Case Study Description of RJR Nabisco Holdings Capital Corp.--1991
An investment manager notices a large apparent discrepancy in the prices of two nearly-identical bonds issued in conjunction with a major leveraged buyout. The manager must figure out whether the instruments are mispriced relative to one another, and if so, how to capture arbitrage profits from the temporary anomaly. The case introduces students to a wide variety of instruments ranging from very simple treasury strips to P-I-K debentures. Encourages students to devise "arbitrage" positions and understand the degree to which these positions are riskless.
Swot Analysis of "RJR Nabisco Holdings Capital Corp.--1991" written by Peter Tufano includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Arbitrage Instruments facing as an external strategic factors. Some of the topics covered in RJR Nabisco Holdings Capital Corp.--1991 case study are - Strategic Management Strategies, Financial markets, Mergers & acquisitions, Pricing and Finance & Accounting.
Some of the macro environment factors that can be used to understand the RJR Nabisco Holdings Capital Corp.--1991 casestudy better are - – wage bills are increasing, increasing transportation and logistics costs, increasing energy prices, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion,
supply chains are disrupted by pandemic , there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of RJR Nabisco Holdings Capital Corp.--1991
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in RJR Nabisco Holdings Capital Corp.--1991 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arbitrage Instruments, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arbitrage Instruments 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 RJR Nabisco Holdings Capital Corp.--1991 can be done for the following purposes –
1. Strategic planning using facts provided in RJR Nabisco Holdings Capital Corp.--1991 case study
2. Improving business portfolio management of Arbitrage Instruments
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arbitrage Instruments
Strengths RJR Nabisco Holdings Capital Corp.--1991 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arbitrage Instruments in RJR Nabisco Holdings Capital Corp.--1991 Harvard Business Review case study are -
High switching costs
– The high switching costs that Arbitrage Instruments 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
- Arbitrage Instruments 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 Arbitrage Instruments is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in RJR Nabisco Holdings Capital Corp.--1991 Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Arbitrage Instruments 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 RJR Nabisco Holdings Capital Corp.--1991 - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the RJR Nabisco Holdings Capital Corp.--1991 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.
Low bargaining power of suppliers
– Suppliers of Arbitrage Instruments in the sector have low bargaining power. RJR Nabisco Holdings Capital Corp.--1991 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arbitrage Instruments to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Arbitrage Instruments has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arbitrage Instruments to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Arbitrage Instruments 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.
Ability to lead change in Finance & Accounting field
– Arbitrage Instruments 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 Arbitrage Instruments in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Arbitrage Instruments 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 Peter Tufano 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.
Successful track record of launching new products
– Arbitrage Instruments has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Arbitrage Instruments 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.
Sustainable margins compare to other players in Finance & Accounting industry
– RJR Nabisco Holdings Capital Corp.--1991 firm has clearly differentiated products in the market place. This has enabled Arbitrage Instruments to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Arbitrage Instruments to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Arbitrage Instruments in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses RJR Nabisco Holdings Capital Corp.--1991 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of RJR Nabisco Holdings Capital Corp.--1991 are -
High bargaining power of channel partners
– Because of the regulatory requirements, Peter Tufano suggests that, Arbitrage Instruments 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Arbitrage Instruments 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study RJR Nabisco Holdings Capital Corp.--1991, is just above the industry average. Arbitrage Instruments 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
– Arbitrage Instruments 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.
High operating costs
– Compare to the competitors, firm in the HBR case study RJR Nabisco Holdings Capital Corp.--1991 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 Arbitrage Instruments 's lucrative customers.
Interest costs
– Compare to the competition, Arbitrage Instruments 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study RJR Nabisco Holdings Capital Corp.--1991, it seems that the employees of Arbitrage Instruments 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.
Slow decision making process
– As mentioned earlier in the report, Arbitrage Instruments 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. Arbitrage Instruments 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study RJR Nabisco Holdings Capital Corp.--1991, in the dynamic environment Arbitrage Instruments has struggled to respond to the nimble upstart competition. Arbitrage Instruments has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Arbitrage Instruments is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study RJR Nabisco Holdings Capital Corp.--1991 can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Arbitrage Instruments products
– To increase the profitability and margins on the products, Arbitrage Instruments needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities RJR Nabisco Holdings Capital Corp.--1991 | 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 RJR Nabisco Holdings Capital Corp.--1991 are -
Creating value in data economy
– The success of analytics program of Arbitrage Instruments has opened avenues for new revenue streams for the organization in the industry. This can help Arbitrage Instruments to build a more holistic ecosystem as suggested in the RJR Nabisco Holdings Capital Corp.--1991 case study. Arbitrage Instruments can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Arbitrage Instruments 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Arbitrage Instruments 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, RJR Nabisco Holdings Capital Corp.--1991, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Arbitrage Instruments 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. Arbitrage Instruments can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Arbitrage Instruments 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.
Using analytics as competitive advantage
– Arbitrage Instruments 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 RJR Nabisco Holdings Capital Corp.--1991 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Arbitrage Instruments to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Arbitrage Instruments 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Arbitrage Instruments 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.
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 Arbitrage Instruments in the consumer business. Now Arbitrage Instruments can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Arbitrage Instruments 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. Arbitrage Instruments 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.
Manufacturing automation
– Arbitrage Instruments can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Arbitrage Instruments in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Threats RJR Nabisco Holdings Capital Corp.--1991 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study RJR Nabisco Holdings Capital Corp.--1991 are -
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 Arbitrage Instruments.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study RJR Nabisco Holdings Capital Corp.--1991, Arbitrage Instruments may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Environmental challenges
– Arbitrage Instruments 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. Arbitrage Instruments can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Consumer confidence and its impact on Arbitrage Instruments 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.
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 Arbitrage Instruments in the Finance & Accounting sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Arbitrage Instruments 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 RJR Nabisco Holdings Capital Corp.--1991 .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Arbitrage Instruments with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Increasing wage structure of Arbitrage Instruments
– 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 Arbitrage Instruments.
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. Arbitrage Instruments needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arbitrage Instruments in the Finance & Accounting industry. The Finance & Accounting 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.
Shortening product life cycle
– it is one of the major threat that Arbitrage Instruments is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Arbitrage Instruments 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.
Weighted SWOT Analysis of RJR Nabisco Holdings Capital Corp.--1991 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 RJR Nabisco Holdings Capital Corp.--1991 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 RJR Nabisco Holdings Capital Corp.--1991 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 RJR Nabisco Holdings Capital Corp.--1991 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 RJR Nabisco Holdings Capital Corp.--1991 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 Arbitrage Instruments needs to make to build a sustainable competitive advantage.