Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study SWOT Analysis Solution
Case Study Description of Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures
How should a multinational firm manage foreign exchange exposures? Examines transactional and translational exposures and alternative responses to these exposures by analyzing two specific hedging decisions by General Motors. Describes General Motors' corporate hedging policies, its risk management structure, and how accounting rules impact hedging decisions. Although the overall corporate hedging policy provides a consistent approach to the foreign exchange risks that General Motors must manage, the company also has to consider deviations from prescribed policies. Describes two such situations: a significant exposure to the Canadian dollar with adverse accounting consequences and GM's exposure to the Argentinean currency when devaluation is widely anticipated. Students must evaluate the risks General Motors faces in each situation and consider which hedging strategy--if any--might be appropriate. Additionally, asks students to analyze the financial costs and accounting treatment of alternative derivative transactions for hedging purposes. A rewritten version of an earlier case.
Swot Analysis of "Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures" written by Mihir A. Desai, Mark F. Veblen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hedging Exposures facing as an external strategic factors. Some of the topics covered in Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures case study are - Strategic Management Strategies, Financial management, Financial markets, International business, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures casestudy better are - – increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, wage bills are increasing, central banks are concerned over increasing inflation, technology disruption, increasing household debt because of falling income levels, supply chains are disrupted by pandemic ,
competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hedging Exposures, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hedging Exposures 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 Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures can be done for the following purposes –
1. Strategic planning using facts provided in Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures case study
2. Improving business portfolio management of Hedging Exposures
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 Hedging Exposures
Strengths Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hedging Exposures in Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures Harvard Business Review case study are -
Training and development
– Hedging Exposures has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Hedging Exposures digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hedging Exposures 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.
Superior customer experience
– The customer experience strategy of Hedging Exposures in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Hedging Exposures is present in almost all the verticals within the industry. This has provided firm in Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures 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.
Highly skilled collaborators
– Hedging Exposures 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 Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Hedging Exposures is one of the leading recruiters in the industry. Managers in the Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures 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
– Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures firm has clearly differentiated products in the market place. This has enabled Hedging Exposures to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Hedging Exposures to invest into research and development (R&D) and innovation.
Strong track record of project management
– Hedging Exposures is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Hedging Exposures 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.
Analytics focus
– Hedging Exposures 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 Mihir A. Desai, Mark F. Veblen 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.
Ability to lead change in Finance & Accounting field
– Hedging Exposures 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 Hedging Exposures in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Hedging Exposures has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hedging Exposures 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 Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures are -
Skills based hiring
– The stress on hiring functional specialists at Hedging Exposures 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures, it seems that the employees of Hedging Exposures 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.
Products dominated business model
– Even though Hedging Exposures 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 - Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Hedging Exposures 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.
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 Hedging Exposures supply chain. Even after few cautionary changes mentioned in the HBR case study - Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hedging Exposures vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hedging Exposures 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Hedging Exposures 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
– Hedging Exposures 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.
High cash cycle compare to competitors
Hedging Exposures 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures, in the dynamic environment Hedging Exposures has struggled to respond to the nimble upstart competition. Hedging Exposures has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners
– Because of the regulatory requirements, Mihir A. Desai, Mark F. Veblen suggests that, Hedging Exposures 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 Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures | 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 Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures 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. Hedging Exposures can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Hedging Exposures 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.
Leveraging digital technologies
– Hedging Exposures can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Developing new processes and practices
– Hedging Exposures 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hedging Exposures 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 Hedging Exposures 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.
Buying journey improvements
– Hedging Exposures can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hedging Exposures 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.
Loyalty marketing
– Hedging Exposures 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.
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 Hedging Exposures in the consumer business. Now Hedging Exposures can target international markets with far fewer capital restrictions requirements than the existing system.
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. Hedging Exposures can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Hedging Exposures 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hedging Exposures can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures are -
Consumer confidence and its impact on Hedging Exposures demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Hedging Exposures business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Hedging Exposures has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Hedging Exposures 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hedging Exposures 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 Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures .
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. Hedging Exposures can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Hedging Exposures
– 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 Hedging Exposures.
Shortening product life cycle
– it is one of the major threat that Hedging Exposures is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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. Hedging Exposures 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
– Hedging Exposures 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. Hedging Exposures can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Stagnating economy with rate increase
– Hedging Exposures 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 dependence on third party suppliers
– Hedging Exposures 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 Hedging Exposures 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.
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. Hedging Exposures needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures 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 Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures 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 Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures 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 Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures 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 Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures 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 Hedging Exposures needs to make to build a sustainable competitive advantage.
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