Case Study Description of Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant?
Alan Wong, an intern at Gem Asset Management, was pleasantly surprised when, as per his supervisor's instructions, reviewed the stock multiples (P/E, P/Sales, P/Book Value, and EV/EBITDA) of healthcare stocks listed on the Singapore Exchange (SGX). He recalled from his Equity Analysis 101 class at business school that the stock valuation metrics of companies in the same industry tended to trade within a narrow range. But certain stock valuation metrics of Healthway Medical Corporation appeared attractive in relation to SGX-listed peers. Alan performs the Du Pont analysis and financial statement analysis to ascertain if the Healthway stock was indeed attractive against the backdrop of its performance. Did the conclusions of his analysis support his initial impression?
Authors :: Ming Jian, Patricia Tan, Nandini Vijayaraghavan
Swot Analysis of "Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant?" written by Ming Jian, Patricia Tan, Nandini Vijayaraghavan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Healthway Sgx facing as an external strategic factors. Some of the topics covered in Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? case study are - Strategic Management Strategies, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, increasing commodity prices, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions,
increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Healthway Sgx, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Healthway Sgx 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 Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? can be done for the following purposes –
1. Strategic planning using facts provided in Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? case study
2. Improving business portfolio management of Healthway Sgx
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 Healthway Sgx
Strengths Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Healthway Sgx in Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? Harvard Business Review case study are -
Sustainable margins compare to other players in Finance & Accounting industry
– Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? firm has clearly differentiated products in the market place. This has enabled Healthway Sgx to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Healthway Sgx to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Healthway Sgx 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.
Training and development
– Healthway Sgx has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? 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.
Cross disciplinary teams
– Horizontal connected teams at the Healthway Sgx 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 Healthway Sgx
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Healthway Sgx does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Healthway Sgx has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Healthway Sgx has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Healthway Sgx to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Healthway Sgx 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 Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Healthway Sgx 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 Healthway Sgx is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Healthway Sgx digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Healthway Sgx 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.
Ability to recruit top talent
– Healthway Sgx is one of the leading recruiters in the industry. Managers in the Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Healthway Sgx in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? are -
Capital Spending Reduction
– Even during the low interest decade, Healthway Sgx 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.
Increasing silos among functional specialists
– The organizational structure of Healthway Sgx is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Healthway Sgx needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Healthway Sgx to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Healthway Sgx, firm in the HBR case study Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant?, is just above the industry average. Healthway Sgx 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.
Need for greater diversity
– Healthway Sgx 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.
Products dominated business model
– Even though Healthway Sgx 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 - Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant?, it seems that the employees of Healthway Sgx 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.
No frontier risks strategy
– After analyzing the HBR case study Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant?, 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.
Slow decision making process
– As mentioned earlier in the report, Healthway Sgx 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. Healthway Sgx 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.
Skills based hiring
– The stress on hiring functional specialists at Healthway Sgx 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, Healthway Sgx 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.
Opportunities Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? | 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 Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? are -
Developing new processes and practices
– Healthway Sgx 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.
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 Healthway Sgx 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, Healthway Sgx 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, Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant?, 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, Healthway Sgx can use these opportunities to build new business models that can help the communities that Healthway Sgx operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Healthway Sgx can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Healthway Sgx is facing challenges because of the dominance of functional experts in the organization. Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? 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.
Creating value in data economy
– The success of analytics program of Healthway Sgx has opened avenues for new revenue streams for the organization in the industry. This can help Healthway Sgx to build a more holistic ecosystem as suggested in the Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? case study. Healthway Sgx can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Healthway Sgx 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.
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. Healthway Sgx can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Healthway Sgx can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Healthway Sgx 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 Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Healthway Sgx to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Healthway Sgx can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Healthway Sgx 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 Healthway Sgx to hire the very best people irrespective of their geographical location.
Threats Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? are -
High dependence on third party suppliers
– Healthway Sgx 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.
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 Healthway Sgx.
Regulatory challenges
– Healthway Sgx 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.
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.
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. Healthway Sgx 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.
Increasing wage structure of Healthway Sgx
– 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 Healthway Sgx.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant?, Healthway Sgx 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 .
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 Healthway Sgx in the Finance & Accounting sector and impact the bottomline of the organization.
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. Healthway Sgx can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Healthway Sgx 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.
Shortening product life cycle
– it is one of the major threat that Healthway Sgx is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Healthway Sgx 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. Healthway Sgx can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Technology acceleration in Forth Industrial Revolution
– Healthway Sgx has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Healthway Sgx 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 Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? 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 Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? 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 Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? 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 Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? 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 Healthway Medical Corporation Limited: Do Stock Valuation Metrics Render Financial Analysis Redundant? 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 Healthway Sgx needs to make to build a sustainable competitive advantage.
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