Case Study Description of Tennessee Valley Authority: Option Purchase Agreements
James Cross, VP of customer planning at the Tennessee Valley Authority, a major supplier of electric power in the Southeast United States, is considering meeting its incremental capacity needs by creating new financial contracts, Option Purchase Agreements (OPAs) to buy or sell electricity. Cross must resolve many design issues with the OPAs and evaluate the OPA proposal in light of the rapidly evolving, increasingly competitive electricity market.
Authors :: Peter Tufano, Cameron Poetzscher, Chris Temple
Swot Analysis of "Tennessee Valley Authority: Option Purchase Agreements" written by Peter Tufano, Cameron Poetzscher, Chris Temple includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Opas Tennessee facing as an external strategic factors. Some of the topics covered in Tennessee Valley Authority: Option Purchase Agreements case study are - Strategic Management Strategies, Financial markets, Managing uncertainty, Regulation, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Tennessee Valley Authority: Option Purchase Agreements casestudy better are - – there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, increasing transportation and logistics costs,
increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Tennessee Valley Authority: Option Purchase Agreements
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tennessee Valley Authority: Option Purchase Agreements case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Opas Tennessee, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Opas Tennessee 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 Tennessee Valley Authority: Option Purchase Agreements can be done for the following purposes –
1. Strategic planning using facts provided in Tennessee Valley Authority: Option Purchase Agreements case study
2. Improving business portfolio management of Opas Tennessee
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 Opas Tennessee
Strengths Tennessee Valley Authority: Option Purchase Agreements | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Opas Tennessee in Tennessee Valley Authority: Option Purchase Agreements Harvard Business Review case study are -
Innovation driven organization
– Opas Tennessee is one of the most innovative firm in sector. Manager in Tennessee Valley Authority: Option Purchase Agreements 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 Opas Tennessee
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Opas Tennessee does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Opas Tennessee is present in almost all the verticals within the industry. This has provided firm in Tennessee Valley Authority: Option Purchase Agreements 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.
Superior customer experience
– The customer experience strategy of Opas Tennessee in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Tennessee Valley Authority: Option Purchase Agreements 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.
Learning organization
- Opas Tennessee 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 Opas Tennessee is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Tennessee Valley Authority: Option Purchase Agreements Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Opas Tennessee 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 Peter Tufano, Cameron Poetzscher, Chris Temple 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.
Successful track record of launching new products
– Opas Tennessee has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Opas Tennessee has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Highly skilled collaborators
– Opas Tennessee 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 Tennessee Valley Authority: Option Purchase Agreements HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Opas Tennessee digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Opas Tennessee 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
– Opas Tennessee 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 Opas Tennessee in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Opas Tennessee 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 Tennessee Valley Authority: Option Purchase Agreements - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Tennessee Valley Authority: Option Purchase Agreements | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tennessee Valley Authority: Option Purchase Agreements are -
High bargaining power of channel partners
– Because of the regulatory requirements, Peter Tufano, Cameron Poetzscher, Chris Temple suggests that, Opas Tennessee 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.
No frontier risks strategy
– After analyzing the HBR case study Tennessee Valley Authority: Option Purchase Agreements, 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.
High cash cycle compare to competitors
Opas Tennessee 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.
Capital Spending Reduction
– Even during the low interest decade, Opas Tennessee 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.
Interest costs
– Compare to the competition, Opas Tennessee 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.
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 Opas Tennessee supply chain. Even after few cautionary changes mentioned in the HBR case study - Tennessee Valley Authority: Option Purchase Agreements, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Opas Tennessee vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Tennessee Valley Authority: Option Purchase Agreements, it seems that the employees of Opas Tennessee 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.
Products dominated business model
– Even though Opas Tennessee has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Tennessee Valley Authority: Option Purchase Agreements should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Opas Tennessee 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. Opas Tennessee 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Tennessee Valley Authority: Option Purchase Agreements 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 Opas Tennessee has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Opas Tennessee 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.
Opportunities Tennessee Valley Authority: Option Purchase Agreements | 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 Tennessee Valley Authority: Option Purchase Agreements are -
Learning at scale
– Online learning technologies has now opened space for Opas Tennessee 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.
Manufacturing automation
– Opas Tennessee 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.
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 Opas Tennessee 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.
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 Opas Tennessee in the consumer business. Now Opas Tennessee can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Opas Tennessee 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Opas Tennessee can use these opportunities to build new business models that can help the communities that Opas Tennessee operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Opas Tennessee can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Opas Tennessee can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Developing new processes and practices
– Opas Tennessee 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.
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. Opas Tennessee can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Opas Tennessee 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. Opas Tennessee 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.
Creating value in data economy
– The success of analytics program of Opas Tennessee has opened avenues for new revenue streams for the organization in the industry. This can help Opas Tennessee to build a more holistic ecosystem as suggested in the Tennessee Valley Authority: Option Purchase Agreements case study. Opas Tennessee can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Opas Tennessee 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 Tennessee Valley Authority: Option Purchase Agreements - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Opas Tennessee to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Tennessee Valley Authority: Option Purchase Agreements External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Tennessee Valley Authority: Option Purchase Agreements are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Opas Tennessee 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.
Environmental challenges
– Opas Tennessee 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. Opas Tennessee can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Opas Tennessee can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Opas Tennessee 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.
Shortening product life cycle
– it is one of the major threat that Opas Tennessee is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Opas Tennessee 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.
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 Opas Tennessee in the Finance & Accounting sector and impact the bottomline of the organization.
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, Opas Tennessee 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 Tennessee Valley Authority: Option Purchase Agreements .
High dependence on third party suppliers
– Opas Tennessee 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.
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. Opas Tennessee needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Opas Tennessee with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Opas Tennessee
– 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 Opas Tennessee.
Weighted SWOT Analysis of Tennessee Valley Authority: Option Purchase Agreements 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 Tennessee Valley Authority: Option Purchase Agreements 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 Tennessee Valley Authority: Option Purchase Agreements 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 Tennessee Valley Authority: Option Purchase Agreements 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 Tennessee Valley Authority: Option Purchase Agreements 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 Opas Tennessee needs to make to build a sustainable competitive advantage.
