Magic Timber and Steel: Investment Evaluation with Net Present Value SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Magic Timber and Steel: Investment Evaluation with Net Present Value
Magic Timber and Steel (Magic) was formed in Caloundra, a community on Queensland, Australia's Sunshine Coast. Magic's business peaked in terms of sales revenue in about 2011 and went on to experience a steady decrease in turnover that was attributed to a number of causes, including infrastructure issues on the coast and a drop in tourism. Hoping to reinvigorate the business in early 2015, Magic's owner believed his company required an investment in fixed assets - specifically, a large finisher that would increase capacity and reduce maintenance. Because the new machine required a significant financial investment, the owner had to use the net present value method to determine whether the purchase would add value to the firm. Scott McCarthy is affiliated with UQ Business School.
Swot Analysis of "Magic Timber and Steel: Investment Evaluation with Net Present Value" written by Scott McCarthy includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Magic's Magic facing as an external strategic factors. Some of the topics covered in Magic Timber and Steel: Investment Evaluation with Net Present Value case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Magic Timber and Steel: Investment Evaluation with Net Present Value casestudy better are - – increasing transportation and logistics costs, supply chains are disrupted by pandemic , increasing commodity prices, there is increasing trade war between United States & China, technology disruption, increasing household debt because of falling income levels, increasing energy prices,
challanges to central banks by blockchain based private currencies, wage bills are increasing, etc
Introduction to SWOT Analysis of Magic Timber and Steel: Investment Evaluation with Net Present Value
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Magic Timber and Steel: Investment Evaluation with Net Present Value case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Magic's Magic, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Magic's Magic 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 Magic Timber and Steel: Investment Evaluation with Net Present Value can be done for the following purposes –
1. Strategic planning using facts provided in Magic Timber and Steel: Investment Evaluation with Net Present Value case study
2. Improving business portfolio management of Magic's Magic
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 Magic's Magic
Strengths Magic Timber and Steel: Investment Evaluation with Net Present Value | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Magic's Magic in Magic Timber and Steel: Investment Evaluation with Net Present Value Harvard Business Review case study are -
Training and development
– Magic's Magic has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Magic Timber and Steel: Investment Evaluation with Net Present Value 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.
Learning organization
- Magic's Magic 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 Magic's Magic is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Magic Timber and Steel: Investment Evaluation with Net Present Value Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Magic's Magic in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Magic's Magic
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Magic's Magic does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Magic's Magic 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.
Operational resilience
– The operational resilience strategy in the Magic Timber and Steel: Investment Evaluation with Net Present Value 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.
Ability to recruit top talent
– Magic's Magic is one of the leading recruiters in the industry. Managers in the Magic Timber and Steel: Investment Evaluation with Net Present Value are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Magic's Magic 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 Magic Timber and Steel: Investment Evaluation with Net Present Value HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Magic's Magic has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Magic's Magic 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
– Magic's Magic 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
– Magic's Magic is present in almost all the verticals within the industry. This has provided firm in Magic Timber and Steel: Investment Evaluation with Net Present Value 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Magic Timber and Steel: Investment Evaluation with Net Present Value firm has clearly differentiated products in the market place. This has enabled Magic's Magic to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Magic's Magic to invest into research and development (R&D) and innovation.
Weaknesses Magic Timber and Steel: Investment Evaluation with Net Present Value | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Magic Timber and Steel: Investment Evaluation with Net Present Value are -
Aligning sales with marketing
– It come across in the case study Magic Timber and Steel: Investment Evaluation with Net Present Value 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 Magic Timber and Steel: Investment Evaluation with Net Present Value can leverage the sales team experience to cultivate customer relationships as Magic's Magic 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 Magic Timber and Steel: Investment Evaluation with Net Present Value, in the dynamic environment Magic's Magic has struggled to respond to the nimble upstart competition. Magic's Magic has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Magic's Magic 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.
Skills based hiring
– The stress on hiring functional specialists at Magic's Magic 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.
Slow decision making process
– As mentioned earlier in the report, Magic's Magic 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. Magic's Magic 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.
Low market penetration in new markets
– Outside its home market of Magic's Magic, firm in the HBR case study Magic Timber and Steel: Investment Evaluation with Net Present Value needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Magic Timber and Steel: Investment Evaluation with Net Present Value 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 Magic's Magic has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Magic's Magic is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Magic's Magic needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Magic's Magic to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Scott McCarthy suggests that, Magic's Magic 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, Magic's Magic 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.
Products dominated business model
– Even though Magic's Magic 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 - Magic Timber and Steel: Investment Evaluation with Net Present Value should strive to include more intangible value offerings along with its core products and services.
Opportunities Magic Timber and Steel: Investment Evaluation with Net Present Value | 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 Magic Timber and Steel: Investment Evaluation with Net Present Value are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Magic's Magic can use these opportunities to build new business models that can help the communities that Magic's Magic operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Magic's Magic 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.
Creating value in data economy
– The success of analytics program of Magic's Magic has opened avenues for new revenue streams for the organization in the industry. This can help Magic's Magic to build a more holistic ecosystem as suggested in the Magic Timber and Steel: Investment Evaluation with Net Present Value case study. Magic's Magic can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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. Magic's Magic can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Magic's Magic can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Magic's Magic 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.
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 Magic's Magic in the consumer business. Now Magic's Magic can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Magic's Magic 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 Magic's Magic to hire the very best people irrespective of their geographical location.
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 Magic's Magic 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.
Learning at scale
– Online learning technologies has now opened space for Magic's Magic to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Buying journey improvements
– Magic's Magic can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Magic Timber and Steel: Investment Evaluation with Net Present Value 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.
Better consumer reach
– The expansion of the 5G network will help Magic's Magic to increase its market reach. Magic's Magic 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.
Using analytics as competitive advantage
– Magic's Magic 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 Magic Timber and Steel: Investment Evaluation with Net Present Value - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Magic's Magic to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Magic Timber and Steel: Investment Evaluation with Net Present Value External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Magic Timber and Steel: Investment Evaluation with Net Present Value 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 Magic's Magic 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 Magic's Magic 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.
Technology acceleration in Forth Industrial Revolution
– Magic's Magic has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Magic's Magic 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 Magic's Magic 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
– Magic's Magic 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.
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. Magic's Magic needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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. Magic's Magic 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Magic's Magic with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Magic's Magic in the Finance & Accounting sector and impact the bottomline 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 Magic's Magic business can come under increasing regulations regarding data privacy, data security, etc.
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. Magic's Magic can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Magic's Magic
– 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 Magic's Magic.
Weighted SWOT Analysis of Magic Timber and Steel: Investment Evaluation with Net Present Value 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 Magic Timber and Steel: Investment Evaluation with Net Present Value 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 Magic Timber and Steel: Investment Evaluation with Net Present Value 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 Magic Timber and Steel: Investment Evaluation with Net Present Value 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 Magic Timber and Steel: Investment Evaluation with Net Present Value 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 Magic's Magic needs to make to build a sustainable competitive advantage.
