Parex Banka: Issuing a 200 Million Bond SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Parex Banka: Issuing a 200 Million Bond
After successfully issuing a a‚¬100 million Eurobond in 2005, executives at Parex Banka (Parex) in Riga, Latvia are considering issuing a second bond with a face value of a‚¬200 million and a term of 5 years. In planning the bond issue, the bank is debating the bond's characteristics, such as the currency (Euro versus U.S. dollar), the spread they would initially offer and how they would approach the meeting with potential investors. Students are tasked with assessing the bank's financing needs and recommending whether the bond should be issued and if so, its currency and price.
Swot Analysis of "Parex Banka: Issuing a 200 Million Bond" written by Basil A. Kalymon, Jordan Mitchell includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Parex Bond facing as an external strategic factors. Some of the topics covered in Parex Banka: Issuing a 200 Million Bond case study are - Strategic Management Strategies, Financial markets and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Parex Banka: Issuing a 200 Million Bond casestudy better are - – wage bills are increasing, there is increasing trade war between United States & China, there is backlash against globalization, challanges to central banks by blockchain based private currencies, technology disruption, increasing household debt because of falling income levels, central banks are concerned over increasing inflation,
banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Parex Banka: Issuing a 200 Million Bond
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Parex Banka: Issuing a 200 Million Bond case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Parex Bond, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Parex Bond 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 Parex Banka: Issuing a 200 Million Bond can be done for the following purposes –
1. Strategic planning using facts provided in Parex Banka: Issuing a 200 Million Bond case study
2. Improving business portfolio management of Parex Bond
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 Parex Bond
Strengths Parex Banka: Issuing a 200 Million Bond | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Parex Bond in Parex Banka: Issuing a 200 Million Bond Harvard Business Review case study are -
Highly skilled collaborators
– Parex Bond 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 Parex Banka: Issuing a 200 Million Bond HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Parex Bond has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Parex Bond 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.
Learning organization
- Parex Bond 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 Parex Bond is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Parex Banka: Issuing a 200 Million Bond Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Parex Bond is one of the leading recruiters in the industry. Managers in the Parex Banka: Issuing a 200 Million Bond are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– Parex Bond is one of the most innovative firm in sector. Manager in Parex Banka: Issuing a 200 Million Bond Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Parex Bond
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Parex Bond does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Parex Bond in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Parex Bond in the sector have low bargaining power. Parex Banka: Issuing a 200 Million Bond has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Parex Bond to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Parex Bond 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 Basil A. Kalymon, Jordan Mitchell 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.
High switching costs
– The high switching costs that Parex Bond 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Parex Banka: Issuing a 200 Million Bond firm has clearly differentiated products in the market place. This has enabled Parex Bond to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Parex Bond to invest into research and development (R&D) and innovation.
Training and development
– Parex Bond has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Parex Banka: Issuing a 200 Million Bond 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.
Weaknesses Parex Banka: Issuing a 200 Million Bond | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Parex Banka: Issuing a 200 Million Bond are -
Slow decision making process
– As mentioned earlier in the report, Parex Bond 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. Parex Bond 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.
Aligning sales with marketing
– It come across in the case study Parex Banka: Issuing a 200 Million Bond 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 Parex Banka: Issuing a 200 Million Bond can leverage the sales team experience to cultivate customer relationships as Parex Bond is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Parex Bond, firm in the HBR case study Parex Banka: Issuing a 200 Million Bond needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Parex Bond 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Parex Banka: Issuing a 200 Million Bond, is just above the industry average. Parex Bond 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 strategic competitive environment developments
– As Parex Banka: Issuing a 200 Million Bond HBR case study mentions - Parex Bond 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 bargaining power of channel partners
– Because of the regulatory requirements, Basil A. Kalymon, Jordan Mitchell suggests that, Parex Bond 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
Parex Bond 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Parex Bond 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.
Lack of clear differentiation of Parex Bond products
– To increase the profitability and margins on the products, Parex Bond needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Parex Bond 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.
Opportunities Parex Banka: Issuing a 200 Million Bond | 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 Parex Banka: Issuing a 200 Million Bond are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Parex Bond 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.
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 Parex Bond 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Parex Bond is facing challenges because of the dominance of functional experts in the organization. Parex Banka: Issuing a 200 Million Bond 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.
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. Parex Bond can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Parex Bond 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.
Leveraging digital technologies
– Parex Bond 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.
Creating value in data economy
– The success of analytics program of Parex Bond has opened avenues for new revenue streams for the organization in the industry. This can help Parex Bond to build a more holistic ecosystem as suggested in the Parex Banka: Issuing a 200 Million Bond case study. Parex Bond can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Parex Bond to increase its market reach. Parex Bond 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Parex Bond can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Parex Bond 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. Parex Bond 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. Parex Bond 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.
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. Parex Bond can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Parex Bond can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Threats Parex Banka: Issuing a 200 Million Bond External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Parex Banka: Issuing a 200 Million Bond are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Parex Bond 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Parex Bond 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 Parex Banka: Issuing a 200 Million Bond .
Increasing wage structure of Parex Bond
– 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 Parex Bond.
Regulatory challenges
– Parex Bond 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.
Technology acceleration in Forth Industrial Revolution
– Parex Bond has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Parex Bond 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.
High dependence on third party suppliers
– Parex Bond 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.
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. Parex Bond can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Parex Bond 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 Parex Bond with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Environmental challenges
– Parex Bond 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. Parex Bond can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Parex Banka: Issuing a 200 Million Bond, Parex Bond 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 .
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. Parex Bond 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.
Weighted SWOT Analysis of Parex Banka: Issuing a 200 Million Bond 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 Parex Banka: Issuing a 200 Million Bond 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 Parex Banka: Issuing a 200 Million Bond 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 Parex Banka: Issuing a 200 Million Bond 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 Parex Banka: Issuing a 200 Million Bond 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 Parex Bond needs to make to build a sustainable competitive advantage.