International Paper's Black Liquor Credit SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of International Paper's Black Liquor Credit
In 2004, Congress passed the American Jobs Creation Act of 2004 (AJCA). Several corporate benefits were included in this sweeping legislation, including the introduction of tax credits to encourage the development and use of alcohol and biodiesel fuels. Specifically, the Alternative Fuel Mixture Credit (AFMC) was structured as a refundable excise tax credit equal to 50 cents per gallon of alternative fuel produced. In 2008, paper manufacturers recognized an opportunity. If they added diesel fuel-which is not considered an alternative or clean fuel source-to black liquor, a natural byproduct of paper pulp processing, the resulting substance would be classified as an alternative fuel mixture that could potentially qualify for the AFMC. By mid-2009, every public company in the U.S. paper processing industry was receiving these credits. Because the credits were "refundable," and firms in the struggling paper industry did not have taxable income, the AFMCs generated tax savings from the U.S. Treasury totaling $6.4 billion, some of which was received in cash. This case examines the arguments around whether the refundable credits are taxable and discusses Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). The case highlights International Paper as an example and presents analysis by the faculty authors on the three ways in which paper companies approached the AFMC.
Authors :: Lisa De Simone, John R. Robinson, Bridget Stomberg
Swot Analysis of "International Paper's Black Liquor Credit" written by Lisa De Simone, John R. Robinson, Bridget Stomberg includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Refundable Paper facing as an external strategic factors. Some of the topics covered in International Paper's Black Liquor Credit case study are - Strategic Management Strategies, Financial management, Policy and Finance & Accounting.
Some of the macro environment factors that can be used to understand the International Paper's Black Liquor Credit casestudy better are - – increasing energy prices, increasing transportation and logistics costs, wage bills are increasing, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs,
digital marketing is dominated by two big players Facebook and Google, technology disruption, etc
Introduction to SWOT Analysis of International Paper's Black Liquor Credit
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in International Paper's Black Liquor Credit case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Refundable Paper, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Refundable Paper 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 International Paper's Black Liquor Credit can be done for the following purposes –
1. Strategic planning using facts provided in International Paper's Black Liquor Credit case study
2. Improving business portfolio management of Refundable Paper
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 Refundable Paper
Strengths International Paper's Black Liquor Credit | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Refundable Paper in International Paper's Black Liquor Credit Harvard Business Review case study are -
Ability to recruit top talent
– Refundable Paper is one of the leading recruiters in the industry. Managers in the International Paper's Black Liquor Credit are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Refundable Paper has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in International Paper's Black Liquor Credit 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.
High brand equity
– Refundable Paper has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Refundable Paper to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Refundable Paper digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Refundable Paper 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.
Low bargaining power of suppliers
– Suppliers of Refundable Paper in the sector have low bargaining power. International Paper's Black Liquor Credit has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Refundable Paper to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Refundable Paper 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 International Paper's Black Liquor Credit 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
– Refundable Paper 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 Refundable Paper in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Refundable Paper 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 Refundable Paper is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in International Paper's Black Liquor Credit Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Refundable Paper 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 International Paper's Black Liquor Credit - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Refundable Paper 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.
Superior customer experience
– The customer experience strategy of Refundable Paper in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Refundable Paper
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Refundable Paper does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses International Paper's Black Liquor Credit | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of International Paper's Black Liquor Credit are -
Slow decision making process
– As mentioned earlier in the report, Refundable Paper 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. Refundable Paper 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.
Interest costs
– Compare to the competition, Refundable Paper 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study International Paper's Black Liquor Credit, in the dynamic environment Refundable Paper has struggled to respond to the nimble upstart competition. Refundable Paper has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– After analyzing the HBR case study International Paper's Black Liquor Credit, 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 cash cycle compare to competitors
Refundable Paper 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.
Skills based hiring
– The stress on hiring functional specialists at Refundable Paper 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.
Low market penetration in new markets
– Outside its home market of Refundable Paper, firm in the HBR case study International Paper's Black Liquor Credit needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study International Paper's Black Liquor Credit 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 Refundable Paper 's lucrative customers.
Products dominated business model
– Even though Refundable Paper has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - International Paper's Black Liquor Credit should strive to include more intangible value offerings along with its core products and services.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the International Paper's Black Liquor Credit 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 Refundable Paper has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study International Paper's Black Liquor Credit, it seems that the employees of Refundable Paper 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.
Opportunities International Paper's Black Liquor Credit | 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 International Paper's Black Liquor Credit are -
Leveraging digital technologies
– Refundable Paper 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Refundable Paper 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, International Paper's Black Liquor Credit, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Refundable Paper 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.
Buying journey improvements
– Refundable Paper can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. International Paper's Black Liquor Credit 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. Refundable Paper can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Refundable Paper 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.
Building a culture of innovation
– managers at Refundable Paper 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.
Learning at scale
– Online learning technologies has now opened space for Refundable Paper 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.
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. Refundable Paper 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 Refundable Paper has opened avenues for new revenue streams for the organization in the industry. This can help Refundable Paper to build a more holistic ecosystem as suggested in the International Paper's Black Liquor Credit case study. Refundable Paper 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 Refundable Paper to increase its market reach. Refundable Paper 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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Refundable Paper to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Refundable Paper 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 Refundable Paper to hire the very best people irrespective of their geographical location.
Threats International Paper's Black Liquor Credit External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study International Paper's Black Liquor Credit are -
Regulatory challenges
– Refundable Paper 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.
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. Refundable Paper 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 International Paper's Black Liquor Credit, Refundable Paper 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 .
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.
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. Refundable Paper can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Refundable Paper has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Refundable Paper 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 Refundable Paper 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
– Refundable Paper 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.
Environmental challenges
– Refundable Paper 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. Refundable Paper can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Refundable Paper 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.
Consumer confidence and its impact on Refundable Paper 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Refundable Paper 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 International Paper's Black Liquor Credit .
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.
Weighted SWOT Analysis of International Paper's Black Liquor Credit 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 International Paper's Black Liquor Credit 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 International Paper's Black Liquor Credit 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 International Paper's Black Liquor Credit 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 International Paper's Black Liquor Credit 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 Refundable Paper needs to make to build a sustainable competitive advantage.
