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 - – customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, there is backlash against globalization, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, increasing energy prices,
increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, 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 -
Strong track record of project management
– Tt Textiles is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Training and development
– Tt Textiles has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Hedging Currency Risk at TT Textiles 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.
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.
Sustainable margins compare to other players in Finance & Accounting industry
– Hedging Currency Risk at TT Textiles firm has clearly differentiated products in the market place. This has enabled Tt Textiles to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Tt Textiles to invest into research and development (R&D) and innovation.
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.
Effective Research and Development (R&D)
– Tt Textiles 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 Hedging Currency Risk at TT Textiles - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Tt Textiles 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.
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 -
Need for greater diversity
– Tt Textiles 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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Hedging Currency Risk at TT Textiles, it seems that the employees of Tt Textiles 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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Hedging Currency Risk at TT Textiles, in the dynamic environment Tt Textiles has struggled to respond to the nimble upstart competition. Tt Textiles has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study Hedging Currency Risk at TT Textiles 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 Tt Textiles 's lucrative customers.
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.
Interest costs
– Compare to the competition, Tt Textiles 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.
Slow to strategic competitive environment developments
– As Hedging Currency Risk at TT Textiles HBR case study mentions - Tt Textiles takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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.
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 -
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. Tt Textiles 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. Tt Textiles 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.
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.
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.
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.
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.
Using analytics as competitive advantage
– Tt Textiles 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 Hedging Currency Risk at TT Textiles - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tt Textiles to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
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.
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.
Leveraging digital technologies
– Tt Textiles 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.
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.
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.
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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tt Textiles 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 Hedging Currency Risk at TT Textiles .
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.
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.
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. Tt Textiles needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.
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.
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.
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.
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 Tt Textiles business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Tt Textiles has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Tt Textiles 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.
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.
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. Tt Textiles 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.
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.