Debt vs. Equity: Definitions and Consequences SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Debt vs. Equity: Definitions and Consequences
Explores the location of the somewhat imprecise line between debt and equity. Identifies the primary business contexts that give rise to problems, the alternative tax consequences attending the debt versus equity determination, and the most prominent tests used to resolve the questions. Deals with corporate debt paying a market rate of interest and issued at par or close to it.
Swot Analysis of "Debt vs. Equity: Definitions and Consequences" written by Henry B. Reiling, Mark R. Pollard includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Debt Equity facing as an external strategic factors. Some of the topics covered in Debt vs. Equity: Definitions and Consequences case study are - Strategic Management Strategies, Financial markets, Policy and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Debt vs. Equity: Definitions and Consequences casestudy better are - – challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, technology disruption, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, increasing commodity prices,
increasing household debt because of falling income levels, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Debt vs. Equity: Definitions and Consequences
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Debt vs. Equity: Definitions and Consequences case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Debt Equity, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Debt Equity 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 Debt vs. Equity: Definitions and Consequences can be done for the following purposes –
1. Strategic planning using facts provided in Debt vs. Equity: Definitions and Consequences case study
2. Improving business portfolio management of Debt Equity
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 Debt Equity
Strengths Debt vs. Equity: Definitions and Consequences | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Debt Equity in Debt vs. Equity: Definitions and Consequences Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Debt vs. Equity: Definitions and Consequences 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
– Debt Equity has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Debt Equity to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Debt Equity is one of the leading recruiters in the industry. Managers in the Debt vs. Equity: Definitions and Consequences are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Debt Equity is present in almost all the verticals within the industry. This has provided firm in Debt vs. Equity: Definitions and Consequences 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Debt vs. Equity: Definitions and Consequences firm has clearly differentiated products in the market place. This has enabled Debt Equity to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Debt Equity to invest into research and development (R&D) and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Debt Equity digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Debt Equity has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Analytics focus
– Debt Equity 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 Henry B. Reiling, Mark R. Pollard 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.
Ability to lead change in Finance & Accounting field
– Debt Equity 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 Debt Equity in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Debt Equity 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.
Training and development
– Debt Equity has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Debt vs. Equity: Definitions and Consequences 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.
Organizational Resilience of Debt Equity
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Debt Equity does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Debt Equity 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 Debt vs. Equity: Definitions and Consequences HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Debt vs. Equity: Definitions and Consequences | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Debt vs. Equity: Definitions and Consequences are -
High bargaining power of channel partners
– Because of the regulatory requirements, Henry B. Reiling, Mark R. Pollard suggests that, Debt Equity 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.
High cash cycle compare to competitors
Debt Equity 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.
Slow to strategic competitive environment developments
– As Debt vs. Equity: Definitions and Consequences HBR case study mentions - Debt Equity 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.
No frontier risks strategy
– After analyzing the HBR case study Debt vs. Equity: Definitions and Consequences, 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.
Need for greater diversity
– Debt Equity 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, Debt Equity is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Debt vs. Equity: Definitions and Consequences can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Debt Equity 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.
Slow decision making process
– As mentioned earlier in the report, Debt Equity 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. Debt Equity 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Debt Equity 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.
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 Debt Equity supply chain. Even after few cautionary changes mentioned in the HBR case study - Debt vs. Equity: Definitions and Consequences, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Debt Equity vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Debt vs. Equity: Definitions and Consequences 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 Debt vs. Equity: Definitions and Consequences can leverage the sales team experience to cultivate customer relationships as Debt Equity is planning to shift buying processes online.
Opportunities Debt vs. Equity: Definitions and Consequences | 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 Debt vs. Equity: Definitions and Consequences are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Debt Equity 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 Debt Equity to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Debt Equity 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 Debt vs. Equity: Definitions and Consequences - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Debt Equity to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Debt Equity can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Debt Equity has opened avenues for new revenue streams for the organization in the industry. This can help Debt Equity to build a more holistic ecosystem as suggested in the Debt vs. Equity: Definitions and Consequences case study. Debt Equity can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Debt Equity is facing challenges because of the dominance of functional experts in the organization. Debt vs. Equity: Definitions and Consequences 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Debt Equity 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.
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. Debt Equity can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Debt Equity 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.
Manufacturing automation
– Debt Equity 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.
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. Debt Equity 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. Debt Equity 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.
Better consumer reach
– The expansion of the 5G network will help Debt Equity to increase its market reach. Debt Equity 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.
Buying journey improvements
– Debt Equity can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Debt vs. Equity: Definitions and Consequences 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Debt Equity 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 Debt vs. Equity: Definitions and Consequences External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Debt vs. Equity: Definitions and Consequences are -
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. Debt Equity 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.
Consumer confidence and its impact on Debt Equity 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.
Regulatory challenges
– Debt Equity 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 Finance & Accounting industry regulations.
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 Debt Equity business can come under increasing regulations regarding data privacy, data security, etc.
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 Debt Equity in the Finance & Accounting sector and impact the bottomline of the organization.
Increasing wage structure of Debt Equity
– 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 Debt Equity.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Debt vs. Equity: Definitions and Consequences, Debt Equity may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
High dependence on third party suppliers
– Debt Equity 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Debt Equity 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
– Debt Equity 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.
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. Debt Equity needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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. Debt Equity 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 Debt Equity 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.
Weighted SWOT Analysis of Debt vs. Equity: Definitions and Consequences 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 Debt vs. Equity: Definitions and Consequences 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 Debt vs. Equity: Definitions and Consequences 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 Debt vs. Equity: Definitions and Consequences 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 Debt vs. Equity: Definitions and Consequences 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 Debt Equity needs to make to build a sustainable competitive advantage.