Royal Mail plc: Cost of Capital SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Royal Mail plc: Cost of Capital
This case examines the cost of capital estimation for British postal service company Royal Mail plc in 2015-a time when company managers and government regulators were adjusting to private ownership after 500 years of government ownership. The case features a flawed cost of capital estimation analysis that includes common blunders. Students are invited to evaluate this analysis and provide their own alternative estimate for the cost of capital for Royal Mail.
Swot Analysis of "Royal Mail plc: Cost of Capital" written by Michael J. Schill includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Royal Mail facing as an external strategic factors. Some of the topics covered in Royal Mail plc: Cost of Capital case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Royal Mail plc: Cost of Capital casestudy better are - – challanges to central banks by blockchain based private currencies, wage bills are increasing, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, increasing commodity prices,
increasing transportation and logistics costs, geopolitical disruptions, etc
Introduction to SWOT Analysis of Royal Mail plc: Cost of Capital
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Royal Mail plc: Cost of Capital case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Royal Mail, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Royal Mail 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 Royal Mail plc: Cost of Capital can be done for the following purposes –
1. Strategic planning using facts provided in Royal Mail plc: Cost of Capital case study
2. Improving business portfolio management of Royal Mail
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 Royal Mail
Strengths Royal Mail plc: Cost of Capital | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Royal Mail in Royal Mail plc: Cost of Capital Harvard Business Review case study are -
Strong track record of project management
– Royal Mail is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Royal Mail plc: Cost of Capital 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
– Royal Mail plc: Cost of Capital firm has clearly differentiated products in the market place. This has enabled Royal Mail to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Royal Mail to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Royal Mail 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.
Learning organization
- Royal Mail 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 Royal Mail is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Royal Mail plc: Cost of Capital Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Royal Mail is present in almost all the verticals within the industry. This has provided firm in Royal Mail plc: Cost of Capital 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.
Ability to lead change in Finance & Accounting field
– Royal Mail 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 Royal Mail in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Royal Mail
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Royal Mail does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Royal Mail has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Royal Mail to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Royal Mail in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Royal Mail 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.
Innovation driven organization
– Royal Mail is one of the most innovative firm in sector. Manager in Royal Mail plc: Cost of Capital Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Royal Mail plc: Cost of Capital | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Royal Mail plc: Cost of Capital are -
Slow to strategic competitive environment developments
– As Royal Mail plc: Cost of Capital HBR case study mentions - Royal Mail 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.
Slow decision making process
– As mentioned earlier in the report, Royal Mail has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Royal Mail even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Aligning sales with marketing
– It come across in the case study Royal Mail plc: Cost of Capital 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 Royal Mail plc: Cost of Capital can leverage the sales team experience to cultivate customer relationships as Royal Mail is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Royal Mail plc: Cost of Capital, is just above the industry average. Royal Mail 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.
Skills based hiring
– The stress on hiring functional specialists at Royal Mail 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Royal Mail 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 Royal Mail plc: Cost of Capital, 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.
Lack of clear differentiation of Royal Mail products
– To increase the profitability and margins on the products, Royal Mail 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 Royal Mail plc: Cost of Capital, in the dynamic environment Royal Mail has struggled to respond to the nimble upstart competition. Royal Mail 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 Royal Mail is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Royal Mail needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Royal Mail to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Michael J. Schill suggests that, Royal Mail 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.
Opportunities Royal Mail plc: Cost of Capital | 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 Royal Mail plc: Cost of Capital are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Royal Mail can use these opportunities to build new business models that can help the communities that Royal Mail operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Buying journey improvements
– Royal Mail can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Royal Mail plc: Cost of Capital 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Royal Mail 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, Royal Mail plc: Cost of Capital, 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 Royal Mail 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.
Developing new processes and practices
– Royal Mail 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.
Better consumer reach
– The expansion of the 5G network will help Royal Mail to increase its market reach. Royal Mail 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.
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. Royal Mail can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Royal Mail 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.
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 Royal Mail to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Manufacturing automation
– Royal Mail 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Royal Mail 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 Royal Mail to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Royal Mail can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Royal Mail has opened avenues for new revenue streams for the organization in the industry. This can help Royal Mail to build a more holistic ecosystem as suggested in the Royal Mail plc: Cost of Capital case study. Royal Mail can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Royal Mail plc: Cost of Capital External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Royal Mail plc: Cost of Capital are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Royal Mail 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 Royal Mail plc: Cost of Capital .
High dependence on third party suppliers
– Royal Mail 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Royal Mail 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.
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. Royal Mail can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Royal Mail 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.
Consumer confidence and its impact on Royal Mail 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Royal Mail with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Royal Mail has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Royal Mail 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.
Increasing wage structure of Royal Mail
– 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 Royal Mail.
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 Royal Mail in the Finance & Accounting sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Royal Mail is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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 Royal Mail.
Weighted SWOT Analysis of Royal Mail plc: Cost of Capital 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 Royal Mail plc: Cost of Capital 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 Royal Mail plc: Cost of Capital 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 Royal Mail plc: Cost of Capital 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 Royal Mail plc: Cost of Capital 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 Royal Mail needs to make to build a sustainable competitive advantage.
