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 commodity prices, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy,
wage bills are increasing, there is backlash against globalization, 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 -
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.
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.
Learning organization
- Cfra Solar 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 Cfra Solar is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in First Solar: CFRA's Accounting Quality Concerns Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
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.
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.
Innovation driven organization
– Cfra Solar is one of the most innovative firm in sector. Manager in First Solar: CFRA's Accounting Quality Concerns Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
Diverse revenue streams
– Cfra Solar is present in almost all the verticals within the industry. This has provided firm in First Solar: CFRA's Accounting Quality Concerns 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Cfra Solar digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Cfra Solar 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.
Ability to lead change in Finance & Accounting field
– Cfra Solar 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 Cfra Solar in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Cfra Solar is one of the leading recruiters in the industry. Managers in the First Solar: CFRA's Accounting Quality Concerns are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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 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.
Increasing silos among functional specialists
– The organizational structure of Cfra Solar is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Cfra Solar needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Cfra Solar to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Cfra Solar 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.
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.
Interest costs
– Compare to the competition, Cfra Solar 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.
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.
Lack of clear differentiation of Cfra Solar products
– To increase the profitability and margins on the products, Cfra Solar needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study First Solar: CFRA's Accounting Quality Concerns, 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.
Aligning sales with marketing
– It come across in the case study First Solar: CFRA's Accounting Quality Concerns 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 First Solar: CFRA's Accounting Quality Concerns can leverage the sales team experience to cultivate customer relationships as Cfra Solar is planning to shift buying processes online.
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 -
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.
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.
Manufacturing automation
– Cfra Solar can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Cfra Solar 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, First Solar: CFRA's Accounting Quality Concerns, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cfra Solar can use these opportunities to build new business models that can help the communities that Cfra Solar operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Loyalty marketing
– Cfra Solar has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Cfra Solar 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.
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.
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.
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 -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Cfra Solar 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.
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.
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.
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.
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 Cfra Solar.
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 dependence on third party suppliers
– Cfra Solar 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.
Stagnating economy with rate increase
– Cfra Solar 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.
Shortening product life cycle
– it is one of the major threat that Cfra Solar is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. 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.
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 .
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 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 .
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.
