Case Study Description of Jumbo Group: Initial Public Offering
Jumbo Group Ltd. (Jumbo) was among Singapore's leading food and beverage establishments. Founded in 1987, the group consisted of eight brands and operated 16 outlets-14 in Singapore and two in China. On October 28, 2015, Jumbo announced its initial public offering (IPO) of SG$22.06 million, consisting of two million retail shares and 86.23 million placement shares at SG$0.25 each. In this highly competitive market, the company's chief executive officer and chairman was motivated to list Jumbo so it would have a bigger platform and better exposure to grow faster. He hoped a softer IPO market would attract more long-term investors. Jumbo was clearly profitable, but based on its past financial performance, what would be a reasonable valuation for each of its shares? The case covers valuation using the discounted cash flow model, weighted average cost of capital, discounted dividend model, and relative valuation, as well as the computation of underpricing. Ruth S.K. Tan is affiliated with National University of Singapore. Zsuzsa R. Huszar is affiliated with National University of Singapore. Weina Zhang is affiliated with National University of Singapore.
Authors :: Ruth S.K. Tan, Zsuzsa R. Huszar, Weina Zhang
Swot Analysis of "Jumbo Group: Initial Public Offering" written by Ruth S.K. Tan, Zsuzsa R. Huszar, Weina Zhang includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Jumbo Singapore facing as an external strategic factors. Some of the topics covered in Jumbo Group: Initial Public Offering case study are - Strategic Management Strategies, Financial analysis, Financial management, IPO and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Jumbo Group: Initial Public Offering casestudy better are - – increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies,
cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Jumbo Group: Initial Public Offering
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Jumbo Group: Initial Public Offering case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Jumbo Singapore, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Jumbo Singapore 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 Jumbo Group: Initial Public Offering can be done for the following purposes –
1. Strategic planning using facts provided in Jumbo Group: Initial Public Offering case study
2. Improving business portfolio management of Jumbo Singapore
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 Jumbo Singapore
Strengths Jumbo Group: Initial Public Offering | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Jumbo Singapore in Jumbo Group: Initial Public Offering Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Jumbo Group: Initial Public Offering 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.
High switching costs
– The high switching costs that Jumbo Singapore 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.
Learning organization
- Jumbo Singapore 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 Jumbo Singapore is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Jumbo Group: Initial Public Offering Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Jumbo Singapore is one of the most innovative firm in sector. Manager in Jumbo Group: Initial Public Offering Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Effective Research and Development (R&D)
– Jumbo Singapore 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 Jumbo Group: Initial Public Offering - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Finance & Accounting field
– Jumbo Singapore 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 Jumbo Singapore in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Jumbo Singapore has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Jumbo Singapore 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.
Organizational Resilience of Jumbo Singapore
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Jumbo Singapore does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Jumbo Singapore 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 Jumbo Group: Initial Public Offering HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Finance & Accounting industry
– Jumbo Group: Initial Public Offering firm has clearly differentiated products in the market place. This has enabled Jumbo Singapore to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Jumbo Singapore to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Jumbo Singapore is one of the leading recruiters in the industry. Managers in the Jumbo Group: Initial Public Offering are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management
– Jumbo Singapore is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Jumbo Group: Initial Public Offering | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Jumbo Group: Initial Public Offering are -
High bargaining power of channel partners
– Because of the regulatory requirements, Ruth S.K. Tan, Zsuzsa R. Huszar, Weina Zhang suggests that, Jumbo Singapore 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.
Interest costs
– Compare to the competition, Jumbo Singapore has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Need for greater diversity
– Jumbo Singapore 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Jumbo Singapore is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Jumbo Group: Initial Public Offering can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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 Jumbo Singapore supply chain. Even after few cautionary changes mentioned in the HBR case study - Jumbo Group: Initial Public Offering, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Jumbo Singapore vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Jumbo Singapore 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 Jumbo Group: Initial Public Offering, 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Jumbo Singapore 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.
Lack of clear differentiation of Jumbo Singapore products
– To increase the profitability and margins on the products, Jumbo Singapore needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Jumbo Group: Initial Public Offering, it seems that the employees of Jumbo Singapore 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.
Increasing silos among functional specialists
– The organizational structure of Jumbo Singapore is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Jumbo Singapore needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Jumbo Singapore to focus more on services rather than just following the product oriented approach.
Opportunities Jumbo Group: Initial Public Offering | 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 Jumbo Group: Initial Public Offering are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Jumbo Singapore 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, Jumbo Singapore is facing challenges because of the dominance of functional experts in the organization. Jumbo Group: Initial Public Offering 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.
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. Jumbo Singapore 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 Jumbo Singapore has opened avenues for new revenue streams for the organization in the industry. This can help Jumbo Singapore to build a more holistic ecosystem as suggested in the Jumbo Group: Initial Public Offering case study. Jumbo Singapore can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Jumbo Singapore to increase its market reach. Jumbo Singapore 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Jumbo Singapore can use these opportunities to build new business models that can help the communities that Jumbo Singapore operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Manufacturing automation
– Jumbo Singapore 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.
Building a culture of innovation
– managers at Jumbo Singapore 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.
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. Jumbo Singapore 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. Jumbo Singapore 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 Jumbo Singapore 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.
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 Jumbo Singapore in the consumer business. Now Jumbo Singapore can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Jumbo Singapore 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.
Using analytics as competitive advantage
– Jumbo Singapore 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 Jumbo Group: Initial Public Offering - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Jumbo Singapore to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Jumbo Group: Initial Public Offering External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Jumbo Group: Initial Public Offering are -
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Jumbo Group: Initial Public Offering, Jumbo Singapore 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 .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Jumbo Singapore 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 Jumbo Group: Initial Public Offering .
Environmental challenges
– Jumbo Singapore 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. Jumbo Singapore can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Jumbo Singapore can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Jumbo Singapore in the Finance & Accounting sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Jumbo Singapore is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Jumbo Singapore 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Jumbo Singapore 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.
Regulatory challenges
– Jumbo Singapore needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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 Jumbo Singapore business can come under increasing regulations regarding data privacy, data security, etc.
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 Jumbo Singapore.
Weighted SWOT Analysis of Jumbo Group: Initial Public Offering 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 Jumbo Group: Initial Public Offering 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 Jumbo Group: Initial Public Offering 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 Jumbo Group: Initial Public Offering 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 Jumbo Group: Initial Public Offering 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 Jumbo Singapore needs to make to build a sustainable competitive advantage.
