Case Study Description of Union Carbide Corp.: Interest Rate Risk Management
Union Carbide's board of directors is asked to evaluate a proposal from the staff treasurer's that would articulate policies to manage its debt portfolio. The staff proposes that shareholder value will be maximized if the firm manages its exposure to interest rates by matching the duration of its liabilities to that of its assets. Based on statistical analysis, examination of rivals' policies, and reasoning, they argue that the firm, establish a benchmark duration for its liabilities against which all future active management activities be measured.
Swot Analysis of "Union Carbide Corp.: Interest Rate Risk Management" written by Peter Tufano, Jonathan S. Headley includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Duration Liabilities facing as an external strategic factors. Some of the topics covered in Union Carbide Corp.: Interest Rate Risk Management case study are - Strategic Management Strategies, Financial management, Financial markets, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Union Carbide Corp.: Interest Rate Risk Management casestudy better are - – increasing government debt because of Covid-19 spendings, increasing energy prices, geopolitical disruptions, challanges to central banks by blockchain based private currencies, there is backlash against globalization, wage bills are increasing, increasing transportation and logistics costs,
talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Union Carbide Corp.: Interest Rate Risk Management
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Union Carbide Corp.: Interest Rate Risk Management case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Duration Liabilities, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Duration Liabilities 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 Union Carbide Corp.: Interest Rate Risk Management can be done for the following purposes –
1. Strategic planning using facts provided in Union Carbide Corp.: Interest Rate Risk Management case study
2. Improving business portfolio management of Duration Liabilities
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 Duration Liabilities
Strengths Union Carbide Corp.: Interest Rate Risk Management | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Duration Liabilities in Union Carbide Corp.: Interest Rate Risk Management Harvard Business Review case study are -
Effective Research and Development (R&D)
– Duration Liabilities 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 Union Carbide Corp.: Interest Rate Risk Management - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Union Carbide Corp.: Interest Rate Risk Management 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.
High switching costs
– The high switching costs that Duration Liabilities 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.
Cross disciplinary teams
– Horizontal connected teams at the Duration Liabilities are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Diverse revenue streams
– Duration Liabilities is present in almost all the verticals within the industry. This has provided firm in Union Carbide Corp.: Interest Rate Risk Management 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.
Highly skilled collaborators
– Duration Liabilities 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 Union Carbide Corp.: Interest Rate Risk Management HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Duration Liabilities is one of the leading recruiters in the industry. Managers in the Union Carbide Corp.: Interest Rate Risk Management are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Duration Liabilities has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Duration Liabilities to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Duration Liabilities in the sector have low bargaining power. Union Carbide Corp.: Interest Rate Risk Management has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Duration Liabilities to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Duration Liabilities has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Duration Liabilities 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Duration Liabilities digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Duration Liabilities 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.
Superior customer experience
– The customer experience strategy of Duration Liabilities in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Union Carbide Corp.: Interest Rate Risk Management | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Union Carbide Corp.: Interest Rate Risk Management are -
Slow to strategic competitive environment developments
– As Union Carbide Corp.: Interest Rate Risk Management HBR case study mentions - Duration Liabilities 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.
Skills based hiring
– The stress on hiring functional specialists at Duration Liabilities 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.
Increasing silos among functional specialists
– The organizational structure of Duration Liabilities is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Duration Liabilities needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Duration Liabilities to focus more on services rather than just following the product oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Union Carbide Corp.: Interest Rate Risk Management HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Duration Liabilities has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Duration Liabilities, firm in the HBR case study Union Carbide Corp.: Interest Rate Risk Management needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Duration Liabilities 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.
Products dominated business model
– Even though Duration Liabilities 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 - Union Carbide Corp.: Interest Rate Risk Management should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Union Carbide Corp.: Interest Rate Risk Management, in the dynamic environment Duration Liabilities has struggled to respond to the nimble upstart competition. Duration Liabilities has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study Union Carbide Corp.: Interest Rate Risk Management has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Duration Liabilities 's lucrative customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Union Carbide Corp.: Interest Rate Risk Management, it seems that the employees of Duration Liabilities 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.
Need for greater diversity
– Duration Liabilities 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.
Opportunities Union Carbide Corp.: Interest Rate Risk Management | 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 Union Carbide Corp.: Interest Rate Risk Management are -
Buying journey improvements
– Duration Liabilities can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Union Carbide Corp.: Interest Rate Risk Management 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.
Using analytics as competitive advantage
– Duration Liabilities 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 Union Carbide Corp.: Interest Rate Risk Management - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Duration Liabilities to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Duration Liabilities 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.
Manufacturing automation
– Duration Liabilities 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, Duration Liabilities 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, Union Carbide Corp.: Interest Rate Risk Management, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Duration Liabilities can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Duration Liabilities can use these opportunities to build new business models that can help the communities that Duration Liabilities operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Duration Liabilities 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.
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. Duration Liabilities can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Duration Liabilities has opened avenues for new revenue streams for the organization in the industry. This can help Duration Liabilities to build a more holistic ecosystem as suggested in the Union Carbide Corp.: Interest Rate Risk Management case study. Duration Liabilities can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Duration Liabilities is facing challenges because of the dominance of functional experts in the organization. Union Carbide Corp.: Interest Rate Risk Management 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. Duration Liabilities can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Duration Liabilities 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 Union Carbide Corp.: Interest Rate Risk Management External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Union Carbide Corp.: Interest Rate Risk Management are -
Stagnating economy with rate increase
– Duration Liabilities 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.
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. Duration Liabilities 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.
Increasing wage structure of Duration Liabilities
– 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 Duration Liabilities.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Duration Liabilities 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.
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 Duration Liabilities business can come under increasing regulations regarding data privacy, data security, etc.
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. Duration Liabilities needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Duration Liabilities has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Duration Liabilities 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.
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. Duration Liabilities can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
High dependence on third party suppliers
– Duration Liabilities 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, Duration Liabilities 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 Union Carbide Corp.: Interest Rate Risk Management .
Shortening product life cycle
– it is one of the major threat that Duration Liabilities is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Duration Liabilities.
Weighted SWOT Analysis of Union Carbide Corp.: Interest Rate Risk Management 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 Union Carbide Corp.: Interest Rate Risk Management 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 Union Carbide Corp.: Interest Rate Risk Management 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 Union Carbide Corp.: Interest Rate Risk Management 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 Union Carbide Corp.: Interest Rate Risk Management 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 Duration Liabilities needs to make to build a sustainable competitive advantage.
