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 - – wage bills are increasing, there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%,
geopolitical disruptions, technology disruption, 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 -
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.
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.
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.
Sustainable margins compare to other players in Finance & Accounting industry
– Great Eastern Toys (C) firm has clearly differentiated products in the market place. This has enabled Ratios Dcf to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Ratios Dcf to invest into research and development (R&D) and innovation.
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.
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.
High brand equity
– Ratios Dcf has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ratios Dcf to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Ratios Dcf
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ratios Dcf does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
Low bargaining power of suppliers
– Suppliers of Ratios Dcf in the sector have low bargaining power. Great Eastern Toys (C) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ratios Dcf to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Ratios Dcf 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.
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 -
Capital Spending Reduction
– Even during the low interest decade, Ratios Dcf 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.
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.
Low market penetration in new markets
– Outside its home market of Ratios Dcf, firm in the HBR case study Great Eastern Toys (C) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners
– Because of the regulatory requirements, Gabriel Hawawini, Lee Remmers suggests that, Ratios Dcf 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.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Great Eastern Toys (C) 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 Ratios Dcf 's lucrative customers.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Ratios Dcf supply chain. Even after few cautionary changes mentioned in the HBR case study - Great Eastern Toys (C), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ratios Dcf vulnerable to further global disruptions in South East Asia.
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.
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.
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.
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.
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.
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.
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.
Leveraging digital technologies
– Ratios Dcf 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.
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 Ratios Dcf 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, Ratios Dcf is facing challenges because of the dominance of functional experts in the organization. Great Eastern Toys (C) 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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ratios Dcf can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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.
Building a culture of innovation
– managers at Ratios Dcf 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.
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.
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 -
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ratios Dcf with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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. Ratios Dcf 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.
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.
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.
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.
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.
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.
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 Ratios Dcf.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Great Eastern Toys (C), Ratios Dcf 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 .
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.