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 - – competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, there is backlash against globalization,
wage bills are increasing, increasing transportation and logistics costs, 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 -
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.
Innovation driven organization
– Debt Equity is one of the most innovative firm in sector. Manager in Debt vs. Equity: Definitions and Consequences Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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 switching costs
– The high switching costs that Debt Equity 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.
Effective Research and Development (R&D)
– Debt Equity 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 Debt vs. Equity: Definitions and Consequences - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
Strong track record of project management
– Debt Equity is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Debt Equity in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Successful track record of launching new products
– Debt Equity has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Debt Equity 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.
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 operating costs
– Compare to the competitors, firm in the HBR case study Debt vs. Equity: Definitions and Consequences 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 Debt Equity 's lucrative 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.
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.
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.
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.
Low market penetration in new markets
– Outside its home market of Debt Equity, firm in the HBR case study Debt vs. Equity: Definitions and Consequences needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
Lack of clear differentiation of Debt Equity products
– To increase the profitability and margins on the products, Debt Equity needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Debt Equity 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 - Debt vs. Equity: Definitions and Consequences should strive to include more intangible value offerings along with its core products and services.
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 -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Debt Equity can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Debt Equity 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.
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.
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.
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.
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 Debt Equity in the consumer business. Now Debt Equity can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Developing new processes and practices
– Debt Equity 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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Debt Equity 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.
Loyalty marketing
– Debt Equity 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.
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 -
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.
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 Debt Equity.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Debt Equity is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Technology acceleration in Forth Industrial Revolution
– Debt Equity has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Debt Equity 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.
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.
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.
