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 - – increasing government debt because of Covid-19 spendings, wage bills are increasing, increasing energy prices, technology disruption, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions,
increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, 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 -
Superior customer experience
– The customer experience strategy of Cavendish Cove in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Cavendish Cove 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.
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.
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.
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.
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.
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.
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.
Diverse revenue streams
– Cavendish Cove is present in almost all the verticals within the industry. This has provided firm in Cavendish Cove Cottages case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
Ability to lead change in Leadership & Managing People field
– Cavendish Cove 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 Cavendish Cove in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Cavendish Cove has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Cavendish Cove Cottages 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.
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 -
Aligning sales with marketing
– It come across in the case study Cavendish Cove Cottages 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 Cavendish Cove Cottages can leverage the sales team experience to cultivate customer relationships as Cavendish Cove is planning to shift buying processes online.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Cavendish Cove Cottages, it seems that the employees of Cavendish Cove 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.
No frontier risks strategy
– After analyzing the HBR case study Cavendish Cove Cottages, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Cavendish Cove Cottages 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 Cavendish Cove 's lucrative customers.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Cavendish Cove is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Cavendish Cove Cottages can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Cavendish Cove Cottages, is just above the industry average. Cavendish Cove 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.
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 -
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.
Buying journey improvements
– Cavendish Cove can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Cavendish Cove Cottages suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Cavendish Cove in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
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.
Learning at scale
– Online learning technologies has now opened space for Cavendish Cove 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.
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.
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.
Creating value in data economy
– The success of analytics program of Cavendish Cove has opened avenues for new revenue streams for the organization in the industry. This can help Cavendish Cove to build a more holistic ecosystem as suggested in the Cavendish Cove Cottages case study. Cavendish Cove can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Cavendish Cove 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. Cavendish Cove 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.
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 -
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.
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.
Regulatory challenges
– Cavendish Cove 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 Leadership & Managing People industry regulations.
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.
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 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.
Technology acceleration in Forth Industrial Revolution
– Cavendish Cove has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Cavendish Cove needs to keep up with the evolution of technology in the Leadership & Managing People 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.
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 Cavendish Cove business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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.
Consumer confidence and its impact on Cavendish Cove 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.
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.