Case Study Description of Saito Solar - Discounted Cash Flow Valuation
The partners of Saito Solar, a privately owned photovoltaic (PV) solar panel manufacturer in Japan, received an unsolicited proposal from an investment bank about their interests in selling the firm. The firm had experienced steady sales decline in recent years, due mainly to intense competition from low-cost solar panel manufacturers from China. However, in 2012, the solar industry in Japan received new signs of life. The threat of radiation from the nuclear plant explosions due to a deadly earthquake in 2011 had prompted Japan to look for alternative energy. On July 1, 2012, the Japanese government implemented a new feed-in-tariff of 42A¥/kWh (about US$0.53/kWh) for solar energy. This tariff was almost twice as large of that in Germany and three times of that in China. This incentive was predicted to produce solar energy that would rank Japan as one of the largest in the world in solar capacity. The partners of Saito Solar were excited about the investment bank's solicitation and wanted to find out how much the firm was worth. The cash flow projections incorporating the positive outlook of the Japanese solar industry were provided. The partners discussed valuation using discounted cash flow (DCF) approach, so it is a perfect case to introduce beginner finance students the proper and common way to value a firm using DCF.
Swot Analysis of "Saito Solar - Discounted Cash Flow Valuation" written by Lena Booth, Frank Tuzzolino includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Solar Saito facing as an external strategic factors. Some of the topics covered in Saito Solar - Discounted Cash Flow Valuation case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Saito Solar - Discounted Cash Flow Valuation casestudy better are - – there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, increasing transportation and logistics costs, wage bills are increasing, increasing commodity prices, talent flight as more people leaving formal jobs,
central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Saito Solar - Discounted Cash Flow Valuation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Saito Solar - Discounted Cash Flow Valuation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Solar Saito, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Solar Saito 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 Saito Solar - Discounted Cash Flow Valuation can be done for the following purposes –
1. Strategic planning using facts provided in Saito Solar - Discounted Cash Flow Valuation case study
2. Improving business portfolio management of Solar Saito
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 Solar Saito
Strengths Saito Solar - Discounted Cash Flow Valuation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Solar Saito in Saito Solar - Discounted Cash Flow Valuation Harvard Business Review case study are -
Successful track record of launching new products
– Solar Saito has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Solar Saito 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.
High brand equity
– Solar Saito has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Solar Saito to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Finance & Accounting field
– Solar Saito 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 Solar Saito in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Solar Saito digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Solar Saito 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)
– Solar Saito 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 Saito Solar - Discounted Cash Flow Valuation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Solar Saito in the sector have low bargaining power. Saito Solar - Discounted Cash Flow Valuation has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Solar Saito to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Solar Saito is present in almost all the verticals within the industry. This has provided firm in Saito Solar - Discounted Cash Flow Valuation 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.
Organizational Resilience of Solar Saito
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Solar Saito does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Solar Saito in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Solar Saito are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Highly skilled collaborators
– Solar Saito 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 Saito Solar - Discounted Cash Flow Valuation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Solar Saito 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 Lena Booth, Frank Tuzzolino 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.
Weaknesses Saito Solar - Discounted Cash Flow Valuation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Saito Solar - Discounted Cash Flow Valuation are -
Slow to strategic competitive environment developments
– As Saito Solar - Discounted Cash Flow Valuation HBR case study mentions - Solar Saito 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.
High cash cycle compare to competitors
Solar Saito 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Saito Solar - Discounted Cash Flow Valuation 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 Solar Saito has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Solar Saito 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Saito Solar - Discounted Cash Flow Valuation, is just above the industry average. Solar Saito needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Increasing silos among functional specialists
– The organizational structure of Solar Saito is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Solar Saito needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Solar Saito to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Saito Solar - Discounted Cash Flow Valuation, it seems that the employees of Solar Saito 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
– Solar Saito 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Lena Booth, Frank Tuzzolino suggests that, Solar Saito 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Solar Saito is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Saito Solar - Discounted Cash Flow Valuation can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study Saito Solar - Discounted Cash Flow Valuation, 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.
Opportunities Saito Solar - Discounted Cash Flow Valuation | 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 Saito Solar - Discounted Cash Flow Valuation are -
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. Solar Saito 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. Solar Saito 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Solar Saito 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Solar Saito can use these opportunities to build new business models that can help the communities that Solar Saito 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, Solar Saito 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, Saito Solar - Discounted Cash Flow Valuation, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Solar Saito is facing challenges because of the dominance of functional experts in the organization. Saito Solar - Discounted Cash Flow Valuation 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.
Developing new processes and practices
– Solar Saito 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.
Creating value in data economy
– The success of analytics program of Solar Saito has opened avenues for new revenue streams for the organization in the industry. This can help Solar Saito to build a more holistic ecosystem as suggested in the Saito Solar - Discounted Cash Flow Valuation case study. Solar Saito can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Solar Saito 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.
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. Solar Saito can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Solar Saito 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.
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. Solar Saito can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Solar Saito can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Solar Saito 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.
Threats Saito Solar - Discounted Cash Flow Valuation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Saito Solar - Discounted Cash Flow Valuation are -
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. Solar Saito can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Solar Saito 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.
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 Solar Saito business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Solar Saito
– 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 Solar Saito.
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. Solar Saito needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 Solar Saito in the Finance & Accounting sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Solar Saito 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 Saito Solar - Discounted Cash Flow Valuation .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Solar Saito 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.
Environmental challenges
– Solar Saito 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. Solar Saito can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Consumer confidence and its impact on Solar Saito 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 Solar Saito with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Solar Saito 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.
Regulatory challenges
– Solar Saito 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.
Weighted SWOT Analysis of Saito Solar - Discounted Cash Flow Valuation 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 Saito Solar - Discounted Cash Flow Valuation 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 Saito Solar - Discounted Cash Flow Valuation 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 Saito Solar - Discounted Cash Flow Valuation 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 Saito Solar - Discounted Cash Flow Valuation 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 Solar Saito needs to make to build a sustainable competitive advantage.
