The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate
With interest rates near all-time lows in late 2015, Stanley Cirano knew it was an opportune time to consider the financing on his portfolio of commercial real estate. Cirano Properties was the general partner on three separate private equity investments of retail shopping centers in suburban Chicago. The first, Brookline Road Shopping Center, had been acquired in 2006 and had been managed through the financial crisis and real estate downturn. The property was performing well and Cirano wondered whether it made sense to refinance or sell. The second property, Columbus Festival Plaza, had been acquired in a 2010 bankruptcy auction. Although the property had needed a good amount of capital improvements, Cirano was proud of the growth in net operating income he had been able to generate. The final property, Deerwood Acres, had been developed by Cirano himself after acquiring the property in 2013 from the previous owner, who had been operating a go-cart track and drive-in theater on the land. Cirano expected great things from the property, though his lease-up had been slower than anticipated. Although the three properties had different levels of performance and presented different management issues, they all shared the fact that they were all significantly financed, in part, with debt. As the properties were acquired at different times, Cirano had simply selected what seemed like reasonable financing at the time. With his concern that interest rates would soon be rising, Cirano thought it made sense to take a holistic view of his portfolio, consider what debt options were available to him, and make a sound strategic decision on the financing of all his assets at the same time.
Swot Analysis of "The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate" written by Craig Furfine includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cirano Property facing as an external strategic factors. Some of the topics covered in The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate case study are - Strategic Management Strategies, Financial analysis, Financial management, Strategic planning and Finance & Accounting.
Some of the macro environment factors that can be used to understand the The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy,
geopolitical disruptions, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cirano Property, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cirano Property 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 The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate can be done for the following purposes –
1. Strategic planning using facts provided in The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate case study
2. Improving business portfolio management of Cirano Property
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 Cirano Property
Strengths The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cirano Property in The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate Harvard Business Review case study are -
Successful track record of launching new products
– Cirano Property has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cirano Property 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.
Training and development
– Cirano Property has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate 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.
Operational resilience
– The operational resilience strategy in the The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate 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.
Superior customer experience
– The customer experience strategy of Cirano Property in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Finance & Accounting industry
– The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate firm has clearly differentiated products in the market place. This has enabled Cirano Property to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Cirano Property to invest into research and development (R&D) and innovation.
Analytics focus
– Cirano Property 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 Craig Furfine 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.
Organizational Resilience of Cirano Property
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Cirano Property does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Cirano Property 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.
Highly skilled collaborators
– Cirano Property 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 The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Cirano Property is one of the most innovative firm in sector. Manager in The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Cirano Property 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 Cirano Property is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Cirano Property in the sector have low bargaining power. The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Cirano Property to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate are -
Interest costs
– Compare to the competition, Cirano Property 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.
Slow decision making process
– As mentioned earlier in the report, Cirano Property 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. Cirano Property 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.
High cash cycle compare to competitors
Cirano Property 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate, in the dynamic environment Cirano Property has struggled to respond to the nimble upstart competition. Cirano Property has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Cirano Property supply chain. Even after few cautionary changes mentioned in the HBR case study - The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Cirano Property vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate, is just above the industry average. Cirano Property 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.
Capital Spending Reduction
– Even during the low interest decade, Cirano Property 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Cirano Property 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.
Products dominated business model
– Even though Cirano Property 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 - The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate 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 The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate 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 Cirano Property has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate 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 The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate can leverage the sales team experience to cultivate customer relationships as Cirano Property is planning to shift buying processes online.
Opportunities The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate | 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 The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate are -
Using analytics as competitive advantage
– Cirano Property 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 The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Cirano Property to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Cirano Property 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Cirano Property can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Cirano Property 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.
Leveraging digital technologies
– Cirano Property 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cirano Property can use these opportunities to build new business models that can help the communities that Cirano Property operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Cirano Property 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.
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 Cirano Property in the consumer business. Now Cirano Property can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Cirano Property is facing challenges because of the dominance of functional experts in the organization. The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate 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.
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. Cirano Property 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
– Cirano Property 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.
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. Cirano Property 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. Cirano Property 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Cirano Property 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 Cirano Property to hire the very best people irrespective of their geographical location.
Threats The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate are -
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. Cirano Property 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.
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 Cirano Property business can come under increasing regulations regarding data privacy, data security, etc.
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.
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 Cirano Property.
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. Cirano Property needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Cirano Property is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Cirano Property
– 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 Cirano Property.
Consumer confidence and its impact on Cirano Property 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Cirano Property 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Cirano Property 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 The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate .
Regulatory challenges
– Cirano Property 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 acceleration in Forth Industrial Revolution
– Cirano Property has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Cirano Property 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Cirano Property with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate 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 The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate 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 The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate 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 The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate 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 The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate 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 Cirano Property needs to make to build a sustainable competitive advantage.
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