This case is designed to present students with the challenges of formulating a discounted-cash-flow (DCF) analysis for a strategically important capital-investment decision. Analytically, the problem is representative of most corporate investment decisions, but it is particularly interesting because of the massive size of the American Centrifuge Project and the potential of the project to significantly affect the stock price. Students must determine the relevant cash flows, paying close attention to the treatment of input costs, selling prices, timing of investment outlays, depreciation, and inflation. An important input is the appropriate cost of uranium, which some students argue should be included at book value, while others argue that market value should be used. Although the primary objective of the case is to focus on the estimation of cash flows, students are provided with a straightforward set of inputs to estimate USEC's weighted average cost of capital. The case is designed for students who are learning, or need a refresher on, DCF analysis. Because of the basic issues covered, the case works well with undergraduate, MBA, and executive-education audiences. The case also affords the opportunity to explore a variety of issues related to capital-investment analysis, including relevant costs, incremental analysis, cost of capital, and sensitivity analysis. The case is an excellent example of the value of a firm as the value of assets in place plus the net present value of future growth opportunities.
Authors :: Kenneth Eades, Lucas Doe, Ben Mackovjak
Swot Analysis of "USEC Inc." written by Kenneth Eades, Lucas Doe, Ben Mackovjak includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Dcf Analysis facing as an external strategic factors. Some of the topics covered in USEC Inc. case study are - Strategic Management Strategies, Budgeting, Costs, Financial analysis and Finance & Accounting.
Some of the macro environment factors that can be used to understand the USEC Inc. casestudy better are - – digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, increasing government debt because of Covid-19 spendings, wage bills are increasing, geopolitical disruptions, challanges to central banks by blockchain based private currencies,
increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in USEC Inc. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Dcf Analysis, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Dcf Analysis 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 USEC Inc. can be done for the following purposes –
1. Strategic planning using facts provided in USEC Inc. case study
2. Improving business portfolio management of Dcf Analysis
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 Dcf Analysis
Strengths USEC Inc. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Dcf Analysis in USEC Inc. Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Dcf Analysis in the sector have low bargaining power. USEC Inc. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Dcf Analysis to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Dcf Analysis digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Dcf Analysis 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.
Learning organization
- Dcf Analysis 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 Dcf Analysis is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in USEC Inc. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Dcf Analysis 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 USEC Inc. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Dcf Analysis
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Dcf Analysis does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Dcf Analysis has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Dcf Analysis to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Dcf Analysis is one of the most innovative firm in sector. Manager in USEC Inc. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Finance & Accounting industry
– USEC Inc. firm has clearly differentiated products in the market place. This has enabled Dcf Analysis to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Dcf Analysis to invest into research and development (R&D) and innovation.
Analytics focus
– Dcf Analysis 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 Kenneth Eades, Lucas Doe, Ben Mackovjak 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.
Highly skilled collaborators
– Dcf Analysis 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 USEC Inc. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Dcf Analysis has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in USEC Inc. Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Cross disciplinary teams
– Horizontal connected teams at the Dcf Analysis 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.
Weaknesses USEC Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of USEC Inc. are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study USEC Inc., it seems that the employees of Dcf Analysis 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.
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 Dcf Analysis supply chain. Even after few cautionary changes mentioned in the HBR case study - USEC Inc., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Dcf Analysis vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Dcf Analysis 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.
Capital Spending Reduction
– Even during the low interest decade, Dcf Analysis 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.
Need for greater diversity
– Dcf Analysis has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Products dominated business model
– Even though Dcf Analysis 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 - USEC Inc. should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Dcf Analysis 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. Dcf Analysis 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.
Low market penetration in new markets
– Outside its home market of Dcf Analysis, firm in the HBR case study USEC Inc. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Dcf Analysis 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.
Increasing silos among functional specialists
– The organizational structure of Dcf Analysis is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Dcf Analysis needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Dcf Analysis to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study USEC Inc., 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.
Opportunities USEC Inc. | 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 USEC Inc. are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Dcf Analysis can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Dcf Analysis 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
– Dcf Analysis can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. USEC Inc. 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.
Manufacturing automation
– Dcf Analysis 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.
Building a culture of innovation
– managers at Dcf Analysis 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Dcf Analysis 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. Dcf Analysis can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Dcf Analysis is facing challenges because of the dominance of functional experts in the organization. USEC Inc. 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.
Better consumer reach
– The expansion of the 5G network will help Dcf Analysis to increase its market reach. Dcf Analysis 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.
Creating value in data economy
– The success of analytics program of Dcf Analysis has opened avenues for new revenue streams for the organization in the industry. This can help Dcf Analysis to build a more holistic ecosystem as suggested in the USEC Inc. case study. Dcf Analysis can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Dcf Analysis can use these opportunities to build new business models that can help the communities that Dcf Analysis operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Dcf Analysis 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 Dcf Analysis 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.
Threats USEC Inc. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study USEC Inc. are -
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.
Consumer confidence and its impact on Dcf Analysis 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.
Regulatory challenges
– Dcf Analysis 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.
Increasing wage structure of Dcf Analysis
– 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 Dcf Analysis.
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 Dcf Analysis in the Finance & Accounting sector and impact the bottomline 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 USEC Inc., Dcf Analysis 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 .
Environmental challenges
– Dcf Analysis 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. Dcf Analysis can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Stagnating economy with rate increase
– Dcf Analysis 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.
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. Dcf Analysis needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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. Dcf Analysis can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Dcf Analysis business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Dcf Analysis with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Dcf Analysis 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.
Weighted SWOT Analysis of USEC Inc. 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 USEC Inc. 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 USEC Inc. 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 USEC Inc. 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 USEC Inc. 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 Dcf Analysis needs to make to build a sustainable competitive advantage.