Case Study Description of Hedging Currency Risk at TT Textiles
This case highlights the impact of currency rate fluctuations on the profitability of an export-oriented textile manufacturing firm, TT Textiles. Against the backdrop of the economic crisis of 2007-08, when the Indian rupee (INR) was expected to appreciate to an unprecedented high of 35 INR per U.S. dollar (US$), the company had entered into a swap deal based on the historical stability of the Swiss franc (CHF) against the US$. At the time of making it, the deal had looked relatively safe and very lucrative. But once the global financial crisis struck in 2008, it started making sizable mark-to-market losses. The unexpected behaviour of the supposedly steady exchange rate between the US$ and the CHF was perplexing. Fortunately, things turned around in 2009 and TT Textiles was no longer in the red. Yet, there was uncertainty about the future. In March 2009, with three months left on the contract, Sanjay Jain, the managing director, was faced with the dilemma of whether to quit then and there or hold the deal till maturity.
Swot Analysis of "Hedging Currency Risk at TT Textiles" written by Rajesh Chakrabarti includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tt Textiles facing as an external strategic factors. Some of the topics covered in Hedging Currency Risk at TT Textiles case study are - Strategic Management Strategies, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Hedging Currency Risk at TT Textiles casestudy better are - – increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, technology disruption, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings,
increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Hedging Currency Risk at TT Textiles
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hedging Currency Risk at TT Textiles case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tt Textiles, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tt Textiles 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 Hedging Currency Risk at TT Textiles can be done for the following purposes –
1. Strategic planning using facts provided in Hedging Currency Risk at TT Textiles case study
2. Improving business portfolio management of Tt Textiles
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 Tt Textiles
Strengths Hedging Currency Risk at TT Textiles | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tt Textiles in Hedging Currency Risk at TT Textiles Harvard Business Review case study are -
Sustainable margins compare to other players in Finance & Accounting industry
– Hedging Currency Risk at TT Textiles firm has clearly differentiated products in the market place. This has enabled Tt Textiles to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Tt Textiles to invest into research and development (R&D) and innovation.
Ability to lead change in Finance & Accounting field
– Tt Textiles 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 Tt Textiles in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Tt Textiles
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Tt Textiles does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Tt Textiles in the sector have low bargaining power. Hedging Currency Risk at TT Textiles has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Tt Textiles to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Tt Textiles 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.
High switching costs
– The high switching costs that Tt Textiles 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.
Strong track record of project management
– Tt Textiles is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Tt Textiles 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 Tt Textiles is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Hedging Currency Risk at TT Textiles Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Tt Textiles 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 Hedging Currency Risk at TT Textiles HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Tt Textiles 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 Rajesh Chakrabarti 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.
Operational resilience
– The operational resilience strategy in the Hedging Currency Risk at TT Textiles 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Tt Textiles digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Tt Textiles 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 Hedging Currency Risk at TT Textiles | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hedging Currency Risk at TT Textiles are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Hedging Currency Risk at TT Textiles, in the dynamic environment Tt Textiles has struggled to respond to the nimble upstart competition. Tt Textiles has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Tt Textiles is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Tt Textiles needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Tt Textiles to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study Hedging Currency Risk at TT Textiles 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 Hedging Currency Risk at TT Textiles can leverage the sales team experience to cultivate customer relationships as Tt Textiles is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Hedging Currency Risk at TT Textiles, it seems that the employees of Tt Textiles 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Tt Textiles is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Hedging Currency Risk at TT Textiles can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Tt Textiles 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 - Hedging Currency Risk at TT Textiles should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners
– Because of the regulatory requirements, Rajesh Chakrabarti suggests that, Tt Textiles 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.
Capital Spending Reduction
– Even during the low interest decade, Tt Textiles 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Hedging Currency Risk at TT Textiles 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 Tt Textiles has relatively successful track record of launching new products.
Skills based hiring
– The stress on hiring functional specialists at Tt Textiles 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.
Low market penetration in new markets
– Outside its home market of Tt Textiles, firm in the HBR case study Hedging Currency Risk at TT Textiles needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Hedging Currency Risk at TT Textiles | 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 Hedging Currency Risk at TT Textiles are -
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. Tt Textiles can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Tt Textiles 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, Hedging Currency Risk at TT Textiles, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Tt Textiles has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Leveraging digital technologies
– Tt Textiles 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.
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. Tt Textiles 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. Tt Textiles 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tt Textiles 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 Tt Textiles to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tt Textiles 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.
Using analytics as competitive advantage
– Tt Textiles 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 Hedging Currency Risk at TT Textiles - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tt Textiles 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 Tt Textiles 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.
Better consumer reach
– The expansion of the 5G network will help Tt Textiles to increase its market reach. Tt Textiles 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tt Textiles is facing challenges because of the dominance of functional experts in the organization. Hedging Currency Risk at TT Textiles 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.
Creating value in data economy
– The success of analytics program of Tt Textiles has opened avenues for new revenue streams for the organization in the industry. This can help Tt Textiles to build a more holistic ecosystem as suggested in the Hedging Currency Risk at TT Textiles case study. Tt Textiles can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tt Textiles can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Hedging Currency Risk at TT Textiles External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hedging Currency Risk at TT Textiles are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Hedging Currency Risk at TT Textiles, Tt Textiles 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 .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tt Textiles 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 Hedging Currency Risk at TT Textiles .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Tt Textiles with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Tt Textiles 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.
Consumer confidence and its impact on Tt Textiles demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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 Tt Textiles.
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 Tt Textiles in the Finance & Accounting sector and impact the bottomline of the organization.
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 Tt Textiles business can come under increasing regulations regarding data privacy, data security, etc.
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. Tt Textiles 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.
Environmental challenges
– Tt Textiles 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. Tt Textiles can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing wage structure of Tt Textiles
– 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 Tt Textiles.
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.
Stagnating economy with rate increase
– Tt Textiles 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.
Weighted SWOT Analysis of Hedging Currency Risk at TT Textiles 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 Hedging Currency Risk at TT Textiles 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 Hedging Currency Risk at TT Textiles 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 Hedging Currency Risk at TT Textiles 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 Hedging Currency Risk at TT Textiles 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 Tt Textiles needs to make to build a sustainable competitive advantage.
