Foreign Exchange Hedging Strategies at General Motors SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
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 - – wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, increasing energy prices, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google,
talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , 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.
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.
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.
Sustainable margins compare to other players in Finance & Accounting industry
– Foreign Exchange Hedging Strategies at General Motors firm has clearly differentiated products in the market place. This has enabled Hedging Motors to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Hedging Motors to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Hedging Motors in the sector have low bargaining power. Foreign Exchange Hedging Strategies at General Motors has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hedging Motors to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
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.
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.
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.
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.
High switching costs
– The high switching costs that Hedging Motors 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.
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 -
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.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, Hedging Motors 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Hedging Motors 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.
Slow to strategic competitive environment developments
– As Foreign Exchange Hedging Strategies at General Motors HBR case study mentions - Hedging Motors takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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.
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.
High bargaining power of channel partners
– Because of the regulatory requirements, Mihir A. Desai, Mark F. Veblen suggests that, Hedging Motors 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.
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.
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 -
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.
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.
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.
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.
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.
Buying journey improvements
– Hedging Motors can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Foreign Exchange Hedging Strategies at General Motors 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.
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.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hedging Motors 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 Hedging Motors to hire the very best people irrespective of their geographical location.
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.
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.
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 -
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.
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.
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.
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 .
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.
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 .
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.
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.
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.
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.
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.
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.
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.
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.