Royal Mail plc: Cost of Capital SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Royal Mail plc: Cost of Capital
This case examines the cost of capital estimation for British postal service company Royal Mail plc in 2015-a time when company managers and government regulators were adjusting to private ownership after 500 years of government ownership. The case features a flawed cost of capital estimation analysis that includes common blunders. Students are invited to evaluate this analysis and provide their own alternative estimate for the cost of capital for Royal Mail.
Swot Analysis of "Royal Mail plc: Cost of Capital" written by Michael J. Schill includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Royal Mail facing as an external strategic factors. Some of the topics covered in Royal Mail plc: Cost of Capital case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Royal Mail plc: Cost of Capital casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, increasing household debt because of falling income levels, geopolitical disruptions, cloud computing is disrupting traditional business models, technology disruption,
wage bills are increasing, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Royal Mail plc: Cost of Capital
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Royal Mail plc: Cost of Capital case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Royal Mail, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Royal Mail 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 Royal Mail plc: Cost of Capital can be done for the following purposes –
1. Strategic planning using facts provided in Royal Mail plc: Cost of Capital case study
2. Improving business portfolio management of Royal Mail
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 Royal Mail
Strengths Royal Mail plc: Cost of Capital | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Royal Mail in Royal Mail plc: Cost of Capital Harvard Business Review case study are -
Analytics focus
– Royal Mail 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 Michael J. Schill 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.
Diverse revenue streams
– Royal Mail is present in almost all the verticals within the industry. This has provided firm in Royal Mail plc: Cost of Capital 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 Royal Mail
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Royal Mail does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Royal Mail has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Royal Mail has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Ability to lead change in Finance & Accounting field
– Royal Mail 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 Royal Mail in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Royal Mail 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 Royal Mail is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Royal Mail plc: Cost of Capital Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Royal Mail has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Royal Mail to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Finance & Accounting industry
– Royal Mail plc: Cost of Capital firm has clearly differentiated products in the market place. This has enabled Royal Mail to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Royal Mail to invest into research and development (R&D) and innovation.
Training and development
– Royal Mail has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Royal Mail plc: Cost of Capital 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.
Highly skilled collaborators
– Royal Mail 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 Royal Mail plc: Cost of Capital HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Royal Mail 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.
Low bargaining power of suppliers
– Suppliers of Royal Mail in the sector have low bargaining power. Royal Mail plc: Cost of Capital has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Royal Mail to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Royal Mail plc: Cost of Capital | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Royal Mail plc: Cost of Capital are -
High bargaining power of channel partners
– Because of the regulatory requirements, Michael J. Schill suggests that, Royal Mail 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, Royal Mail is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Royal Mail plc: Cost of Capital can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Royal Mail plc: Cost of Capital, in the dynamic environment Royal Mail has struggled to respond to the nimble upstart competition. Royal Mail has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Royal Mail has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
No frontier risks strategy
– After analyzing the HBR case study Royal Mail plc: Cost of Capital, 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Royal Mail plc: Cost of Capital, it seems that the employees of Royal Mail 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Royal Mail 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 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 Royal Mail supply chain. Even after few cautionary changes mentioned in the HBR case study - Royal Mail plc: Cost of Capital, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Royal Mail vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study Royal Mail plc: Cost of Capital 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 Royal Mail 's lucrative customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Royal Mail plc: Cost of Capital 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 Royal Mail has relatively successful track record of launching new products.
High cash cycle compare to competitors
Royal Mail 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.
Opportunities Royal Mail plc: Cost of Capital | 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 Royal Mail plc: Cost of Capital 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. Royal Mail 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. Royal Mail 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.
Building a culture of innovation
– managers at Royal Mail 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.
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 Royal Mail in the consumer business. Now Royal Mail can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Royal Mail 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Royal Mail 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Royal Mail is facing challenges because of the dominance of functional experts in the organization. Royal Mail plc: Cost of Capital 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Royal Mail can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Royal Mail 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Royal Mail 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 Royal Mail to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Royal Mail 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 Royal Mail plc: Cost of Capital - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Royal Mail to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Royal Mail 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.
Buying journey improvements
– Royal Mail can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Royal Mail plc: Cost of Capital 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.
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. Royal Mail can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Royal Mail plc: Cost of Capital External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Royal Mail plc: Cost of Capital are -
Consumer confidence and its impact on Royal Mail 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.
Regulatory challenges
– Royal Mail 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.
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.
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. Royal Mail needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Royal Mail plc: Cost of Capital, Royal Mail 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 .
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. Royal Mail 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.
Technology acceleration in Forth Industrial Revolution
– Royal Mail has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Royal Mail 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.
Shortening product life cycle
– it is one of the major threat that Royal Mail 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 Royal Mail business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Royal Mail with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Royal Mail 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 Royal Mail plc: Cost of Capital .
Increasing wage structure of Royal Mail
– 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 Royal Mail.
Stagnating economy with rate increase
– Royal Mail 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.
Weighted SWOT Analysis of Royal Mail plc: Cost of Capital 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 Royal Mail plc: Cost of Capital 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 Royal Mail plc: Cost of Capital 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 Royal Mail plc: Cost of Capital 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 Royal Mail plc: Cost of Capital 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 Royal Mail needs to make to build a sustainable competitive advantage.