Case Study Description of OSG Corporation: Risk Hedging Against Transaction Exposures
In Tokyo on Monday, April 24th, 2006, the U.S. dollar fell to a three-month low against the yen, carrying over its weakness from Friday's trading in New York, where it had fallen more than two yen (1.75%). Mr. Teruhide Osawa, president of OSG Corporation in Japan (OSG), a multinational cutting-tool producer, was following the foreign exchange market on his computer screen that Monday and was very surprised to see that the yen had appreciated 1.75% in one day. He wondered if such a big change would cause problems for the company's business. Faced with big fluctuations in the yen-dollar exchange rate, he summoned the manager of the Support Center Finance Group, asking him to analyze and report on how OSG's foreign currency transaction exposure was measured, and how it could be managed. He asked the manager specifically how the company was currently hedging its foreign currency exposures. The Finance Group gave a presentation at a meeting of the board of directors on May 29th, 2006. They explained that in order to eliminate short-term transaction exposure, a variety of hedging methods were available at varying costs to the company. After the presentation by the Finance Group, members of the board got into a heated discussion.
Swot Analysis of "OSG Corporation: Risk Hedging Against Transaction Exposures" written by Mitsuru Misawa includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Osg Yen facing as an external strategic factors. Some of the topics covered in OSG Corporation: Risk Hedging Against Transaction Exposures case study are - Strategic Management Strategies, Currency, Financial analysis, Financial management, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the OSG Corporation: Risk Hedging Against Transaction Exposures casestudy better are - – cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs,
there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of OSG Corporation: Risk Hedging Against Transaction Exposures
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in OSG Corporation: Risk Hedging Against Transaction Exposures case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Osg Yen, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Osg Yen 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 OSG Corporation: Risk Hedging Against Transaction Exposures can be done for the following purposes –
1. Strategic planning using facts provided in OSG Corporation: Risk Hedging Against Transaction Exposures case study
2. Improving business portfolio management of Osg Yen
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 Osg Yen
Strengths OSG Corporation: Risk Hedging Against Transaction Exposures | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Osg Yen in OSG Corporation: Risk Hedging Against Transaction Exposures Harvard Business Review case study are -
Learning organization
- Osg Yen 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 Osg Yen is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in OSG Corporation: Risk Hedging Against Transaction Exposures Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Finance & Accounting industry
– OSG Corporation: Risk Hedging Against Transaction Exposures firm has clearly differentiated products in the market place. This has enabled Osg Yen to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Osg Yen to invest into research and development (R&D) and innovation.
Ability to lead change in Finance & Accounting field
– Osg Yen 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 Osg Yen in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Osg Yen 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 Osg Yen 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.
Organizational Resilience of Osg Yen
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Osg Yen does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Osg Yen 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 Mitsuru Misawa 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 Osg Yen in the sector have low bargaining power. OSG Corporation: Risk Hedging Against Transaction Exposures has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Osg Yen to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the OSG Corporation: Risk Hedging Against Transaction Exposures 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.
Effective Research and Development (R&D)
– Osg Yen 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 OSG Corporation: Risk Hedging Against Transaction Exposures - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Osg Yen has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in OSG Corporation: Risk Hedging Against Transaction Exposures 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.
Successful track record of launching new products
– Osg Yen has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Osg Yen 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.
Weaknesses OSG Corporation: Risk Hedging Against Transaction Exposures | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of OSG Corporation: Risk Hedging Against Transaction Exposures are -
Slow to strategic competitive environment developments
– As OSG Corporation: Risk Hedging Against Transaction Exposures HBR case study mentions - Osg Yen 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.
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 Osg Yen supply chain. Even after few cautionary changes mentioned in the HBR case study - OSG Corporation: Risk Hedging Against Transaction Exposures, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Osg Yen vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study OSG Corporation: Risk Hedging Against Transaction Exposures 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 OSG Corporation: Risk Hedging Against Transaction Exposures can leverage the sales team experience to cultivate customer relationships as Osg Yen is planning to shift buying processes online.
Interest costs
– Compare to the competition, Osg Yen 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.
Skills based hiring
– The stress on hiring functional specialists at Osg Yen 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.
Slow decision making process
– As mentioned earlier in the report, Osg Yen 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. Osg Yen 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 Osg Yen is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Osg Yen needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Osg Yen to focus more on services rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Osg Yen 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study OSG Corporation: Risk Hedging Against Transaction Exposures, is just above the industry average. Osg Yen 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Osg Yen is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study OSG Corporation: Risk Hedging Against Transaction Exposures can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Osg Yen 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 - OSG Corporation: Risk Hedging Against Transaction Exposures should strive to include more intangible value offerings along with its core products and services.
Opportunities OSG Corporation: Risk Hedging Against Transaction Exposures | 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 OSG Corporation: Risk Hedging Against Transaction Exposures are -
Leveraging digital technologies
– Osg Yen 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.
Using analytics as competitive advantage
– Osg Yen 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 OSG Corporation: Risk Hedging Against Transaction Exposures - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Osg Yen to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Osg Yen can use these opportunities to build new business models that can help the communities that Osg Yen 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. Osg Yen 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. Osg Yen 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.
Better consumer reach
– The expansion of the 5G network will help Osg Yen to increase its market reach. Osg Yen 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, Osg Yen 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Osg Yen 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Osg Yen 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 Osg Yen to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Osg Yen can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Osg Yen 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, OSG Corporation: Risk Hedging Against Transaction Exposures, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Osg Yen 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.
Building a culture of innovation
– managers at Osg Yen 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.
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. Osg Yen can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats OSG Corporation: Risk Hedging Against Transaction Exposures External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study OSG Corporation: Risk Hedging Against Transaction Exposures are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Osg Yen 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.
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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Osg Yen 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 OSG Corporation: Risk Hedging Against Transaction Exposures .
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. Osg Yen can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Osg Yen needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 Osg Yen in the Finance & Accounting sector and impact the bottomline of the organization.
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.
Shortening product life cycle
– it is one of the major threat that Osg Yen is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Osg Yen 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. Osg Yen can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing wage structure of Osg Yen
– 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 Osg Yen.
Technology acceleration in Forth Industrial Revolution
– Osg Yen has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Osg Yen 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.
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. Osg Yen 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.
Regulatory challenges
– Osg Yen 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 OSG Corporation: Risk Hedging Against Transaction Exposures 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 OSG Corporation: Risk Hedging Against Transaction Exposures 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 OSG Corporation: Risk Hedging Against Transaction Exposures 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 OSG Corporation: Risk Hedging Against Transaction Exposures 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 OSG Corporation: Risk Hedging Against Transaction Exposures 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 Osg Yen needs to make to build a sustainable competitive advantage.
