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 - – technology disruption, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, there is increasing trade war between United States & China,
talent flight as more people leaving formal jobs, increasing commodity prices, 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 -
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.
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.
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.
Effective Research and Development (R&D)
– Saskpower Dollar 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 SaskPower U.S. Debt: Hedging Currency Exposure - 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 switching costs
– The high switching costs that Saskpower Dollar 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.
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.
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.
Ability to recruit top talent
– Saskpower Dollar is one of the leading recruiters in the industry. Managers in the SaskPower U.S. Debt: Hedging Currency Exposure are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Sustainable margins compare to other players in Finance & Accounting industry
– SaskPower U.S. Debt: Hedging Currency Exposure firm has clearly differentiated products in the market place. This has enabled Saskpower Dollar to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Saskpower Dollar to invest into research and development (R&D) and innovation.
Ability to lead change in Finance & Accounting field
– Saskpower Dollar 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 Saskpower Dollar in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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 -
Aligning sales with marketing
– It come across in the case study SaskPower U.S. Debt: Hedging Currency Exposure that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case SaskPower U.S. Debt: Hedging Currency Exposure can leverage the sales team experience to cultivate customer relationships as Saskpower Dollar is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As SaskPower U.S. Debt: Hedging Currency Exposure HBR case study mentions - Saskpower Dollar takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Capital Spending Reduction
– Even during the low interest decade, Saskpower Dollar 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.
Slow decision making process
– As mentioned earlier in the report, Saskpower Dollar 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. Saskpower Dollar 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.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Saskpower Dollar 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.
Products dominated business model
– Even though Saskpower Dollar 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 - SaskPower U.S. Debt: Hedging Currency Exposure should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Saskpower Dollar 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.
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.
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.
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 -
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.
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 Saskpower Dollar 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Saskpower Dollar can use these opportunities to build new business models that can help the communities that Saskpower Dollar 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 Saskpower Dollar to increase its market reach. Saskpower Dollar 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.
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.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Saskpower Dollar can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Saskpower Dollar 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.
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.
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 -
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.
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 .
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Saskpower Dollar with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 .
Consumer confidence and its impact on Saskpower Dollar 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.
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.
Stagnating economy with rate increase
– Saskpower Dollar 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.
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.
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 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.
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.
