Case Study Description of Teuer Furniture (A): Discounted Cash Flow Valuation
Teuer Furniture is a privately owned, moderately sized chain of upscale home furnishing showrooms in the United States. The firm survived the economic recession and by the end of 2012, it has regained its financial footing. Now that the firm is more secure financially, some of its long-term investors have asked to cash out their investments. This will be the first time that Teuer has repurchased its equity; the company has paid dividends since 2009. Chief financial officer Jennifer Jerabek and her team have been given the task of valuing Teuer using a discounted cash flow approach. The discount rate is given in the case, and the students need to build a pro forma income statement, balance sheet, and cash flow statement and then calculate a per-share value for Teuer.
Swot Analysis of "Teuer Furniture (A): Discounted Cash Flow Valuation" written by Mitchell A. Petersen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Teuer Cash facing as an external strategic factors. Some of the topics covered in Teuer Furniture (A): Discounted Cash Flow Valuation case study are - Strategic Management Strategies, Financial management, Growth strategy and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Teuer Furniture (A): Discounted Cash Flow Valuation casestudy better are - – supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, increasing commodity prices, there is backlash against globalization,
competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Teuer Furniture (A): Discounted Cash Flow Valuation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Teuer Furniture (A): Discounted Cash Flow Valuation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Teuer Cash, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Teuer Cash 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 Teuer Furniture (A): Discounted Cash Flow Valuation can be done for the following purposes –
1. Strategic planning using facts provided in Teuer Furniture (A): Discounted Cash Flow Valuation case study
2. Improving business portfolio management of Teuer Cash
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 Teuer Cash
Strengths Teuer Furniture (A): Discounted Cash Flow Valuation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Teuer Cash in Teuer Furniture (A): Discounted Cash Flow Valuation Harvard Business Review case study are -
Strong track record of project management
– Teuer Cash 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 Teuer Cash in the sector have low bargaining power. Teuer Furniture (A): Discounted Cash Flow Valuation has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Teuer Cash to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the Teuer Furniture (A): Discounted Cash Flow Valuation 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.
Ability to lead change in Finance & Accounting field
– Teuer Cash 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 Teuer Cash in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Teuer Cash is one of the leading recruiters in the industry. Managers in the Teuer Furniture (A): Discounted Cash Flow Valuation are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Finance & Accounting industry
– Teuer Furniture (A): Discounted Cash Flow Valuation firm has clearly differentiated products in the market place. This has enabled Teuer Cash to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Teuer Cash to invest into research and development (R&D) and innovation.
Analytics focus
– Teuer Cash 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 Mitchell A. Petersen 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.
High switching costs
– The high switching costs that Teuer Cash 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.
Superior customer experience
– The customer experience strategy of Teuer Cash in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Teuer Cash digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Teuer Cash 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.
Diverse revenue streams
– Teuer Cash is present in almost all the verticals within the industry. This has provided firm in Teuer Furniture (A): Discounted Cash Flow Valuation 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.
Successful track record of launching new products
– Teuer Cash has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Teuer Cash has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses Teuer Furniture (A): Discounted Cash Flow Valuation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Teuer Furniture (A): Discounted Cash Flow Valuation are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Teuer Furniture (A): Discounted Cash Flow Valuation, is just above the industry average. Teuer Cash 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.
Lack of clear differentiation of Teuer Cash products
– To increase the profitability and margins on the products, Teuer Cash needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Teuer Cash is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Teuer Cash needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Teuer Cash to focus more on services rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Teuer Furniture (A): Discounted Cash Flow Valuation, in the dynamic environment Teuer Cash has struggled to respond to the nimble upstart competition. Teuer Cash has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Teuer Cash 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 Teuer Furniture (A): Discounted Cash Flow Valuation, 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.
Need for greater diversity
– Teuer Cash 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.
Interest costs
– Compare to the competition, Teuer Cash 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Teuer Furniture (A): Discounted Cash Flow Valuation, it seems that the employees of Teuer Cash 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 bargaining power of channel partners
– Because of the regulatory requirements, Mitchell A. Petersen suggests that, Teuer Cash 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.
Aligning sales with marketing
– It come across in the case study Teuer Furniture (A): Discounted Cash Flow Valuation 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 Teuer Furniture (A): Discounted Cash Flow Valuation can leverage the sales team experience to cultivate customer relationships as Teuer Cash is planning to shift buying processes online.
Opportunities Teuer Furniture (A): Discounted Cash Flow Valuation | 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 Teuer Furniture (A): Discounted Cash Flow Valuation are -
Manufacturing automation
– Teuer Cash 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 Teuer Cash 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 Teuer Cash to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Teuer Cash 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.
Learning at scale
– Online learning technologies has now opened space for Teuer Cash 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 Teuer Cash can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Teuer Cash 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.
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. Teuer Cash 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
– Teuer Cash 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Teuer Cash can use these opportunities to build new business models that can help the communities that Teuer Cash operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Teuer Cash in the consumer business. Now Teuer Cash can target international markets with far fewer capital restrictions requirements than the existing system.
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 Teuer Cash 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.
Buying journey improvements
– Teuer Cash can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Teuer Furniture (A): Discounted Cash Flow Valuation 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.
Creating value in data economy
– The success of analytics program of Teuer Cash has opened avenues for new revenue streams for the organization in the industry. This can help Teuer Cash to build a more holistic ecosystem as suggested in the Teuer Furniture (A): Discounted Cash Flow Valuation case study. Teuer Cash can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Teuer Furniture (A): Discounted Cash Flow Valuation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Teuer Furniture (A): Discounted Cash Flow Valuation are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Teuer Cash 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Teuer Furniture (A): Discounted Cash Flow Valuation, Teuer Cash 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 .
High dependence on third party suppliers
– Teuer Cash 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.
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 Teuer Cash in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Teuer Cash 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Teuer Cash 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 Teuer Furniture (A): Discounted Cash Flow Valuation .
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. Teuer Cash can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Teuer Cash is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Teuer Cash 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. Teuer Cash 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.
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.
Regulatory challenges
– Teuer Cash 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 Teuer Cash.
Weighted SWOT Analysis of Teuer Furniture (A): Discounted Cash Flow Valuation 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 Teuer Furniture (A): Discounted Cash Flow Valuation 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 Teuer Furniture (A): Discounted Cash Flow Valuation 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 Teuer Furniture (A): Discounted Cash Flow Valuation 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 Teuer Furniture (A): Discounted Cash Flow Valuation 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 Teuer Cash needs to make to build a sustainable competitive advantage.
