Case Study Description of Dividend Policy at Fuyao Glass
The chief financial officer (CFO) of Fuyao Glass Industry Group., Ltd. had to recommend dividend distributions prior to the company's global initial public offering in Hong Kong. Fuyao was China's largest automotive-glass manufacturer and the second-largest, most profitable, and fastest-growing automotive-glass manufacturer in the world. Controlled by its founder and largest minority shareholder, Mr. Cho Tak Wong, Fuyao was in the midst of substantial global expansion into the United States and Russia. The CFO had to project cash flows from operations, as well as substantial investment needs and the potential effects of the IPO, all while taking into consideration the effect of Fuyao's dividends on existing and planned investors. Hugh Thomas is affiliated with Chinese University of Hong Kong. Joyce L. Wang is affiliated with Chinese University of Hong Kong. Wu Yuhui is affiliated with Xiamen University.
Swot Analysis of "Dividend Policy at Fuyao Glass" written by Hugh Thomas, Joyce L. Wang, Yuhui Wu includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Fuyao Glass facing as an external strategic factors. Some of the topics covered in Dividend Policy at Fuyao Glass case study are - Strategic Management Strategies, Manufacturing and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Dividend Policy at Fuyao Glass casestudy better are - – central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, geopolitical disruptions, there is increasing trade war between United States & China, increasing energy prices, challanges to central banks by blockchain based private currencies,
increasing commodity prices, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Dividend Policy at Fuyao Glass
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Dividend Policy at Fuyao Glass case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fuyao Glass, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fuyao Glass 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 Dividend Policy at Fuyao Glass can be done for the following purposes –
1. Strategic planning using facts provided in Dividend Policy at Fuyao Glass case study
2. Improving business portfolio management of Fuyao Glass
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 Fuyao Glass
Strengths Dividend Policy at Fuyao Glass | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fuyao Glass in Dividend Policy at Fuyao Glass Harvard Business Review case study are -
Highly skilled collaborators
– Fuyao Glass 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 Dividend Policy at Fuyao Glass 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
– Dividend Policy at Fuyao Glass firm has clearly differentiated products in the market place. This has enabled Fuyao Glass to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Fuyao Glass to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Fuyao Glass has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fuyao Glass 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.
Strong track record of project management
– Fuyao Glass is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Fuyao Glass is present in almost all the verticals within the industry. This has provided firm in Dividend Policy at Fuyao Glass 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.
High switching costs
– The high switching costs that Fuyao Glass 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.
Ability to lead change in Finance & Accounting field
– Fuyao Glass 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 Fuyao Glass in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Fuyao Glass is one of the most innovative firm in sector. Manager in Dividend Policy at Fuyao Glass Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Fuyao Glass 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.
Organizational Resilience of Fuyao Glass
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Fuyao Glass does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Fuyao Glass 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 Hugh Thomas, Joyce L. Wang, Yuhui Wu 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.
Low bargaining power of suppliers
– Suppliers of Fuyao Glass in the sector have low bargaining power. Dividend Policy at Fuyao Glass has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fuyao Glass to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Dividend Policy at Fuyao Glass | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Dividend Policy at Fuyao Glass are -
Need for greater diversity
– Fuyao Glass 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, Fuyao Glass is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Dividend Policy at Fuyao Glass 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 bargaining power of channel partners
– Because of the regulatory requirements, Hugh Thomas, Joyce L. Wang, Yuhui Wu suggests that, Fuyao Glass 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.
Aligning sales with marketing
– It come across in the case study Dividend Policy at Fuyao Glass that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Dividend Policy at Fuyao Glass can leverage the sales team experience to cultivate customer relationships as Fuyao Glass is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Dividend Policy at Fuyao Glass, in the dynamic environment Fuyao Glass has struggled to respond to the nimble upstart competition. Fuyao Glass has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Dividend Policy at Fuyao Glass, is just above the industry average. Fuyao Glass 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.
Skills based hiring
– The stress on hiring functional specialists at Fuyao Glass 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.
Interest costs
– Compare to the competition, Fuyao Glass 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.
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 Fuyao Glass supply chain. Even after few cautionary changes mentioned in the HBR case study - Dividend Policy at Fuyao Glass, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Fuyao Glass vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Dividend Policy at Fuyao Glass, it seems that the employees of Fuyao Glass 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.
Low market penetration in new markets
– Outside its home market of Fuyao Glass, firm in the HBR case study Dividend Policy at Fuyao Glass needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Dividend Policy at Fuyao Glass | 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 Dividend Policy at Fuyao Glass are -
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 Fuyao Glass 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fuyao Glass 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, Dividend Policy at Fuyao Glass, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Fuyao Glass can use these opportunities to build new business models that can help the communities that Fuyao Glass operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Fuyao Glass 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. Fuyao Glass 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Fuyao Glass is facing challenges because of the dominance of functional experts in the organization. Dividend Policy at Fuyao Glass 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.
Buying journey improvements
– Fuyao Glass can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Dividend Policy at Fuyao Glass 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fuyao Glass 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 Fuyao Glass to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Fuyao Glass 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 Dividend Policy at Fuyao Glass - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fuyao Glass to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Fuyao Glass can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Fuyao Glass has opened avenues for new revenue streams for the organization in the industry. This can help Fuyao Glass to build a more holistic ecosystem as suggested in the Dividend Policy at Fuyao Glass case study. Fuyao Glass 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 Fuyao Glass to increase its market reach. Fuyao Glass 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.
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 Fuyao Glass in the consumer business. Now Fuyao Glass can target international markets with far fewer capital restrictions requirements than the existing system.
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. Fuyao Glass can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Dividend Policy at Fuyao Glass External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Dividend Policy at Fuyao Glass 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.
Consumer confidence and its impact on Fuyao Glass 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.
Stagnating economy with rate increase
– Fuyao Glass 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.
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. Fuyao Glass needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fuyao Glass 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 Dividend Policy at Fuyao Glass .
Environmental challenges
– Fuyao Glass 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. Fuyao Glass can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing wage structure of Fuyao Glass
– 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 Fuyao Glass.
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. Fuyao Glass 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 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.
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 Fuyao Glass in the Finance & Accounting sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Dividend Policy at Fuyao Glass, Fuyao Glass 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 .
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 Fuyao Glass.
Technology acceleration in Forth Industrial Revolution
– Fuyao Glass has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Fuyao Glass 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.
Weighted SWOT Analysis of Dividend Policy at Fuyao Glass 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 Dividend Policy at Fuyao Glass 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 Dividend Policy at Fuyao Glass 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 Dividend Policy at Fuyao Glass 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 Dividend Policy at Fuyao Glass 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 Fuyao Glass needs to make to build a sustainable competitive advantage.
