Case Study Description of Hedging Currency Risk at TT Textiles
This case highlights the impact of currency rate fluctuations on the profitability of an export-oriented textile manufacturing firm, TT Textiles. Against the backdrop of the economic crisis of 2007-08, when the Indian rupee (INR) was expected to appreciate to an unprecedented high of 35 INR per U.S. dollar (US$), the company had entered into a swap deal based on the historical stability of the Swiss franc (CHF) against the US$. At the time of making it, the deal had looked relatively safe and very lucrative. But once the global financial crisis struck in 2008, it started making sizable mark-to-market losses. The unexpected behaviour of the supposedly steady exchange rate between the US$ and the CHF was perplexing. Fortunately, things turned around in 2009 and TT Textiles was no longer in the red. Yet, there was uncertainty about the future. In March 2009, with three months left on the contract, Sanjay Jain, the managing director, was faced with the dilemma of whether to quit then and there or hold the deal till maturity.
Swot Analysis of "Hedging Currency Risk at TT Textiles" written by Rajesh Chakrabarti includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tt Textiles facing as an external strategic factors. Some of the topics covered in Hedging Currency Risk at TT Textiles case study are - Strategic Management Strategies, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Hedging Currency Risk at TT Textiles casestudy better are - – digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, wage bills are increasing, increasing energy prices, there is increasing trade war between United States & China, increasing commodity prices, technology disruption,
challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Hedging Currency Risk at TT Textiles
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hedging Currency Risk at TT Textiles case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tt Textiles, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tt Textiles 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 Hedging Currency Risk at TT Textiles can be done for the following purposes –
1. Strategic planning using facts provided in Hedging Currency Risk at TT Textiles case study
2. Improving business portfolio management of Tt Textiles
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 Tt Textiles
Strengths Hedging Currency Risk at TT Textiles | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tt Textiles in Hedging Currency Risk at TT Textiles Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Tt Textiles in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Tt Textiles digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Tt Textiles 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.
Organizational Resilience of Tt Textiles
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Tt Textiles does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Tt Textiles has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Tt Textiles 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.
Ability to lead change in Finance & Accounting field
– Tt Textiles 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 Tt Textiles in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Tt Textiles 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 Rajesh Chakrabarti 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.
Ability to recruit top talent
– Tt Textiles is one of the leading recruiters in the industry. Managers in the Hedging Currency Risk at TT Textiles are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Tt Textiles 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.
Low bargaining power of suppliers
– Suppliers of Tt Textiles in the sector have low bargaining power. Hedging Currency Risk at TT Textiles has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Tt Textiles to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Tt Textiles is present in almost all the verticals within the industry. This has provided firm in Hedging Currency Risk at TT Textiles 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.
Innovation driven organization
– Tt Textiles is one of the most innovative firm in sector. Manager in Hedging Currency Risk at TT Textiles Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the Hedging Currency Risk at TT Textiles 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.
Weaknesses Hedging Currency Risk at TT Textiles | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hedging Currency Risk at TT Textiles are -
Products dominated business model
– Even though Tt Textiles 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 - Hedging Currency Risk at TT Textiles should strive to include more intangible value offerings along with its core products and services.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Hedging Currency Risk at TT Textiles 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 Tt Textiles has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Hedging Currency Risk at TT Textiles, is just above the industry average. Tt Textiles 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.
Slow decision making process
– As mentioned earlier in the report, Tt Textiles 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. Tt Textiles 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.
Aligning sales with marketing
– It come across in the case study Hedging Currency Risk at TT Textiles 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 Hedging Currency Risk at TT Textiles can leverage the sales team experience to cultivate customer relationships as Tt Textiles is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Tt Textiles, firm in the HBR case study Hedging Currency Risk at TT Textiles needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners
– Because of the regulatory requirements, Rajesh Chakrabarti suggests that, Tt Textiles 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.
Skills based hiring
– The stress on hiring functional specialists at Tt Textiles 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.
Capital Spending Reduction
– Even during the low interest decade, Tt Textiles 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.
No frontier risks strategy
– After analyzing the HBR case study Hedging Currency Risk at TT Textiles, 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.
Lack of clear differentiation of Tt Textiles products
– To increase the profitability and margins on the products, Tt Textiles needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Hedging Currency Risk at TT Textiles | 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 Hedging Currency Risk at TT Textiles are -
Better consumer reach
– The expansion of the 5G network will help Tt Textiles to increase its market reach. Tt Textiles will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Creating value in data economy
– The success of analytics program of Tt Textiles has opened avenues for new revenue streams for the organization in the industry. This can help Tt Textiles to build a more holistic ecosystem as suggested in the Hedging Currency Risk at TT Textiles case study. Tt Textiles can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Tt Textiles 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, Hedging Currency Risk at TT Textiles, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Tt Textiles 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.
Loyalty marketing
– Tt Textiles 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tt Textiles in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
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 Tt Textiles in the consumer business. Now Tt Textiles can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Tt Textiles 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.
Manufacturing automation
– Tt Textiles 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tt Textiles to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Tt Textiles to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Tt Textiles 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tt Textiles is facing challenges because of the dominance of functional experts in the organization. Hedging Currency Risk at TT Textiles 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Tt Textiles can use these opportunities to build new business models that can help the communities that Tt Textiles operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Threats Hedging Currency Risk at TT Textiles External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hedging Currency Risk at TT Textiles are -
Increasing wage structure of Tt Textiles
– 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 Tt Textiles.
Regulatory challenges
– Tt Textiles 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.
Consumer confidence and its impact on Tt Textiles 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.
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 Tt Textiles.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Tt Textiles with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Hedging Currency Risk at TT Textiles, Tt Textiles 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 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.
Stagnating economy with rate increase
– Tt Textiles 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.
Environmental challenges
– Tt Textiles 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. Tt Textiles can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Tt Textiles 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 Tt Textiles 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.
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. Tt Textiles can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Weighted SWOT Analysis of Hedging Currency Risk at TT Textiles 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 Hedging Currency Risk at TT Textiles 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 Hedging Currency Risk at TT Textiles 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 Hedging Currency Risk at TT Textiles 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 Hedging Currency Risk at TT Textiles 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 Tt Textiles needs to make to build a sustainable competitive advantage.