Foreign Exchange Hedging Strategies at General Motors SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of Foreign Exchange Hedging Strategies at General Motors
How should a multinational firm manage foreign exchange exposures? Examines transactional, translational, and competitive exposures. 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, there are situations where the company must consider deviations from prescribed policies. Describes three such situations: large exposure to the Canadian dollar with adverse accounting consequences, GM's exposure to the Argentinean currency when devaluation is widely anticipated, and the impact of the depreciation of the Japanese yen to the dollar. To obtain executable spreadsheets (courseware), please contact our Customer Service Department at custserv@hbsp.harvard.edu
Swot Analysis of "Foreign Exchange Hedging Strategies at General Motors" 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 Motors facing as an external strategic factors. Some of the topics covered in Foreign Exchange Hedging Strategies at General Motors 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 casestudy better are - – geopolitical disruptions, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, there is backlash against globalization, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs,
increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Foreign Exchange Hedging Strategies at General Motors
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 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hedging Motors, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hedging Motors 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 can be done for the following purposes –
1. Strategic planning using facts provided in Foreign Exchange Hedging Strategies at General Motors case study
2. Improving business portfolio management of Hedging Motors
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 Motors
Strengths Foreign Exchange Hedging Strategies at General Motors | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hedging Motors in Foreign Exchange Hedging Strategies at General Motors Harvard Business Review case study are -
Analytics focus
– Hedging Motors 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.
Strong track record of project management
– Hedging Motors 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 recruit top talent
– Hedging Motors is one of the leading recruiters in the industry. Managers in the Foreign Exchange Hedging Strategies at General Motors are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Hedging Motors 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 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.
Innovation driven organization
– Hedging Motors is one of the most innovative firm in sector. Manager in Foreign Exchange Hedging Strategies at General Motors Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Effective Research and Development (R&D)
– Hedging Motors 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 Foreign Exchange Hedging Strategies at General Motors - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Hedging Motors 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.
Organizational Resilience of Hedging Motors
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Hedging Motors does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Foreign Exchange Hedging Strategies at General Motors 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.
Highly skilled collaborators
– Hedging Motors 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 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Hedging Motors is present in almost all the verticals within the industry. This has provided firm in Foreign Exchange Hedging Strategies at General Motors 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.
High brand equity
– Hedging Motors has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hedging Motors to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Foreign Exchange Hedging Strategies at General Motors | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Foreign Exchange Hedging Strategies at General Motors are -
High cash cycle compare to competitors
Hedging Motors 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.
Lack of clear differentiation of Hedging Motors products
– To increase the profitability and margins on the products, Hedging Motors needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Hedging Motors 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.
Slow decision making process
– As mentioned earlier in the report, Hedging Motors 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. Hedging Motors 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.
Products dominated business model
– Even though Hedging Motors 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 should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Foreign Exchange Hedging Strategies at General Motors, it seems that the employees of Hedging Motors 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.
Low market penetration in new markets
– Outside its home market of Hedging Motors, firm in the HBR case study Foreign Exchange Hedging Strategies at General Motors needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Hedging Motors is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Hedging Motors needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hedging Motors to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Foreign Exchange Hedging Strategies at General Motors, 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
– Hedging Motors 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.
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, in the dynamic environment Hedging Motors has struggled to respond to the nimble upstart competition. Hedging Motors has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Foreign Exchange Hedging Strategies at General Motors | 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 are -
Developing new processes and practices
– Hedging Motors 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hedging Motors can use these opportunities to build new business models that can help the communities that Hedging Motors operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hedging Motors can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hedging Motors 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 Motors 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.
Building a culture of innovation
– managers at Hedging Motors 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. Hedging Motors can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Hedging Motors 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. Hedging Motors 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.
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 Hedging Motors 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.
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 Motors in the consumer business. Now Hedging Motors 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 Motors can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Hedging Motors 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 Foreign Exchange Hedging Strategies at General Motors - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hedging Motors to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Hedging Motors has opened avenues for new revenue streams for the organization in the industry. This can help Hedging Motors to build a more holistic ecosystem as suggested in the Foreign Exchange Hedging Strategies at General Motors case study. Hedging Motors can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Foreign Exchange Hedging Strategies at General Motors 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 are -
Technology acceleration in Forth Industrial Revolution
– Hedging Motors has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Hedging Motors 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.
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 Hedging Motors in the Finance & Accounting sector and impact the bottomline of the organization.
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.
Environmental challenges
– Hedging Motors 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 Motors can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Consumer confidence and its impact on Hedging Motors 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
– Hedging Motors 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.
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 Motors business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Foreign Exchange Hedging Strategies at General Motors, Hedging Motors 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 .
Stagnating economy with rate increase
– Hedging Motors 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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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 Hedging Motors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hedging Motors 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 .
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 Motors 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 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 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 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 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 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 Motors needs to make to build a sustainable competitive advantage.