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 - – increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, technology disruption, supply chains are disrupted by pandemic , there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%,
talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, 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 -
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.
Effective Research and Development (R&D)
– Teuer Cash 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 Teuer Furniture (A): Discounted Cash Flow Valuation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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.
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.
Innovation driven organization
– Teuer Cash is one of the most innovative firm in sector. Manager in Teuer Furniture (A): Discounted Cash Flow Valuation Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– Teuer Cash 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 Teuer Furniture (A): Discounted Cash Flow Valuation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Teuer Cash 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 Teuer Cash is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Teuer Furniture (A): Discounted Cash Flow Valuation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
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.
High brand equity
– Teuer Cash has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Teuer Cash to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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 -
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.
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.
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.
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 Teuer Cash supply chain. Even after few cautionary changes mentioned in the HBR case study - Teuer Furniture (A): Discounted Cash Flow Valuation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Teuer Cash vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Teuer Cash, firm in the HBR case study Teuer Furniture (A): Discounted Cash Flow Valuation needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Teuer Furniture (A): Discounted Cash Flow Valuation HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Teuer Cash has relatively successful track record of launching new products.
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.
High cash cycle compare to competitors
Teuer Cash 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Teuer Cash is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Teuer Furniture (A): Discounted Cash Flow Valuation can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
Products dominated business model
– Even though Teuer Cash 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 - Teuer Furniture (A): Discounted Cash Flow Valuation should strive to include more intangible value offerings along with its core products and services.
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 -
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.
Using analytics as competitive advantage
– Teuer Cash 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 Teuer Furniture (A): Discounted Cash Flow Valuation - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Teuer Cash to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Teuer Cash 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Teuer Cash can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Teuer Cash can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
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.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Teuer Cash is facing challenges because of the dominance of functional experts in the organization. Teuer Furniture (A): Discounted Cash Flow Valuation 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Teuer Cash 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, Teuer Furniture (A): Discounted Cash Flow Valuation, 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 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.
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.
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 -
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.
Environmental challenges
– Teuer Cash 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. Teuer Cash can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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.
Increasing wage structure of Teuer Cash
– 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 Teuer Cash.
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.
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. Teuer Cash needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Teuer Cash with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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.
Consumer confidence and its impact on Teuer Cash 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.
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.
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 .
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.