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 - – technology disruption, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, increasing commodity prices,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, 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 -
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.
Organizational Resilience of Preferred Stock
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Preferred Stock does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Cross disciplinary teams
– Horizontal connected teams at the Preferred Stock 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.
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.
Highly skilled collaborators
– Preferred Stock 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 Citigroup's Exchange Offer (C) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
Operational resilience
– The operational resilience strategy in the Citigroup's Exchange Offer (C) 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.
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.
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.
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.
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 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.
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.
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.
Aligning sales with marketing
– It come across in the case study Citigroup's Exchange Offer (C) 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 Citigroup's Exchange Offer (C) can leverage the sales team experience to cultivate customer relationships as Preferred Stock is planning to shift buying processes online.
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.
Capital Spending Reduction
– Even during the low interest decade, Preferred Stock has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Slow to strategic competitive environment developments
– As Citigroup's Exchange Offer (C) HBR case study mentions - Preferred Stock takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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 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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Citigroup's Exchange Offer (C), it seems that the employees of Preferred Stock 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.
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 -
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Preferred Stock is facing challenges because of the dominance of functional experts in the organization. Citigroup's Exchange Offer (C) 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Preferred Stock can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Preferred Stock 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 Citigroup's Exchange Offer (C) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Preferred Stock to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
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.
Loyalty marketing
– Preferred Stock 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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Preferred Stock 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 Preferred Stock to hire the very best people irrespective of their geographical location.
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 Preferred Stock 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.
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. Preferred Stock 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. Preferred Stock 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.
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.
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 -
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Preferred Stock 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.
Increasing wage structure of Preferred Stock
– 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 Preferred Stock.
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.
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.
Environmental challenges
– Preferred Stock 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. Preferred Stock can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Preferred Stock 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, 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) .
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.
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.
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 Preferred Stock business can come under increasing regulations regarding data privacy, data security, etc.
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.