CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A)
In December 2015, Susan Chen, an equity analyst, was preparing a valuation of Hong Kong electric utility China Light and Power Holdings (CLP). In Part A of the case, Susan considered ways to incorporate environmental, social and governance (ESG) factors into the equity valuation. She believed that including these factors in the valuation framework could help to identify undervalued shares, in cases where ESG factors had not been fully priced in by the markets. Susan decided to focus on the ESG key performance indicators (KPIs) for the electric utility industry, and assess those that are financially material for the CLP's valuation. As such, she planned to create a "materiality matrix" plotting the size against the likelihood of each KPI's impact on the share price. Part B of this two-part case focuses on the valuation process. It describes ways of incorporating environmental, social, and governance (ESG) into company valuation. At first, Susan would make use of the materiality matrix. Only the KPIs of large size and high likelihood of happening should be integrated into the valuation process.
Swot Analysis of "CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A)" written by Entela Benz, Ellen Orr includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Valuation Esg facing as an external strategic factors. Some of the topics covered in CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) case study are - Strategic Management Strategies, Analytics, Corporate governance, Financial analysis, Sustainability and Finance & Accounting.
Some of the macro environment factors that can be used to understand the CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) casestudy better are - – increasing commodity prices, increasing energy prices, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google,
banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, etc
Introduction to SWOT Analysis of CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Valuation Esg, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Valuation Esg 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 CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) can be done for the following purposes –
1. Strategic planning using facts provided in CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) case study
2. Improving business portfolio management of Valuation Esg
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 Valuation Esg
Strengths CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Valuation Esg in CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) Harvard Business Review case study are -
Analytics focus
– Valuation Esg 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 Entela Benz, Ellen Orr 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.
Low bargaining power of suppliers
– Suppliers of Valuation Esg in the sector have low bargaining power. CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Valuation Esg to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Valuation Esg has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) 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.
Operational resilience
– The operational resilience strategy in the CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) 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.
Strong track record of project management
– Valuation Esg is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Valuation Esg has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Valuation Esg to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Valuation Esg 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 CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Valuation Esg 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 Valuation Esg is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Valuation Esg 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.
Diverse revenue streams
– Valuation Esg is present in almost all the verticals within the industry. This has provided firm in CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) 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.
Sustainable margins compare to other players in Finance & Accounting industry
– CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) firm has clearly differentiated products in the market place. This has enabled Valuation Esg to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Valuation Esg to invest into research and development (R&D) and innovation.
Ability to lead change in Finance & Accounting field
– Valuation Esg 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 Valuation Esg in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) are -
Need for greater diversity
– Valuation Esg 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.
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 Valuation Esg supply chain. Even after few cautionary changes mentioned in the HBR case study - CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Valuation Esg vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Valuation Esg products
– To increase the profitability and margins on the products, Valuation Esg needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) HBR case study mentions - Valuation Esg 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A), is just above the industry average. Valuation Esg 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.
Capital Spending Reduction
– Even during the low interest decade, Valuation Esg 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.
Low market penetration in new markets
– Outside its home market of Valuation Esg, firm in the HBR case study CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) 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, Valuation Esg 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.
Aligning sales with marketing
– It come across in the case study CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) 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 CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) can leverage the sales team experience to cultivate customer relationships as Valuation Esg is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A), it seems that the employees of Valuation Esg don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High cash cycle compare to competitors
Valuation Esg 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.
Opportunities CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) | 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 CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Valuation Esg 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, CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Valuation Esg 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.
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 Valuation Esg 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.
Creating value in data economy
– The success of analytics program of Valuation Esg has opened avenues for new revenue streams for the organization in the industry. This can help Valuation Esg to build a more holistic ecosystem as suggested in the CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) case study. Valuation Esg can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Valuation Esg in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Valuation Esg 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 CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Valuation Esg to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Valuation Esg 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.
Loyalty marketing
– Valuation Esg 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Valuation Esg can use these opportunities to build new business models that can help the communities that Valuation Esg operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Valuation Esg 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. Valuation Esg 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.
Buying journey improvements
– Valuation Esg can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) 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 Valuation Esg can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Valuation Esg 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.
Threats CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) are -
Consumer confidence and its impact on Valuation Esg 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.
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. Valuation Esg can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Valuation Esg with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Valuation Esg 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. Valuation Esg can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Shortening product life cycle
– it is one of the major threat that Valuation Esg is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Valuation Esg 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.
High dependence on third party suppliers
– Valuation Esg high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Valuation Esg 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 CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) .
Increasing wage structure of Valuation Esg
– 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 Valuation Esg.
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. Valuation Esg 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.
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 Valuation Esg.
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. Valuation Esg 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 CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A), Valuation Esg 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 .
Weighted SWOT Analysis of CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) 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 CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) 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 CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) 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 CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) 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 CLP Group: Environmental, Social and Governance Factors and Their Effects on Valuation (A) 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 Valuation Esg needs to make to build a sustainable competitive advantage.
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