Case Study Description of SaskPower U.S. Debt: Hedging Currency Exposure
On December 19, 2002, the board of directors of the Saskatchewan Power Corporation (SaskPower) was contemplating the approval of the company's 2003 foreign exchange strategy to manage long-term currency risk exposure in the utility's U.S. dollar debt. SaskPower had borrowed extensively in the early 1990s, with maturities ranging from 10 to 30 years. The U.S. dollar exchange rate against the Canadian dollar had since increased, thereby increasing the effective burden of the debt and reducing the utility's net income. A change in accounting practices implemented in 2001 required SaskPower to recognize as a gain or a loss in the current year any translation differences in the value of its outstanding U.S. dollar debt resulting from fluctuations in the exchange rate during the year. This policy change led to a significant reduction in net income in 2001, followed by a significant increase during the first eight months of 2002. The volatility in earnings had complicated the task of setting rates for electricity and had proved politically difficult to justify. In late 2002, SaskPower had to decide whether and how to hedge its currency exposure in outstanding U.S. dollar debt.
Swot Analysis of "SaskPower U.S. Debt: Hedging Currency Exposure" written by Walid Busaba, Saqib A. Khan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Saskpower Dollar facing as an external strategic factors. Some of the topics covered in SaskPower U.S. Debt: Hedging Currency Exposure case study are - Strategic Management Strategies, International business, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the SaskPower U.S. Debt: Hedging Currency Exposure casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, wage bills are increasing, increasing commodity prices, there is increasing trade war between United States & China,
talent flight as more people leaving formal jobs, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of SaskPower U.S. Debt: Hedging Currency Exposure
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in SaskPower U.S. Debt: Hedging Currency Exposure case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Saskpower Dollar, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Saskpower Dollar 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 SaskPower U.S. Debt: Hedging Currency Exposure can be done for the following purposes –
1. Strategic planning using facts provided in SaskPower U.S. Debt: Hedging Currency Exposure case study
2. Improving business portfolio management of Saskpower Dollar
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 Saskpower Dollar
Strengths SaskPower U.S. Debt: Hedging Currency Exposure | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Saskpower Dollar in SaskPower U.S. Debt: Hedging Currency Exposure Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Saskpower Dollar 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.
Analytics focus
– Saskpower Dollar 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 Walid Busaba, Saqib A. Khan can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Organizational Resilience of Saskpower Dollar
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Saskpower Dollar does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Saskpower Dollar has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Saskpower Dollar 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.
Innovation driven organization
– Saskpower Dollar is one of the most innovative firm in sector. Manager in SaskPower U.S. Debt: Hedging Currency Exposure Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Saskpower Dollar is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Saskpower Dollar in the sector have low bargaining power. SaskPower U.S. Debt: Hedging Currency Exposure has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Saskpower Dollar to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Saskpower Dollar 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 Saskpower Dollar is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in SaskPower U.S. Debt: Hedging Currency Exposure Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Saskpower Dollar in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Saskpower Dollar is present in almost all the verticals within the industry. This has provided firm in SaskPower U.S. Debt: Hedging Currency Exposure 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
– Saskpower Dollar has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Saskpower Dollar 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 Saskpower Dollar digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Saskpower Dollar 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.
Weaknesses SaskPower U.S. Debt: Hedging Currency Exposure | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SaskPower U.S. Debt: Hedging Currency Exposure are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study SaskPower U.S. Debt: Hedging Currency Exposure, it seems that the employees of Saskpower Dollar 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.
Low market penetration in new markets
– Outside its home market of Saskpower Dollar, firm in the HBR case study SaskPower U.S. Debt: Hedging Currency Exposure needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study SaskPower U.S. Debt: Hedging Currency Exposure, in the dynamic environment Saskpower Dollar has struggled to respond to the nimble upstart competition. Saskpower Dollar has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners
– Because of the regulatory requirements, Walid Busaba, Saqib A. Khan suggests that, Saskpower Dollar 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 cash cycle compare to competitors
Saskpower Dollar 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Saskpower Dollar is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study SaskPower U.S. Debt: Hedging Currency Exposure can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study SaskPower U.S. Debt: Hedging Currency Exposure, 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.
Interest costs
– Compare to the competition, Saskpower Dollar 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.
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 Saskpower Dollar supply chain. Even after few cautionary changes mentioned in the HBR case study - SaskPower U.S. Debt: Hedging Currency Exposure, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Saskpower Dollar vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Saskpower Dollar 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.
Increasing silos among functional specialists
– The organizational structure of Saskpower Dollar is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Saskpower Dollar needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Saskpower Dollar to focus more on services rather than just following the product oriented approach.
Opportunities SaskPower U.S. Debt: Hedging Currency Exposure | 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 SaskPower U.S. Debt: Hedging Currency Exposure are -
Loyalty marketing
– Saskpower Dollar 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.
Creating value in data economy
– The success of analytics program of Saskpower Dollar has opened avenues for new revenue streams for the organization in the industry. This can help Saskpower Dollar to build a more holistic ecosystem as suggested in the SaskPower U.S. Debt: Hedging Currency Exposure case study. Saskpower Dollar can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Saskpower Dollar 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 Saskpower Dollar to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Saskpower Dollar 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Saskpower Dollar 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.
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. Saskpower Dollar 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. Saskpower Dollar 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.
Manufacturing automation
– Saskpower Dollar 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Saskpower Dollar is facing challenges because of the dominance of functional experts in the organization. SaskPower U.S. Debt: Hedging Currency Exposure 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.
Buying journey improvements
– Saskpower Dollar can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. SaskPower U.S. Debt: Hedging Currency Exposure 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Saskpower Dollar 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.
Developing new processes and practices
– Saskpower Dollar 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Saskpower Dollar 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, SaskPower U.S. Debt: Hedging Currency Exposure, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Saskpower Dollar can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats SaskPower U.S. Debt: Hedging Currency Exposure External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study SaskPower U.S. Debt: Hedging Currency Exposure 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 Saskpower Dollar in the Finance & Accounting sector and impact the bottomline of the organization.
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. Saskpower Dollar 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Saskpower Dollar 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 SaskPower U.S. Debt: Hedging Currency Exposure .
High dependence on third party suppliers
– Saskpower Dollar 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.
Environmental challenges
– Saskpower Dollar 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. Saskpower Dollar can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Saskpower Dollar 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.
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 Saskpower Dollar.
Technology acceleration in Forth Industrial Revolution
– Saskpower Dollar has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Saskpower Dollar 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.
Increasing wage structure of Saskpower Dollar
– 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 Saskpower Dollar.
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.
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. Saskpower Dollar needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study SaskPower U.S. Debt: Hedging Currency Exposure, Saskpower Dollar 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 .
Regulatory challenges
– Saskpower Dollar 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.
Weighted SWOT Analysis of SaskPower U.S. Debt: Hedging Currency Exposure 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 SaskPower U.S. Debt: Hedging Currency Exposure 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 SaskPower U.S. Debt: Hedging Currency Exposure 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 SaskPower U.S. Debt: Hedging Currency Exposure 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 SaskPower U.S. Debt: Hedging Currency Exposure 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 Saskpower Dollar needs to make to build a sustainable competitive advantage.