfolio management of Phon Hurdle
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 Phon Hurdle
Strengths Phon-Tech Corporation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Phon Hurdle in Phon-Tech Corporation Harvard Business Review case study are -
Analytics focus
– Phon Hurdle 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 Robert F. Bruner 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.
Highly skilled collaborators
– Phon Hurdle 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 Phon-Tech Corporation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Finance & Accounting field
– Phon Hurdle 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 Phon Hurdle in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the Phon-Tech Corporation 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.
Organizational Resilience of Phon Hurdle
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Phon Hurdle does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Phon Hurdle is one of the leading recruiters in the industry. Managers in the Phon-Tech Corporation are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Phon Hurdle 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.
Low bargaining power of suppliers
– Suppliers of Phon Hurdle in the sector have low bargaining power. Phon-Tech Corporation has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Phon Hurdle to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Phon Hurdle has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Phon Hurdle to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Phon Hurdle is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Phon Hurdle 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 Phon-Tech Corporation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Phon Hurdle 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 Phon Hurdle is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Phon-Tech Corporation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Phon-Tech Corporation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Phon-Tech Corporation are -
Workers concerns about automation
– As automation is fast increasing in the segment, Phon Hurdle 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.
Aligning sales with marketing
– It come across in the case study Phon-Tech Corporation 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 Phon-Tech Corporation can leverage the sales team experience to cultivate customer relationships as Phon Hurdle is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Phon-Tech Corporation, it seems that the employees of Phon Hurdle 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.
Need for greater diversity
– Phon Hurdle 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.
Skills based hiring
– The stress on hiring functional specialists at Phon Hurdle 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, Robert F. Bruner suggests that, Phon Hurdle 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.
Increasing silos among functional specialists
– The organizational structure of Phon Hurdle is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Phon Hurdle needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Phon Hurdle to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Phon Hurdle 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. Phon Hurdle 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 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 Phon Hurdle supply chain. Even after few cautionary changes mentioned in the HBR case study - Phon-Tech Corporation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Phon Hurdle vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study Phon-Tech Corporation, 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 star products
– The top 2 products and services of the firm as mentioned in the Phon-Tech Corporation 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 Phon Hurdle has relatively successful track record of launching new products.
Opportunities Phon-Tech Corporation | 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 Phon-Tech Corporation are -
Better consumer reach
– The expansion of the 5G network will help Phon Hurdle to increase its market reach. Phon Hurdle 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.
Manufacturing automation
– Phon Hurdle can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Using analytics as competitive advantage
– Phon Hurdle 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 Phon-Tech Corporation - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Phon Hurdle to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Phon Hurdle 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.
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. Phon Hurdle 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. Phon Hurdle 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.
Buying journey improvements
– Phon Hurdle can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Phon-Tech Corporation suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Phon Hurdle 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, Phon-Tech Corporation, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Phon Hurdle 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 Phon Hurdle has opened avenues for new revenue streams for the organization in the industry. This can help Phon Hurdle to build a more holistic ecosystem as suggested in the Phon-Tech Corporation case study. Phon Hurdle can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Phon Hurdle 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.
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. Phon Hurdle can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Phon Hurdle in the consumer business. Now Phon Hurdle 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 Phon Hurdle can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Phon-Tech Corporation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Phon-Tech Corporation are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Phon Hurdle 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 Phon-Tech Corporation .
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. Phon Hurdle 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
– Phon Hurdle has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Phon Hurdle 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.
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 Phon Hurdle business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Phon Hurdle is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Phon Hurdle 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.
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
– Phon Hurdle 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.
Increasing wage structure of Phon Hurdle
– 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 Phon Hurdle.
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. Phon Hurdle 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.
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 Phon Hurdle.
Consumer confidence and its impact on Phon Hurdle 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Phon Hurdle with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Phon-Tech Corporation 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 Phon-Tech Corporation 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 Phon-Tech Corporation 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 Phon-Tech Corporation 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 Phon-Tech Corporation 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 Phon Hurdle needs to make to build a sustainable competitive advantage.
