Case Study Description of First Solar: CFRA's Accounting Quality Concerns
The case relates to accounting quality analysis conducted by the leading research firm Center for Financial Research and Analysis (CFRA) on companies in the solar industry with a focus on First Solar Inc. In 2009, CFRA was concerned that First Solar, like much of the solar industry, was facing deterioration in business prospects and exposed to risks arising from revenue recognition, high inventory levels, lack of customer and geographic diversification, aggressive warranty policies, excessive production capacity growth, and supply chain risks. The case places students in the shoes of CFRA analysts who need to assess First Solar's accounting quality and business prospects after the company releases its second quarter financial numbers in 2009. The case provides students with background information on the solar power industry, First Solar, data from CFRA research, and First Solar's quarterly reports and the earnings conference call to analyze and draw conclusions about First Solar's accounting practices and strength as a company. Students have to decide whether CFRA should flag First Solar as a concern and add it to CFRA's "Biggest Concerns" list.
Swot Analysis of "First Solar: CFRA's Accounting Quality Concerns" written by Suraj Srinivasan, Ian McKown Cornell includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cfra Solar facing as an external strategic factors. Some of the topics covered in First Solar: CFRA's Accounting Quality Concerns case study are - Strategic Management Strategies, Business law, Ethics, Financial analysis, Financial management, Managing uncertainty, Product development, Risk management, Technology and Finance & Accounting.
Some of the macro environment factors that can be used to understand the First Solar: CFRA's Accounting Quality Concerns casestudy better are - – increasing energy prices, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies,
increasing government debt because of Covid-19 spendings, technology disruption, etc
Introduction to SWOT Analysis of First Solar: CFRA's Accounting Quality Concerns
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in First Solar: CFRA's Accounting Quality Concerns case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cfra Solar, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cfra Solar 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 First Solar: CFRA's Accounting Quality Concerns can be done for the following purposes –
1. Strategic planning using facts provided in First Solar: CFRA's Accounting Quality Concerns case study
2. Improving business portfolio management of Cfra Solar
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 Cfra Solar
Strengths First Solar: CFRA's Accounting Quality Concerns | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cfra Solar in First Solar: CFRA's Accounting Quality Concerns Harvard Business Review case study are -
Sustainable margins compare to other players in Finance & Accounting industry
– First Solar: CFRA's Accounting Quality Concerns firm has clearly differentiated products in the market place. This has enabled Cfra Solar to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Cfra Solar to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Cfra Solar in the sector have low bargaining power. First Solar: CFRA's Accounting Quality Concerns has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Cfra Solar to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Cfra Solar 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.
Superior customer experience
– The customer experience strategy of Cfra Solar in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Cfra Solar 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 Suraj Srinivasan, Ian McKown Cornell 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.
Effective Research and Development (R&D)
– Cfra Solar 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 First Solar: CFRA's Accounting Quality Concerns - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Cfra Solar
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Cfra Solar 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 First Solar: CFRA's Accounting Quality Concerns 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
– Cfra Solar has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cfra Solar 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.
Cross disciplinary teams
– Horizontal connected teams at the Cfra Solar 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.
Highly skilled collaborators
– Cfra Solar 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 First Solar: CFRA's Accounting Quality Concerns HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Cfra Solar is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses First Solar: CFRA's Accounting Quality Concerns | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of First Solar: CFRA's Accounting Quality Concerns are -
High cash cycle compare to competitors
Cfra Solar 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study First Solar: CFRA's Accounting Quality Concerns, it seems that the employees of Cfra Solar 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.
Need for greater diversity
– Cfra Solar 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.
Slow to strategic competitive environment developments
– As First Solar: CFRA's Accounting Quality Concerns HBR case study mentions - Cfra Solar 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.
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 Cfra Solar supply chain. Even after few cautionary changes mentioned in the HBR case study - First Solar: CFRA's Accounting Quality Concerns, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Cfra Solar vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Cfra Solar, firm in the HBR case study First Solar: CFRA's Accounting Quality Concerns needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners
– Because of the regulatory requirements, Suraj Srinivasan, Ian McKown Cornell suggests that, Cfra Solar 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 operating costs
– Compare to the competitors, firm in the HBR case study First Solar: CFRA's Accounting Quality Concerns 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 Cfra Solar 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Cfra Solar 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 star products
– The top 2 products and services of the firm as mentioned in the First Solar: CFRA's Accounting Quality Concerns 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 Cfra Solar has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Cfra Solar 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. Cfra Solar 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.
Opportunities First Solar: CFRA's Accounting Quality Concerns | 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 First Solar: CFRA's Accounting Quality Concerns are -
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 Cfra Solar 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.
Using analytics as competitive advantage
– Cfra Solar 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 First Solar: CFRA's Accounting Quality Concerns - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Cfra Solar 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 Cfra Solar has opened avenues for new revenue streams for the organization in the industry. This can help Cfra Solar to build a more holistic ecosystem as suggested in the First Solar: CFRA's Accounting Quality Concerns case study. Cfra Solar can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Cfra Solar 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.
Building a culture of innovation
– managers at Cfra Solar 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.
Developing new processes and practices
– Cfra Solar 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.
Buying journey improvements
– Cfra Solar can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. First Solar: CFRA's Accounting Quality Concerns 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.
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 Cfra Solar in the consumer business. Now Cfra Solar 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. Cfra Solar 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, Cfra Solar is facing challenges because of the dominance of functional experts in the organization. First Solar: CFRA's Accounting Quality Concerns 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.
Learning at scale
– Online learning technologies has now opened space for Cfra Solar 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Cfra Solar can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Cfra Solar can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats First Solar: CFRA's Accounting Quality Concerns External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study First Solar: CFRA's Accounting Quality Concerns are -
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. Cfra Solar can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Cfra Solar in the Finance & Accounting sector and impact the bottomline of the organization.
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 Cfra Solar business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Cfra Solar 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. Cfra Solar can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Cfra Solar needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing wage structure of Cfra Solar
– 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 Cfra Solar.
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. Cfra Solar 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.
Regulatory challenges
– Cfra Solar 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Cfra Solar 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 First Solar: CFRA's Accounting Quality Concerns .
Consumer confidence and its impact on Cfra Solar 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study First Solar: CFRA's Accounting Quality Concerns, Cfra Solar 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 .
Technology acceleration in Forth Industrial Revolution
– Cfra Solar has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Cfra Solar 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.
Weighted SWOT Analysis of First Solar: CFRA's Accounting Quality Concerns 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 First Solar: CFRA's Accounting Quality Concerns 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 First Solar: CFRA's Accounting Quality Concerns 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 First Solar: CFRA's Accounting Quality Concerns 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 First Solar: CFRA's Accounting Quality Concerns 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 Cfra Solar needs to make to build a sustainable competitive advantage.