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 - – geopolitical disruptions, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, there is backlash against globalization, wage bills are increasing, increasing government debt because of Covid-19 spendings,
increasing household debt because of falling income levels, supply chains are disrupted by pandemic , 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 -
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.
Innovation driven organization
– Osg Yen is one of the most innovative firm in sector. Manager in OSG Corporation: Risk Hedging Against Transaction Exposures 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)
– 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.
Diverse revenue streams
– Osg Yen is present in almost all the verticals within the industry. This has provided firm in OSG Corporation: Risk Hedging Against Transaction Exposures 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.
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.
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.
Highly skilled collaborators
– Osg Yen has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in OSG Corporation: Risk Hedging Against Transaction Exposures HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Osg Yen 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
– Osg Yen has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Osg Yen to keep acquiring new customers and building profitable relationship with both the new and loyal 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Osg Yen digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Osg Yen 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.
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.
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 -
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.
Need for greater diversity
– Osg Yen 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.
No frontier risks strategy
– After analyzing the HBR case study OSG Corporation: Risk Hedging Against Transaction Exposures, 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.
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.
High bargaining power of channel partners
– Because of the regulatory requirements, Mitsuru Misawa suggests that, Osg Yen 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
Osg Yen 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study OSG Corporation: Risk Hedging Against Transaction Exposures, in the dynamic environment Osg Yen has struggled to respond to the nimble upstart competition. Osg Yen has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Osg Yen products
– To increase the profitability and margins on the products, Osg Yen needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
Low market penetration in new markets
– Outside its home market of Osg Yen, firm in the HBR case study OSG Corporation: Risk Hedging Against Transaction Exposures needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 -
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.
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.
Buying journey improvements
– Osg Yen can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. OSG Corporation: Risk Hedging Against Transaction Exposures 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.
Learning at scale
– Online learning technologies has now opened space for Osg Yen 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.
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.
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 Osg Yen 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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Osg Yen is facing challenges because of the dominance of functional experts in the organization. OSG Corporation: Risk Hedging Against Transaction Exposures 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.
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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Osg Yen can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Osg Yen has opened avenues for new revenue streams for the organization in the industry. This can help Osg Yen to build a more holistic ecosystem as suggested in the OSG Corporation: Risk Hedging Against Transaction Exposures case study. Osg Yen can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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 -
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.
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.
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.
Stagnating economy with rate increase
– Osg Yen 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Osg Yen with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 dependence on third party suppliers
– Osg Yen 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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Osg Yen business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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 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.
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.