Price of Light: Privatization, Regulation and Valuation in Brazil SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Price of Light: Privatization, Regulation and Valuation in Brazil
Asks students to produce a valuation for Rio Light, a Brazilian power company that is state owned and to be sold in March 1996. If successful, the privatization would bring in over $2 billion to the Brazilian treasury. But success was far from assured. Members of the financial community suggested that the minimum bid established for the upcoming auction was too high, particularly given the lack of regulation before privatization and the underlying volatility of investments in Brazil. Elena Landau's attempt to resolve the crisis was a renegotiation of the terms of sale. Immediately, financial investors and strategic investors like Steve Shuler of Houston Industries Energy worked to incorporate the revised terms into their valuation models to decide whether Rio Light was worth pursuing. Time was short and billions of dollars were at stake.
Swot Analysis of "Price of Light: Privatization, Regulation and Valuation in Brazil" written by Alexander Dyck includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Privatization Rio facing as an external strategic factors. Some of the topics covered in Price of Light: Privatization, Regulation and Valuation in Brazil case study are - Strategic Management Strategies, Economy, Financial analysis and Global Business.
Some of the macro environment factors that can be used to understand the Price of Light: Privatization, Regulation and Valuation in Brazil casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, wage bills are increasing,
digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Price of Light: Privatization, Regulation and Valuation in Brazil
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Price of Light: Privatization, Regulation and Valuation in Brazil case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Privatization Rio, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Privatization Rio 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 Price of Light: Privatization, Regulation and Valuation in Brazil can be done for the following purposes –
1. Strategic planning using facts provided in Price of Light: Privatization, Regulation and Valuation in Brazil case study
2. Improving business portfolio management of Privatization Rio
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Privatization Rio
Strengths Price of Light: Privatization, Regulation and Valuation in Brazil | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Privatization Rio in Price of Light: Privatization, Regulation and Valuation in Brazil Harvard Business Review case study are -
Strong track record of project management
– Privatization Rio is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Price of Light: Privatization, Regulation and Valuation in Brazil 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.
High switching costs
– The high switching costs that Privatization Rio 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.
Highly skilled collaborators
– Privatization Rio 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 Price of Light: Privatization, Regulation and Valuation in Brazil HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Privatization Rio is present in almost all the verticals within the industry. This has provided firm in Price of Light: Privatization, Regulation and Valuation in Brazil 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
– Privatization Rio has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Privatization Rio 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.
Learning organization
- Privatization Rio 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 Privatization Rio is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Price of Light: Privatization, Regulation and Valuation in Brazil Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Privatization Rio
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Privatization Rio does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Privatization Rio is one of the leading recruiters in the industry. Managers in the Price of Light: Privatization, Regulation and Valuation in Brazil 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 brand equity
– Privatization Rio has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Privatization Rio to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Global Business industry
– Price of Light: Privatization, Regulation and Valuation in Brazil firm has clearly differentiated products in the market place. This has enabled Privatization Rio to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Privatization Rio to invest into research and development (R&D) and innovation.
Ability to lead change in Global Business field
– Privatization Rio 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 Privatization Rio in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Price of Light: Privatization, Regulation and Valuation in Brazil | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Price of Light: Privatization, Regulation and Valuation in Brazil are -
Workers concerns about automation
– As automation is fast increasing in the segment, Privatization Rio 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Price of Light: Privatization, Regulation and Valuation in Brazil 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 Privatization Rio has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Alexander Dyck suggests that, Privatization Rio 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.
High cash cycle compare to competitors
Privatization Rio has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, Privatization Rio 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 Privatization Rio products
– To increase the profitability and margins on the products, Privatization Rio needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Privatization Rio, firm in the HBR case study Price of Light: Privatization, Regulation and Valuation in Brazil needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Privatization Rio 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Privatization Rio is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Price of Light: Privatization, Regulation and Valuation in Brazil can help to provide better information regarding products and services. It can also build an online community to further reach out to potential 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 Privatization Rio supply chain. Even after few cautionary changes mentioned in the HBR case study - Price of Light: Privatization, Regulation and Valuation in Brazil, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Privatization Rio vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Privatization Rio 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 Price of Light: Privatization, Regulation and Valuation in Brazil | 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 Price of Light: Privatization, Regulation and Valuation in Brazil are -
Buying journey improvements
– Privatization Rio can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Price of Light: Privatization, Regulation and Valuation in Brazil 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.
Developing new processes and practices
– Privatization Rio can develop new processes and procedures in Global Business 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 Privatization Rio 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 Privatization Rio to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Privatization Rio can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Privatization Rio in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Privatization Rio can use these opportunities to build new business models that can help the communities that Privatization Rio operates in. Secondly it can use opportunities from government spending in Global Business sector.
Building a culture of innovation
– managers at Privatization Rio 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 Global Business segment.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Privatization Rio can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Privatization Rio can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Privatization Rio has opened avenues for new revenue streams for the organization in the industry. This can help Privatization Rio to build a more holistic ecosystem as suggested in the Price of Light: Privatization, Regulation and Valuation in Brazil case study. Privatization Rio can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Privatization Rio can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Privatization Rio to increase its market reach. Privatization Rio 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Privatization Rio 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, Price of Light: Privatization, Regulation and Valuation in Brazil, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Price of Light: Privatization, Regulation and Valuation in Brazil External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Price of Light: Privatization, Regulation and Valuation in Brazil are -
Shortening product life cycle
– it is one of the major threat that Privatization Rio is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Privatization Rio 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.
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. Privatization Rio 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 Privatization Rio with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Privatization Rio.
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 Privatization Rio in the Global Business sector and impact the bottomline of the organization.
Regulatory challenges
– Privatization Rio 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 Global Business industry regulations.
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 Privatization Rio business can come under increasing regulations regarding data privacy, data security, etc.
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. Privatization Rio needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Increasing wage structure of Privatization Rio
– 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 Privatization Rio.
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.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Privatization Rio can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Privatization Rio 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.
Weighted SWOT Analysis of Price of Light: Privatization, Regulation and Valuation in Brazil 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 Price of Light: Privatization, Regulation and Valuation in Brazil 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 Price of Light: Privatization, Regulation and Valuation in Brazil 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 Price of Light: Privatization, Regulation and Valuation in Brazil 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 Price of Light: Privatization, Regulation and Valuation in Brazil 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 Privatization Rio needs to make to build a sustainable competitive advantage.
