Real Options Valuation when Multiple Sources of Uncertainty Exist SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Real Options Valuation when Multiple Sources of Uncertainty Exist
This case describes how multiple sources of uncertainty can be incorporated into a real-options-based analysis. It works through an example of a two-stage problem where a company has both an option to explore and an option to develop oil reserves.
Swot Analysis of "Real Options Valuation when Multiple Sources of Uncertainty Exist" written by Lisa Meulbroek includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Uncertainty Sources facing as an external strategic factors. Some of the topics covered in Real Options Valuation when Multiple Sources of Uncertainty Exist case study are - Strategic Management Strategies, Financial markets, Managing uncertainty, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Real Options Valuation when Multiple Sources of Uncertainty Exist casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, geopolitical disruptions, wage bills are increasing, challanges to central banks by blockchain based private currencies, technology disruption,
there is backlash against globalization, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Real Options Valuation when Multiple Sources of Uncertainty Exist
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Real Options Valuation when Multiple Sources of Uncertainty Exist case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Uncertainty Sources, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Uncertainty Sources 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 Real Options Valuation when Multiple Sources of Uncertainty Exist can be done for the following purposes –
1. Strategic planning using facts provided in Real Options Valuation when Multiple Sources of Uncertainty Exist case study
2. Improving business portfolio management of Uncertainty Sources
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 Uncertainty Sources
Strengths Real Options Valuation when Multiple Sources of Uncertainty Exist | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Uncertainty Sources in Real Options Valuation when Multiple Sources of Uncertainty Exist Harvard Business Review case study are -
Training and development
– Uncertainty Sources has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Real Options Valuation when Multiple Sources of Uncertainty Exist 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 Uncertainty Sources 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.
Analytics focus
– Uncertainty Sources 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 Lisa Meulbroek 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Uncertainty Sources digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Uncertainty Sources 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.
Diverse revenue streams
– Uncertainty Sources is present in almost all the verticals within the industry. This has provided firm in Real Options Valuation when Multiple Sources of Uncertainty Exist 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.
Successful track record of launching new products
– Uncertainty Sources has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Uncertainty Sources 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.
Operational resilience
– The operational resilience strategy in the Real Options Valuation when Multiple Sources of Uncertainty Exist 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.
Ability to lead change in Finance & Accounting field
– Uncertainty Sources 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 Uncertainty Sources in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Uncertainty Sources 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 Uncertainty Sources is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Real Options Valuation when Multiple Sources of Uncertainty Exist Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Uncertainty Sources is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Uncertainty Sources 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 Real Options Valuation when Multiple Sources of Uncertainty Exist HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Uncertainty Sources is one of the leading recruiters in the industry. Managers in the Real Options Valuation when Multiple Sources of Uncertainty Exist are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Real Options Valuation when Multiple Sources of Uncertainty Exist | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Real Options Valuation when Multiple Sources of Uncertainty Exist are -
Products dominated business model
– Even though Uncertainty Sources 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 - Real Options Valuation when Multiple Sources of Uncertainty Exist should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Uncertainty Sources needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High cash cycle compare to competitors
Uncertainty Sources 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.
Slow to strategic competitive environment developments
– As Real Options Valuation when Multiple Sources of Uncertainty Exist HBR case study mentions - Uncertainty Sources 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.
Lack of clear differentiation of Uncertainty Sources products
– To increase the profitability and margins on the products, Uncertainty Sources needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study Real Options Valuation when Multiple Sources of Uncertainty Exist 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 Uncertainty Sources 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Uncertainty Sources, firm in the HBR case study Real Options Valuation when Multiple Sources of Uncertainty Exist needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– It come across in the case study Real Options Valuation when Multiple Sources of Uncertainty Exist 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 Real Options Valuation when Multiple Sources of Uncertainty Exist can leverage the sales team experience to cultivate customer relationships as Uncertainty Sources is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Uncertainty Sources 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. Uncertainty Sources 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 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 Uncertainty Sources supply chain. Even after few cautionary changes mentioned in the HBR case study - Real Options Valuation when Multiple Sources of Uncertainty Exist, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Uncertainty Sources vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Real Options Valuation when Multiple Sources of Uncertainty Exist, is just above the industry average. Uncertainty Sources 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.
Opportunities Real Options Valuation when Multiple Sources of Uncertainty Exist | 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 Real Options Valuation when Multiple Sources of Uncertainty Exist 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. Uncertainty Sources can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Uncertainty Sources has opened avenues for new revenue streams for the organization in the industry. This can help Uncertainty Sources to build a more holistic ecosystem as suggested in the Real Options Valuation when Multiple Sources of Uncertainty Exist case study. Uncertainty Sources 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
– Uncertainty Sources 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 Real Options Valuation when Multiple Sources of Uncertainty Exist - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Uncertainty Sources to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Uncertainty Sources can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Uncertainty Sources 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Uncertainty Sources can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Uncertainty Sources 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.
Learning at scale
– Online learning technologies has now opened space for Uncertainty Sources 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.
Developing new processes and practices
– Uncertainty Sources 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.
Buying journey improvements
– Uncertainty Sources can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Real Options Valuation when Multiple Sources of Uncertainty Exist suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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. Uncertainty Sources can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Uncertainty Sources can use these opportunities to build new business models that can help the communities that Uncertainty Sources operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Uncertainty Sources 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 Uncertainty Sources to hire the very best people irrespective of their geographical location.
Threats Real Options Valuation when Multiple Sources of Uncertainty Exist External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Real Options Valuation when Multiple Sources of Uncertainty Exist 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 Uncertainty Sources.
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.
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. Uncertainty Sources can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Uncertainty Sources
– 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 Uncertainty Sources.
Stagnating economy with rate increase
– Uncertainty Sources 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Uncertainty Sources 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.
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. Uncertainty Sources needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Regulatory challenges
– Uncertainty Sources 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Real Options Valuation when Multiple Sources of Uncertainty Exist, Uncertainty Sources 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 .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Uncertainty Sources 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 Real Options Valuation when Multiple Sources of Uncertainty Exist .
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. Uncertainty Sources 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.
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.
Shortening product life cycle
– it is one of the major threat that Uncertainty Sources is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Real Options Valuation when Multiple Sources of Uncertainty Exist 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 Real Options Valuation when Multiple Sources of Uncertainty Exist 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 Real Options Valuation when Multiple Sources of Uncertainty Exist 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 Real Options Valuation when Multiple Sources of Uncertainty Exist 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 Real Options Valuation when Multiple Sources of Uncertainty Exist 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 Uncertainty Sources needs to make to build a sustainable competitive advantage.
