Sherry Noonan, a senior business student, is considering purchasing Cavendish Cove Cottages, a complex of 19 cottage rental units marketed to visitors. The property is located in the heart of Cavendish, a very popular tourist destination on Prince Edward Island (PEI), Canada. Sherry must analyze this opportunity as a going concern. This case presents a unique situation: the opportunity to apply business valuation concepts in a small business environment, and from the perspective of a college-age entrepreneur. This case provides the opportunity to utilize the planning, analytical, and decision-making techniques of a prospective entrepreneur who is considering acquiring an existing business. This is complicated by the fact that the business is seasonal and only open a portion of the year. Also affecting the analysis is the deteriorating economic environment that existed at the time of the case (early 2009), leading to the possibility of declining tourist numbers and spending on PEI. While her family may provide some of the financing to purchase the business, the task of raising the additional funds required could prove difficult given Sherry's young age and the very tight credit markets. A thorough analysis of the business's financial situation must be completed, strengths and weaknesses uncovered, and areas for improvement discussed. Yearly sales, expenses, and cash operating earnings must then be forecast, and the value of the business estimated. A recommendation, based on the various tools used to analyze the case information, must then be made. The Instructor's Manual suggests the types of courses the case is suited for, offers a range of discussion questions and teaching formats, and provides a thorough financial analysis of the business opportunity.
Swot Analysis of "Cavendish Cove Cottages" written by Sean M Hennessey includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cavendish Cove facing as an external strategic factors. Some of the topics covered in Cavendish Cove Cottages case study are - Strategic Management Strategies, Financial analysis, Forecasting and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Cavendish Cove Cottages casestudy better are - – central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, increasing energy prices,
wage bills are increasing, technology disruption, etc
Introduction to SWOT Analysis of Cavendish Cove Cottages
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Cavendish Cove Cottages case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cavendish Cove, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cavendish Cove 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 Cavendish Cove Cottages can be done for the following purposes –
1. Strategic planning using facts provided in Cavendish Cove Cottages case study
2. Improving business portfolio management of Cavendish Cove
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Cavendish Cove
Strengths Cavendish Cove Cottages | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cavendish Cove in Cavendish Cove Cottages Harvard Business Review case study are -
Organizational Resilience of Cavendish Cove
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Cavendish Cove does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Cavendish Cove Cottages 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.
Successful track record of launching new products
– Cavendish Cove has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cavendish Cove 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
– Cavendish Cove 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 Sean M Hennessey 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.
Strong track record of project management
– Cavendish Cove is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Cavendish Cove 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 Cavendish Cove Cottages - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Cavendish Cove 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 Cavendish Cove is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Cavendish Cove Cottages Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Cavendish Cove 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.
Ability to recruit top talent
– Cavendish Cove is one of the leading recruiters in the industry. Managers in the Cavendish Cove Cottages are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Cavendish Cove has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Cavendish Cove to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Cavendish Cove in the sector have low bargaining power. Cavendish Cove Cottages has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Cavendish Cove to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Cavendish Cove 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 Cavendish Cove Cottages HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Cavendish Cove Cottages | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Cavendish Cove Cottages are -
High cash cycle compare to competitors
Cavendish Cove 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 Cavendish Cove products
– To increase the profitability and margins on the products, Cavendish Cove needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Cavendish Cove, firm in the HBR case study Cavendish Cove Cottages needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Cavendish Cove 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 - Cavendish Cove Cottages should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Cavendish Cove 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.
Interest costs
– Compare to the competition, Cavendish Cove 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 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 Cavendish Cove supply chain. Even after few cautionary changes mentioned in the HBR case study - Cavendish Cove Cottages, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Cavendish Cove vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Sean M Hennessey suggests that, Cavendish Cove 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.
Slow decision making process
– As mentioned earlier in the report, Cavendish Cove 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. Cavendish Cove 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Cavendish Cove Cottages 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 Cavendish Cove has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Cavendish Cove Cottages, in the dynamic environment Cavendish Cove has struggled to respond to the nimble upstart competition. Cavendish Cove has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Cavendish Cove Cottages | 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 Cavendish Cove Cottages 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 Cavendish Cove in the consumer business. Now Cavendish Cove can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Cavendish Cove to increase its market reach. Cavendish Cove 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Cavendish Cove 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 Cavendish Cove to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Cavendish Cove 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.
Manufacturing automation
– Cavendish Cove can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Cavendish Cove can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Cavendish Cove 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.
Developing new processes and practices
– Cavendish Cove can develop new processes and procedures in Leadership & Managing People 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.
Using analytics as competitive advantage
– Cavendish Cove 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 Cavendish Cove Cottages - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Cavendish Cove to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Cavendish Cove is facing challenges because of the dominance of functional experts in the organization. Cavendish Cove Cottages case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cavendish Cove can use these opportunities to build new business models that can help the communities that Cavendish Cove operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Leveraging digital technologies
– Cavendish Cove 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 Cavendish Cove 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.
Threats Cavendish Cove Cottages External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Cavendish Cove Cottages are -
Increasing wage structure of Cavendish Cove
– 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 Cavendish Cove.
Environmental challenges
– Cavendish Cove 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. Cavendish Cove can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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. Cavendish Cove 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.
High dependence on third party suppliers
– Cavendish Cove 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.
Shortening product life cycle
– it is one of the major threat that Cavendish Cove is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Cavendish Cove can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Cavendish Cove.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Cavendish Cove with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Cavendish Cove Cottages, Cavendish Cove may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
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.
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. Cavendish Cove needs to understand the core reasons impacting the Leadership & Managing People 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 Cavendish Cove in the Leadership & Managing People industry. The Leadership & Managing People 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.
Weighted SWOT Analysis of Cavendish Cove Cottages 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 Cavendish Cove Cottages 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 Cavendish Cove Cottages 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 Cavendish Cove Cottages 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 Cavendish Cove Cottages 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 Cavendish Cove needs to make to build a sustainable competitive advantage.