Case Study Description of Pidilite Industries: Assessing Credit Quality
In mid-2015, a credit analyst with a leading investment company was tasked with assessing the overall credit quality of a chemical company that equity analysts had recommended as a long-term investment for his firm's insurance equity fund. The analyst set out to use various financial parameters-liquidity, working capital, profitability, efficiency, capital structure, and debt servicing. He believed that a fair assessment of credit quality could help capture a firm's financial health in its entirety, and had a lot to consider as he began his analysis. The case illustrates best practices for credit analysts in assessing a target company's overall financial risk profile using the company's publicly available audited financial statements. Varun Dawar is affiliated with Institute of Management Technology, Ghaziabad. Debasish Maitra is affiliated with Indian Institute of Management Indore.
Swot Analysis of "Pidilite Industries: Assessing Credit Quality" written by Varun Dawar, Debasish Maitra, Arit Chaudhury includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Credit Assessing facing as an external strategic factors. Some of the topics covered in Pidilite Industries: Assessing Credit Quality case study are - Strategic Management Strategies, Financial management, Manufacturing and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Pidilite Industries: Assessing Credit Quality casestudy better are - – increasing government debt because of Covid-19 spendings, technology disruption, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing household debt because of falling income levels, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Pidilite Industries: Assessing Credit Quality
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Pidilite Industries: Assessing Credit Quality case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Credit Assessing, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Credit Assessing 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 Pidilite Industries: Assessing Credit Quality can be done for the following purposes –
1. Strategic planning using facts provided in Pidilite Industries: Assessing Credit Quality case study
2. Improving business portfolio management of Credit Assessing
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 Credit Assessing
Strengths Pidilite Industries: Assessing Credit Quality | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Credit Assessing in Pidilite Industries: Assessing Credit Quality Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Pidilite Industries: Assessing Credit Quality 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
– Credit Assessing has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Credit Assessing 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.
Low bargaining power of suppliers
– Suppliers of Credit Assessing in the sector have low bargaining power. Pidilite Industries: Assessing Credit Quality has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Credit Assessing to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Credit Assessing 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
– Pidilite Industries: Assessing Credit Quality firm has clearly differentiated products in the market place. This has enabled Credit Assessing to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Credit Assessing to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Credit Assessing 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 Pidilite Industries: Assessing Credit Quality - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Credit Assessing 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 Pidilite Industries: Assessing Credit Quality HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Credit Assessing is present in almost all the verticals within the industry. This has provided firm in Pidilite Industries: Assessing Credit Quality 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.
Learning organization
- Credit Assessing 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 Credit Assessing is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Pidilite Industries: Assessing Credit Quality Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Credit Assessing is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Credit Assessing digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Credit Assessing 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.
Training and development
– Credit Assessing has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Pidilite Industries: Assessing Credit Quality Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses Pidilite Industries: Assessing Credit Quality | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Pidilite Industries: Assessing Credit Quality are -
No frontier risks strategy
– After analyzing the HBR case study Pidilite Industries: Assessing Credit Quality, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Need for greater diversity
– Credit Assessing 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Pidilite Industries: Assessing Credit Quality, is just above the industry average. Credit Assessing 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.
Capital Spending Reduction
– Even during the low interest decade, Credit Assessing 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Credit Assessing is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Pidilite Industries: Assessing Credit Quality can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring
– The stress on hiring functional specialists at Credit Assessing 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.
High cash cycle compare to competitors
Credit Assessing 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Pidilite Industries: Assessing Credit Quality 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 Credit Assessing has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Pidilite Industries: Assessing Credit Quality 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 Credit Assessing 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Pidilite Industries: Assessing Credit Quality 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 Pidilite Industries: Assessing Credit Quality can leverage the sales team experience to cultivate customer relationships as Credit Assessing is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Credit Assessing, firm in the HBR case study Pidilite Industries: Assessing Credit Quality needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Pidilite Industries: Assessing Credit Quality | 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 Pidilite Industries: Assessing Credit Quality are -
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. Credit Assessing can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Credit Assessing can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Credit Assessing 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 Pidilite Industries: Assessing Credit Quality - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Credit Assessing to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Credit Assessing 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.
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 Credit Assessing 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.
Manufacturing automation
– Credit Assessing 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Credit Assessing is facing challenges because of the dominance of functional experts in the organization. Pidilite Industries: Assessing Credit Quality 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.
Building a culture of innovation
– managers at Credit Assessing 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.
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. Credit Assessing 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. Credit Assessing 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.
Loyalty marketing
– Credit Assessing 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.
Leveraging digital technologies
– Credit Assessing 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Credit Assessing can use these opportunities to build new business models that can help the communities that Credit Assessing operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Credit Assessing in the consumer business. Now Credit Assessing can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Pidilite Industries: Assessing Credit Quality External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Pidilite Industries: Assessing Credit Quality are -
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 Credit Assessing.
Technology acceleration in Forth Industrial Revolution
– Credit Assessing has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Credit Assessing 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Credit Assessing with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Credit Assessing 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.
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. Credit Assessing 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.
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. Credit Assessing 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 Credit Assessing in the Finance & Accounting sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Credit Assessing 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.
Stagnating economy with rate increase
– Credit Assessing 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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Credit Assessing 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 Pidilite Industries: Assessing Credit Quality .
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 Credit Assessing business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Pidilite Industries: Assessing Credit Quality 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 Pidilite Industries: Assessing Credit Quality 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 Pidilite Industries: Assessing Credit Quality 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 Pidilite Industries: Assessing Credit Quality 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 Pidilite Industries: Assessing Credit Quality 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 Credit Assessing needs to make to build a sustainable competitive advantage.
