Case Study Description of Steinhoff International: Accounting Irregularities and Financial Markets
Steinhoff International Holdings N.V. was a holding company, whose subsidiaries manufactured, distributed and sold furniture and household products. Steinhoff was widely known as a South African company because it first listed on the South African Johannesburg Stock Exchange (JSE) and its global headquarters was in South Africa. However, Steinhoff went on to expand from distribution and manufacturing to retail businesses across 30 countries, employing over 130 thousand people. As its global revenues grew, especially in Europe, Steinhoff created a new holding company, Steinhoff International Holdings N.V. incorporated in the Netherlands and with a primary listing in Germany and secondary listing on the JSE. Steinhoff was soon mired in allegations and investigations of accounting misrepresentations, and came crashing on December 6, 2017 after admission of possible accounting irregularities. The case is set days after news broke out about the accounting irregularities and explores the decision of the Johannesburg Stock Exchange (JSE) on whether to suspend the listing of Steinhoff's securities.
Swot Analysis of "Steinhoff International: Accounting Irregularities and Financial Markets" written by Siko Sikochi, Austin Lim includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Steinhoff Jse facing as an external strategic factors. Some of the topics covered in Steinhoff International: Accounting Irregularities and Financial Markets case study are - Strategic Management Strategies, Corporate governance, Financial management, Financial markets, Marketing, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Steinhoff International: Accounting Irregularities and Financial Markets casestudy better are - – increasing commodity prices, supply chains are disrupted by pandemic , wage bills are increasing, increasing household debt because of falling income levels, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, technology disruption,
increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Steinhoff International: Accounting Irregularities and Financial Markets
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Steinhoff International: Accounting Irregularities and Financial Markets case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Steinhoff Jse, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Steinhoff Jse 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 Steinhoff International: Accounting Irregularities and Financial Markets can be done for the following purposes –
1. Strategic planning using facts provided in Steinhoff International: Accounting Irregularities and Financial Markets case study
2. Improving business portfolio management of Steinhoff Jse
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 Steinhoff Jse
Strengths Steinhoff International: Accounting Irregularities and Financial Markets | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Steinhoff Jse in Steinhoff International: Accounting Irregularities and Financial Markets Harvard Business Review case study are -
Strong track record of project management
– Steinhoff Jse is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Steinhoff Jse has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Steinhoff International: Accounting Irregularities and Financial Markets 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.
Highly skilled collaborators
– Steinhoff Jse 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 Steinhoff International: Accounting Irregularities and Financial Markets HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Steinhoff Jse 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.
Effective Research and Development (R&D)
– Steinhoff Jse 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 Steinhoff International: Accounting Irregularities and Financial Markets - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Steinhoff International: Accounting Irregularities and Financial Markets 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 lead change in Finance & Accounting field
– Steinhoff Jse is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Steinhoff Jse in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Steinhoff Jse is one of the most innovative firm in sector. Manager in Steinhoff International: Accounting Irregularities and Financial Markets Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Steinhoff Jse digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Steinhoff Jse 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.
High brand equity
– Steinhoff Jse has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Steinhoff Jse to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Steinhoff Jse in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Steinhoff Jse 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.
Weaknesses Steinhoff International: Accounting Irregularities and Financial Markets | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Steinhoff International: Accounting Irregularities and Financial Markets are -
Increasing silos among functional specialists
– The organizational structure of Steinhoff Jse is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Steinhoff Jse needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Steinhoff Jse to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Steinhoff Jse, firm in the HBR case study Steinhoff International: Accounting Irregularities and Financial Markets needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the segment, Steinhoff Jse 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Steinhoff International: Accounting Irregularities and Financial Markets has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Steinhoff Jse 's lucrative customers.
Lack of clear differentiation of Steinhoff Jse products
– To increase the profitability and margins on the products, Steinhoff Jse needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study Steinhoff International: Accounting Irregularities and Financial Markets, 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Siko Sikochi, Austin Lim suggests that, Steinhoff Jse 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Steinhoff Jse is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Steinhoff International: Accounting Irregularities and Financial Markets can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Steinhoff International: Accounting Irregularities and Financial Markets, in the dynamic environment Steinhoff Jse has struggled to respond to the nimble upstart competition. Steinhoff Jse has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Steinhoff Jse 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.
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 Steinhoff Jse supply chain. Even after few cautionary changes mentioned in the HBR case study - Steinhoff International: Accounting Irregularities and Financial Markets, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Steinhoff Jse vulnerable to further global disruptions in South East Asia.
Opportunities Steinhoff International: Accounting Irregularities and Financial Markets | 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 Steinhoff International: Accounting Irregularities and Financial Markets are -
Developing new processes and practices
– Steinhoff Jse 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 Steinhoff Jse 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.
Loyalty marketing
– Steinhoff Jse 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Steinhoff Jse 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, Steinhoff International: Accounting Irregularities and Financial Markets, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Steinhoff Jse has opened avenues for new revenue streams for the organization in the industry. This can help Steinhoff Jse to build a more holistic ecosystem as suggested in the Steinhoff International: Accounting Irregularities and Financial Markets case study. Steinhoff Jse can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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. Steinhoff Jse 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. Steinhoff Jse can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Steinhoff Jse is facing challenges because of the dominance of functional experts in the organization. Steinhoff International: Accounting Irregularities and Financial Markets 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.
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. Steinhoff Jse can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Steinhoff Jse in the consumer business. Now Steinhoff Jse can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Steinhoff Jse 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.
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. Steinhoff Jse can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Steinhoff Jse 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.
Leveraging digital technologies
– Steinhoff Jse 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.
Threats Steinhoff International: Accounting Irregularities and Financial Markets External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Steinhoff International: Accounting Irregularities and Financial Markets are -
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 Steinhoff Jse in the Finance & Accounting sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Steinhoff Jse is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Steinhoff Jse 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.
Increasing wage structure of Steinhoff Jse
– 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 Steinhoff Jse.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Steinhoff Jse with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Steinhoff Jse 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.
Regulatory challenges
– Steinhoff Jse 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.
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. Steinhoff Jse 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.
Environmental challenges
– Steinhoff Jse 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. Steinhoff Jse can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Steinhoff International: Accounting Irregularities and Financial Markets, Steinhoff Jse 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 .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Steinhoff Jse 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 Steinhoff International: Accounting Irregularities and Financial Markets .
Stagnating economy with rate increase
– Steinhoff Jse 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.
Weighted SWOT Analysis of Steinhoff International: Accounting Irregularities and Financial Markets 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 Steinhoff International: Accounting Irregularities and Financial Markets 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 Steinhoff International: Accounting Irregularities and Financial Markets 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 Steinhoff International: Accounting Irregularities and Financial Markets 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 Steinhoff International: Accounting Irregularities and Financial Markets 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 Steinhoff Jse needs to make to build a sustainable competitive advantage.
