Case Study Description of Citigroup's Exchange Offer (C)
Citigroup faced considerable distress in early 2009. In late 2008, the bank had accepted $45 billion in preferred equity from the United States government via the Troubled Assets Relief Program (TARP). Yet, the stock had continued to slide in early 2009. In late February, the company announced that it would convert as much as $50 billion of preferred stock into common stock, at $3.25 per share. The case asks students to evaluate the pricing of preferred stock relative to common stock at this time. As the case takes place during a period of considerable uncertainty in global capital markets, and conventional sources of arbitrage capital have been depleted, the apparent mispricing may not be as attractive as it initially seems. In the B and C case, students must decide whether their view of the appropriate pricing changes, when the apparent mispricing worsens. A final additional teaching point relates to the formation of a synthetic short position using the options markets.
Swot Analysis of "Citigroup's Exchange Offer (C)" written by Robin Greenwood, James Quinn includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Preferred Stock facing as an external strategic factors. Some of the topics covered in Citigroup's Exchange Offer (C) case study are - Strategic Management Strategies, Financial management, Financial markets, International business and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Citigroup's Exchange Offer (C) casestudy better are - – wage bills are increasing, increasing household debt because of falling income levels, geopolitical disruptions, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs,
customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Citigroup's Exchange Offer (C)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Citigroup's Exchange Offer (C) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Preferred Stock, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Preferred Stock 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 Citigroup's Exchange Offer (C) can be done for the following purposes –
1. Strategic planning using facts provided in Citigroup's Exchange Offer (C) case study
2. Improving business portfolio management of Preferred Stock
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 Preferred Stock
Strengths Citigroup's Exchange Offer (C) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Preferred Stock in Citigroup's Exchange Offer (C) Harvard Business Review case study are -
Training and development
– Preferred Stock has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Citigroup's Exchange Offer (C) 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.
Ability to recruit top talent
– Preferred Stock is one of the leading recruiters in the industry. Managers in the Citigroup's Exchange Offer (C) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Preferred Stock in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Preferred Stock is one of the most innovative firm in sector. Manager in Citigroup's Exchange Offer (C) 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 Finance & Accounting field
– Preferred Stock 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 Preferred Stock in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Preferred Stock is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Preferred Stock 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 Robin Greenwood, James Quinn 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.
Learning organization
- Preferred Stock 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 Preferred Stock is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Citigroup's Exchange Offer (C) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Preferred Stock in the sector have low bargaining power. Citigroup's Exchange Offer (C) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Preferred Stock to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Preferred Stock has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Preferred Stock 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.
High brand equity
– Preferred Stock has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Preferred Stock to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Preferred Stock is present in almost all the verticals within the industry. This has provided firm in Citigroup's Exchange Offer (C) 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.
Weaknesses Citigroup's Exchange Offer (C) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Citigroup's Exchange Offer (C) are -
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 Preferred Stock supply chain. Even after few cautionary changes mentioned in the HBR case study - Citigroup's Exchange Offer (C), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Preferred Stock vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Preferred Stock is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Preferred Stock needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Preferred Stock to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Citigroup's Exchange Offer (C) 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 Preferred Stock 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Preferred Stock, firm in the HBR case study Citigroup's Exchange Offer (C) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Citigroup's Exchange Offer (C), is just above the industry average. Preferred Stock 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.
High cash cycle compare to competitors
Preferred Stock 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.
Need for greater diversity
– Preferred Stock 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.
Lack of clear differentiation of Preferred Stock products
– To increase the profitability and margins on the products, Preferred Stock needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study Citigroup's Exchange Offer (C), it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Citigroup's Exchange Offer (C) 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 Preferred Stock has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Preferred Stock 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.
Opportunities Citigroup's Exchange Offer (C) | 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 Citigroup's Exchange Offer (C) are -
Buying journey improvements
– Preferred Stock can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Citigroup's Exchange Offer (C) 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.
Building a culture of innovation
– managers at Preferred Stock 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 Finance & Accounting segment.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Preferred Stock can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Preferred Stock can use these opportunities to build new business models that can help the communities that Preferred Stock operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Developing new processes and practices
– Preferred Stock can develop new processes and procedures in Finance & Accounting 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Preferred Stock 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.
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. Preferred Stock can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Preferred Stock in the consumer business. Now Preferred Stock 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 Preferred Stock to increase its market reach. Preferred Stock 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.
Leveraging digital technologies
– Preferred Stock 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Preferred Stock 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.
Manufacturing automation
– Preferred Stock 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Preferred Stock 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, Citigroup's Exchange Offer (C), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Citigroup's Exchange Offer (C) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Citigroup's Exchange Offer (C) are -
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 Preferred Stock in the Finance & Accounting sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Preferred Stock with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Preferred Stock can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
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 acceleration in Forth Industrial Revolution
– Preferred Stock has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Preferred Stock needs to keep up with the evolution of technology in the Finance & Accounting 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.
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 Preferred Stock 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. Preferred Stock 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 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. Preferred Stock needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Preferred Stock 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 Citigroup's Exchange Offer (C) .
Consumer confidence and its impact on Preferred Stock demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Preferred Stock 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 Preferred Stock.
Weighted SWOT Analysis of Citigroup's Exchange Offer (C) 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 Citigroup's Exchange Offer (C) 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 Citigroup's Exchange Offer (C) 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 Citigroup's Exchange Offer (C) 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 Citigroup's Exchange Offer (C) 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 Preferred Stock needs to make to build a sustainable competitive advantage.
