Supplement to case IN1047. A major concern of the family owners was whether to try to sell their company. The "C" case gives students the opportunity to consider many approaches to valuing a firm: comparative valuation (P/E ratios, price-to-book ratios, price to cash flow ratios, and price to sales ratios) or a DCF valuation. Both approaches present considerable analytical problems. A major weakness of the comparative approach is to find a similar company. Hong Kong, a relatively small stock market, has no firm in the toy business to use as a guide. Other publically traded firms of similar size, markets, and product-lines are found in the Japanese and the American stock markets. But given the differences among the companies and also the markets, how useful are these? There is enough data in the case to allow the student to make a DCF valuation, although projection of the cash flows is subject to a wide range of possibilities. An estimate of a reasonable discount rate also is required, raising questions (assuming use of the CAPM) such as what should be the firm's beta, the risk-free rate, and the equity market premium. Students will need at least two hours of preparation plus a full class session.
Swot Analysis of "Great Eastern Toys (C)" written by Gabriel Hawawini, Lee Remmers includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ratios Dcf facing as an external strategic factors. Some of the topics covered in Great Eastern Toys (C) case study are - Strategic Management Strategies, Financial management, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Great Eastern Toys (C) casestudy better are - – challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, wage bills are increasing,
increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Great Eastern Toys (C)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Great Eastern Toys (C) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ratios Dcf, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ratios Dcf 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 Great Eastern Toys (C) can be done for the following purposes –
1. Strategic planning using facts provided in Great Eastern Toys (C) case study
2. Improving business portfolio management of Ratios Dcf
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 Ratios Dcf
Strengths Great Eastern Toys (C) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ratios Dcf in Great Eastern Toys (C) Harvard Business Review case study are -
Highly skilled collaborators
– Ratios Dcf 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 Great Eastern Toys (C) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Ratios Dcf 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 Ratios Dcf is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Great Eastern Toys (C) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Ratios Dcf is one of the most innovative firm in sector. Manager in Great Eastern Toys (C) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Ratios Dcf has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Great Eastern Toys (C) 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.
Cross disciplinary teams
– Horizontal connected teams at the Ratios Dcf 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.
Ability to lead change in Finance & Accounting field
– Ratios Dcf 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 Ratios Dcf in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Ratios Dcf is one of the leading recruiters in the industry. Managers in the Great Eastern Toys (C) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Ratios Dcf 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 Great Eastern Toys (C) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Ratios Dcf in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Great Eastern Toys (C) 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.
Analytics focus
– Ratios Dcf 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 Gabriel Hawawini, Lee Remmers 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Ratios Dcf digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ratios Dcf 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.
Weaknesses Great Eastern Toys (C) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Great Eastern Toys (C) are -
Increasing silos among functional specialists
– The organizational structure of Ratios Dcf is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Ratios Dcf needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ratios Dcf to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study Great Eastern Toys (C) 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 Great Eastern Toys (C) can leverage the sales team experience to cultivate customer relationships as Ratios Dcf is planning to shift buying processes online.
Skills based hiring
– The stress on hiring functional specialists at Ratios Dcf 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.
Lack of clear differentiation of Ratios Dcf products
– To increase the profitability and margins on the products, Ratios Dcf needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Great Eastern Toys (C), in the dynamic environment Ratios Dcf has struggled to respond to the nimble upstart competition. Ratios Dcf has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Ratios Dcf 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.
No frontier risks strategy
– After analyzing the HBR case study Great Eastern Toys (C), 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ratios Dcf is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Great Eastern Toys (C) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Great Eastern Toys (C) HBR case study mentions - Ratios Dcf 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 star products
– The top 2 products and services of the firm as mentioned in the Great Eastern Toys (C) 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 Ratios Dcf has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Ratios Dcf 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.
Opportunities Great Eastern Toys (C) | 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 Great Eastern Toys (C) are -
Buying journey improvements
– Ratios Dcf can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Great Eastern Toys (C) 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.
Creating value in data economy
– The success of analytics program of Ratios Dcf has opened avenues for new revenue streams for the organization in the industry. This can help Ratios Dcf to build a more holistic ecosystem as suggested in the Great Eastern Toys (C) case study. Ratios Dcf can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Ratios Dcf 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ratios Dcf 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 Ratios Dcf 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 Ratios Dcf 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 Ratios Dcf to hire the very best people irrespective of their geographical location.
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. Ratios Dcf can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Ratios Dcf to increase its market reach. Ratios Dcf 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.
Manufacturing automation
– Ratios Dcf 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, Ratios Dcf 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, Great Eastern Toys (C), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Ratios Dcf can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Ratios Dcf 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 Great Eastern Toys (C) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ratios Dcf to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ratios Dcf 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.
Threats Great Eastern Toys (C) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Great Eastern Toys (C) are -
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. Ratios Dcf 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
– Ratios Dcf has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Ratios Dcf 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. Ratios Dcf can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ratios Dcf 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
– Ratios Dcf 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.
Shortening product life cycle
– it is one of the major threat that Ratios Dcf is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Ratios Dcf in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Ratios Dcf 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.
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 Ratios Dcf business can come under increasing regulations regarding data privacy, data security, etc.
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.
High dependence on third party suppliers
– Ratios Dcf 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, Ratios Dcf 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 Great Eastern Toys (C) .
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 Great Eastern Toys (C) 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 Great Eastern Toys (C) 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 Great Eastern Toys (C) 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 Great Eastern Toys (C) 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 Great Eastern Toys (C) 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 Ratios Dcf needs to make to build a sustainable competitive advantage.