Foreign Exchange Hedging Strategies at General Motors 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
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 - – digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, wage bills are increasing, increasing commodity prices,
increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
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.
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.
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.
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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Hedging Motors digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hedging Motors 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.
Successful track record of launching new products
– Hedging Motors has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hedging Motors 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.
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.
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.
Learning organization
- Hedging Motors 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 Hedging Motors is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Foreign Exchange Hedging Strategies at General Motors Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Finance & Accounting field
– Hedging Motors 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 Motors in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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 -
Aligning sales with marketing
– It come across in the case study Foreign Exchange Hedging Strategies at General Motors 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 Foreign Exchange Hedging Strategies at General Motors can leverage the sales team experience to cultivate customer relationships as Hedging Motors is planning to shift buying processes online.
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.
Skills based hiring
– The stress on hiring functional specialists at Hedging Motors 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hedging Motors is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Foreign Exchange Hedging Strategies at General Motors can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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.
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.
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.
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 Motors supply chain. Even after few cautionary changes mentioned in the HBR case study - Foreign Exchange Hedging Strategies at General Motors, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hedging Motors vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Foreign Exchange Hedging Strategies at General Motors, is just above the industry average. Hedging Motors 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Foreign Exchange Hedging Strategies at General Motors 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 Hedging Motors has relatively successful track record of launching new products.
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 -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hedging Motors is facing challenges because of the dominance of functional experts in the organization. Foreign Exchange Hedging Strategies at General Motors 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hedging Motors 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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Hedging Motors to increase its market reach. Hedging Motors will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Manufacturing automation
– Hedging Motors 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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hedging Motors 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, Foreign Exchange Hedging Strategies at General Motors, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Hedging Motors 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.
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.
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.
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.
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 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.
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 Motors can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Hedging Motors business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Hedging Motors 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.
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.
Shortening product life cycle
– it is one of the major threat that Hedging Motors is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hedging Motors 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Hedging Motors with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Increasing wage structure of Hedging Motors
– 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 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 .
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.
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.
