Working Capital: A Summary of Ratios by Industry SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Working Capital: A Summary of Ratios by Industry
The case graphically presents various working capital ratios (days inventory outstanding, days sales outstanding, days payables outstanding, cash conversion cycle, and operating cycle) over the 2009 through 2012 period by industry and for specific well-known companies. Students are given the opportunity to craft an intuitive story around the ratios they are given in the case. The case works well as a supplement for classes on working capital management. It is designed to help students relate the often difficult-to-grasp concepts around working capital and working capital ratios to industries and companies that they are familiar with, using companies whose business models and business practices are particularly good illustrations of the relevant concepts.
Authors :: Luann J. Lynch, Graham Gillam, Jennifer Forman
Swot Analysis of "Working Capital: A Summary of Ratios by Industry" written by Luann J. Lynch, Graham Gillam, Jennifer Forman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ratios Outstanding facing as an external strategic factors. Some of the topics covered in Working Capital: A Summary of Ratios by Industry case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Working Capital: A Summary of Ratios by Industry casestudy better are - – cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, technology disruption, geopolitical disruptions,
central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Working Capital: A Summary of Ratios by Industry
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Working Capital: A Summary of Ratios by Industry case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ratios Outstanding, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ratios Outstanding 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 Working Capital: A Summary of Ratios by Industry can be done for the following purposes –
1. Strategic planning using facts provided in Working Capital: A Summary of Ratios by Industry case study
2. Improving business portfolio management of Ratios Outstanding
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 Ratios Outstanding
Strengths Working Capital: A Summary of Ratios by Industry | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ratios Outstanding in Working Capital: A Summary of Ratios by Industry Harvard Business Review case study are -
High switching costs
– The high switching costs that Ratios Outstanding 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.
Successful track record of launching new products
– Ratios Outstanding has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ratios Outstanding 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 recruit top talent
– Ratios Outstanding is one of the leading recruiters in the industry. Managers in the Working Capital: A Summary of Ratios by Industry are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Ratios Outstanding
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ratios Outstanding does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Ratios Outstanding 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 Working Capital: A Summary of Ratios by Industry - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Ratios Outstanding has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ratios Outstanding to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Ratios Outstanding 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 Ratios Outstanding is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Working Capital: A Summary of Ratios by Industry Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Ratios Outstanding in the sector have low bargaining power. Working Capital: A Summary of Ratios by Industry has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ratios Outstanding to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Ratios Outstanding in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Ratios Outstanding are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Sustainable margins compare to other players in Finance & Accounting industry
– Working Capital: A Summary of Ratios by Industry firm has clearly differentiated products in the market place. This has enabled Ratios Outstanding to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Ratios Outstanding to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Ratios Outstanding is present in almost all the verticals within the industry. This has provided firm in Working Capital: A Summary of Ratios by Industry 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.
Weaknesses Working Capital: A Summary of Ratios by Industry | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Working Capital: A Summary of Ratios by Industry are -
High bargaining power of channel partners
– Because of the regulatory requirements, Luann J. Lynch, Graham Gillam, Jennifer Forman suggests that, Ratios Outstanding 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.
Slow to strategic competitive environment developments
– As Working Capital: A Summary of Ratios by Industry HBR case study mentions - Ratios Outstanding 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.
Products dominated business model
– Even though Ratios Outstanding 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 - Working Capital: A Summary of Ratios by Industry should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Working Capital: A Summary of Ratios by Industry, it seems that the employees of Ratios Outstanding 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.
No frontier risks strategy
– After analyzing the HBR case study Working Capital: A Summary of Ratios by Industry, 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.
Low market penetration in new markets
– Outside its home market of Ratios Outstanding, firm in the HBR case study Working Capital: A Summary of Ratios by Industry needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Ratios Outstanding has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, firm in the HBR case study Working Capital: A Summary of Ratios by Industry 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 Ratios Outstanding 's lucrative customers.
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 Ratios Outstanding supply chain. Even after few cautionary changes mentioned in the HBR case study - Working Capital: A Summary of Ratios by Industry, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ratios Outstanding vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ratios Outstanding is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Working Capital: A Summary of Ratios by Industry can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring
– The stress on hiring functional specialists at Ratios Outstanding 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.
Opportunities Working Capital: A Summary of Ratios by Industry | 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 Working Capital: A Summary of Ratios by Industry are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Ratios Outstanding 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.
Loyalty marketing
– Ratios Outstanding 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 Ratios Outstanding 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ratios Outstanding 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, Working Capital: A Summary of Ratios by Industry, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Ratios Outstanding can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ratios Outstanding 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. Ratios Outstanding 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ratios Outstanding 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 Ratios Outstanding to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Ratios Outstanding 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.
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. Ratios Outstanding can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Ratios Outstanding 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.
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. Ratios Outstanding can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ratios Outstanding can use these opportunities to build new business models that can help the communities that Ratios Outstanding operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Creating value in data economy
– The success of analytics program of Ratios Outstanding has opened avenues for new revenue streams for the organization in the industry. This can help Ratios Outstanding to build a more holistic ecosystem as suggested in the Working Capital: A Summary of Ratios by Industry case study. Ratios Outstanding can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Working Capital: A Summary of Ratios by Industry External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Working Capital: A Summary of Ratios by Industry are -
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 Ratios Outstanding business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Ratios Outstanding 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. Ratios Outstanding can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
High dependence on third party suppliers
– Ratios Outstanding 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.
Consumer confidence and its impact on Ratios Outstanding 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.
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. Ratios Outstanding needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Working Capital: A Summary of Ratios by Industry, Ratios Outstanding 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 .
Shortening product life cycle
– it is one of the major threat that Ratios Outstanding is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ratios Outstanding 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 Working Capital: A Summary of Ratios by 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. Ratios Outstanding can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Ratios Outstanding.
Technology acceleration in Forth Industrial Revolution
– Ratios Outstanding has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Ratios Outstanding 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.
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. Ratios Outstanding 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ratios Outstanding with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Working Capital: A Summary of Ratios by Industry 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 Working Capital: A Summary of Ratios by Industry 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 Working Capital: A Summary of Ratios by Industry 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 Working Capital: A Summary of Ratios by Industry 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 Working Capital: A Summary of Ratios by Industry 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 Ratios Outstanding needs to make to build a sustainable competitive advantage.
