Case Study Description of F. Mayer Imports: Hedging Foreign Currency Risk
In September 2014, F. Mayer Imports Pty. Ltd., an Australian gourmet food importer, had a narrow window of opportunity to potentially protect its budget exchange rate for the rest of that, and the following, financial year. With imports such as European butter, chocolate, and cheese, the company procured a significant portion of its product in euros. The Australian dollar to euro exchange (AUD/EUR) dropped from a high of 0.7027 in October 2013 to a low of 0.6369 in January 2014. With the AUD/EUR recently rebounding and edging back toward the company's budget rate of 0.6900, the company's chief financial officer needed to choose between four proposed hedging strategies. Wallace Fan is affiliated with University of New South Wales.
Swot Analysis of "F. Mayer Imports: Hedging Foreign Currency Risk" written by Wallace Fan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Eur Imports facing as an external strategic factors. Some of the topics covered in F. Mayer Imports: Hedging Foreign Currency Risk case study are - Strategic Management Strategies, Financial markets, Risk management and Global Business.
Some of the macro environment factors that can be used to understand the F. Mayer Imports: Hedging Foreign Currency Risk casestudy better are - – increasing energy prices, increasing transportation and logistics costs, there is backlash against globalization, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies,
geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of F. Mayer Imports: Hedging Foreign Currency Risk
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in F. Mayer Imports: Hedging Foreign Currency Risk case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Eur Imports, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Eur Imports 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 F. Mayer Imports: Hedging Foreign Currency Risk can be done for the following purposes –
1. Strategic planning using facts provided in F. Mayer Imports: Hedging Foreign Currency Risk case study
2. Improving business portfolio management of Eur Imports
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 Eur Imports
Strengths F. Mayer Imports: Hedging Foreign Currency Risk | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Eur Imports in F. Mayer Imports: Hedging Foreign Currency Risk Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Eur Imports in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Eur Imports 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 Wallace Fan can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Global Business field
– Eur Imports 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 Eur Imports in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Eur Imports 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 F. Mayer Imports: Hedging Foreign Currency Risk HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Eur Imports has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Eur Imports to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Eur Imports has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in F. Mayer Imports: Hedging Foreign Currency Risk 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.
Sustainable margins compare to other players in Global Business industry
– F. Mayer Imports: Hedging Foreign Currency Risk firm has clearly differentiated products in the market place. This has enabled Eur Imports to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Eur Imports to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the F. Mayer Imports: Hedging Foreign Currency Risk 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.
Cross disciplinary teams
– Horizontal connected teams at the Eur Imports 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.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Eur Imports digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Eur Imports 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.
High switching costs
– The high switching costs that Eur Imports 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.
Learning organization
- Eur Imports 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 Eur Imports is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in F. Mayer Imports: Hedging Foreign Currency Risk Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses F. Mayer Imports: Hedging Foreign Currency Risk | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of F. Mayer Imports: Hedging Foreign Currency Risk are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study F. Mayer Imports: Hedging Foreign Currency Risk, in the dynamic environment Eur Imports has struggled to respond to the nimble upstart competition. Eur Imports has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Eur Imports, firm in the HBR case study F. Mayer Imports: Hedging Foreign Currency Risk needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Eur Imports is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study F. Mayer Imports: Hedging Foreign Currency Risk 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 cash cycle compare to competitors
Eur Imports 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.
Products dominated business model
– Even though Eur Imports 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 - F. Mayer Imports: Hedging Foreign Currency Risk should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As F. Mayer Imports: Hedging Foreign Currency Risk HBR case study mentions - Eur Imports 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Eur Imports 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 bargaining power of channel partners
– Because of the regulatory requirements, Wallace Fan suggests that, Eur Imports 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the F. Mayer Imports: Hedging Foreign Currency Risk 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 Eur Imports has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study F. Mayer Imports: Hedging Foreign Currency Risk, is just above the industry average. Eur Imports 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.
Skills based hiring
– The stress on hiring functional specialists at Eur Imports 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 F. Mayer Imports: Hedging Foreign Currency Risk | 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 F. Mayer Imports: Hedging Foreign Currency Risk are -
Buying journey improvements
– Eur Imports can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. F. Mayer Imports: Hedging Foreign Currency Risk 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.
Leveraging digital technologies
– Eur Imports 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.
Developing new processes and practices
– Eur Imports 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.
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 Eur Imports 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Eur Imports 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.
Creating value in data economy
– The success of analytics program of Eur Imports has opened avenues for new revenue streams for the organization in the industry. This can help Eur Imports to build a more holistic ecosystem as suggested in the F. Mayer Imports: Hedging Foreign Currency Risk case study. Eur Imports 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. Eur Imports can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Eur Imports 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.
Using analytics as competitive advantage
– Eur Imports 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 F. Mayer Imports: Hedging Foreign Currency Risk - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Eur Imports to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Eur Imports 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Eur Imports in the consumer business. Now Eur Imports can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Eur Imports 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, F. Mayer Imports: Hedging Foreign Currency Risk, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Eur Imports can use these opportunities to build new business models that can help the communities that Eur Imports operates in. Secondly it can use opportunities from government spending in Global Business sector.
Threats F. Mayer Imports: Hedging Foreign Currency Risk External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study F. Mayer Imports: Hedging Foreign Currency Risk are -
Stagnating economy with rate increase
– Eur Imports 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.
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. Eur Imports needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
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. Eur Imports 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.
Consumer confidence and its impact on Eur Imports 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.
Increasing wage structure of Eur Imports
– 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 Eur Imports.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Eur Imports in the Global Business industry. The Global Business 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Eur Imports with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Eur Imports has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Eur Imports needs to keep up with the evolution of technology in the Global Business 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.
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.
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.
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 Eur Imports business can come under increasing regulations regarding data privacy, data security, etc.
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 Eur Imports in the Global Business sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Eur Imports 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 F. Mayer Imports: Hedging Foreign Currency Risk .
Weighted SWOT Analysis of F. Mayer Imports: Hedging Foreign Currency Risk 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 F. Mayer Imports: Hedging Foreign Currency Risk 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 F. Mayer Imports: Hedging Foreign Currency Risk 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 F. Mayer Imports: Hedging Foreign Currency Risk 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 F. Mayer Imports: Hedging Foreign Currency Risk 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 Eur Imports needs to make to build a sustainable competitive advantage.
