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 - – cloud computing is disrupting traditional business models, wage bills are increasing, increasing commodity prices, increasing household debt because of falling income levels, technology disruption, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions,
digital marketing is dominated by two big players Facebook and Google, 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 -
Effective Research and Development (R&D)
– Eur Imports 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 F. Mayer Imports: Hedging Foreign Currency Risk - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Low bargaining power of suppliers
– Suppliers of Eur Imports in the sector have low bargaining power. F. Mayer Imports: Hedging Foreign Currency Risk has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Eur Imports to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
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.
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.
Organizational Resilience of Eur Imports
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Eur Imports does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Eur Imports is one of the leading recruiters in the industry. Managers in the F. Mayer Imports: Hedging Foreign Currency Risk are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Eur Imports has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Eur Imports 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.
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.
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.
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 -
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study F. Mayer Imports: Hedging Foreign Currency Risk, it seems that the employees of Eur Imports 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.
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.
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.
Lack of clear differentiation of Eur Imports products
– To increase the profitability and margins on the products, Eur Imports needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Eur Imports 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. Eur Imports 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.
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.
Need for greater diversity
– Eur Imports 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.
Capital Spending Reduction
– Even during the low interest decade, Eur Imports 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.
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.
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 -
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.
Manufacturing automation
– Eur Imports 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.
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.
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.
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.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Eur Imports can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Eur Imports 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. Eur Imports 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 Eur Imports 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 Eur Imports to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Eur Imports 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.
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 -
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.
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 .
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.
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.
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.
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 Eur Imports.
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.
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.
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.
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. Eur Imports can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Eur Imports 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.
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.