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 - – supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, geopolitical disruptions, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs,
increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, 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 -
Organizational Resilience of Duration Liabilities
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Duration Liabilities does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Finance & Accounting field
– Duration Liabilities 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 Duration Liabilities in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Duration Liabilities 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 Duration Liabilities is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Union Carbide Corp.: Interest Rate Risk Management Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
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.
Strong track record of project management
– Duration Liabilities is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
Analytics focus
– Duration Liabilities 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 Peter Tufano, Jonathan S. Headley 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 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Union Carbide Corp.: Interest Rate Risk Management firm has clearly differentiated products in the market place. This has enabled Duration Liabilities to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Duration Liabilities to invest into research and development (R&D) and innovation.
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.
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 -
Workers concerns about automation
– As automation is fast increasing in the segment, Duration Liabilities 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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Union Carbide Corp.: Interest Rate Risk Management, is just above the industry average. Duration Liabilities needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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.
Aligning sales with marketing
– It come across in the case study Union Carbide Corp.: Interest Rate Risk Management 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 Union Carbide Corp.: Interest Rate Risk Management can leverage the sales team experience to cultivate customer relationships as Duration Liabilities is planning to shift buying processes online.
Lack of clear differentiation of Duration Liabilities products
– To increase the profitability and margins on the products, Duration Liabilities needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Duration Liabilities is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Union Carbide Corp.: Interest Rate Risk Management can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Peter Tufano, Jonathan S. Headley suggests that, Duration Liabilities 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, 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.
High cash cycle compare to competitors
Duration Liabilities has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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 -
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.
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.
Loyalty marketing
– Duration Liabilities 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.
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.
Learning at scale
– Online learning technologies has now opened space for Duration Liabilities 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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Duration Liabilities 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.
Developing new processes and practices
– Duration Liabilities 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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Duration Liabilities 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 Duration Liabilities to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Duration Liabilities 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.
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.
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 -
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.
Regulatory challenges
– Duration Liabilities 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.
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.
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.
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 Duration Liabilities in the Finance & Accounting sector and impact the bottomline of the organization.
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.
Environmental challenges
– Duration Liabilities 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. Duration Liabilities can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Union Carbide Corp.: Interest Rate Risk Management, Duration Liabilities 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 .
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.
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.
Consumer confidence and its impact on Duration Liabilities 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.
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.
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.
