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 - – there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels,
challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, 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 -
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.
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.
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.
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.
High brand equity
– Magic's Magic has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Magic's Magic 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 Magic's Magic digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Magic's Magic 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.
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.
Innovation driven organization
– Magic's Magic is one of the most innovative firm in sector. Manager in Magic Timber and Steel: Investment Evaluation with Net Present Value Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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.
Analytics focus
– Magic's Magic 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 Scott McCarthy 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.
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 -
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.
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 cash cycle compare to competitors
Magic's Magic 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.
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.
Capital Spending Reduction
– Even during the low interest decade, Magic's Magic 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Magic Timber and Steel: Investment Evaluation with Net Present Value, it seems that the employees of Magic's Magic 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.
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.
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 Magic's Magic supply chain. Even after few cautionary changes mentioned in the HBR case study - Magic Timber and Steel: Investment Evaluation with Net Present Value, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Magic's Magic vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Magic's Magic products
– To increase the profitability and margins on the products, Magic's Magic needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Magic's Magic 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.
No frontier risks strategy
– After analyzing the HBR case study Magic Timber and Steel: Investment Evaluation with Net Present Value, 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.
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 -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Magic's Magic 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.
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.
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.
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.
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. Magic's Magic 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. Magic's Magic 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.
Loyalty marketing
– Magic's Magic has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
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.
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.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Magic's Magic can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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 -
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.
Stagnating economy with rate increase
– Magic's Magic 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.
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 Magic's Magic.
Regulatory challenges
– Magic's Magic 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.
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.
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.
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.
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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Magic's Magic 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 Magic Timber and Steel: Investment Evaluation with Net Present Value .
Environmental challenges
– Magic's Magic 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. Magic's Magic can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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.