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 - – challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions,
talent flight as more people leaving formal jobs, increasing energy prices, 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 -
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.
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.
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.
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.
Strong track record of project management
– Eur Imports is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Eur Imports is one of the most innovative firm in sector. Manager in F. Mayer Imports: Hedging Foreign Currency Risk Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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.
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.
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.
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.
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 -
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.
Interest costs
– Compare to the competition, Eur Imports has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High operating costs
– Compare to the competitors, firm in the HBR case study F. Mayer Imports: Hedging Foreign Currency Risk 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 Eur Imports 's lucrative customers.
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.
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.
Aligning sales with marketing
– It come across in the case study F. Mayer Imports: Hedging Foreign Currency Risk that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case F. Mayer Imports: Hedging Foreign Currency Risk can leverage the sales team experience to cultivate customer relationships as Eur Imports is planning to shift buying processes online.
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.
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.
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.
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.
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 Eur Imports supply chain. Even after few cautionary changes mentioned in the HBR case study - F. Mayer Imports: Hedging Foreign Currency Risk, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Eur Imports vulnerable to further global disruptions in South East Asia.
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.
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.
Loyalty marketing
– Eur Imports has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, 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.
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.
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.
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.
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.
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. Eur Imports can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Eur Imports to increase its market reach. Eur Imports 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.
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 -
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.
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.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Eur Imports is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
Regulatory challenges
– Eur Imports 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.
Environmental challenges
– Eur Imports 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. Eur Imports can take advantage of this fund but it will also bring new competitors in the Global Business industry.
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.
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.
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.
