SWOT analysis

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Simon Properties Group – Real Estate and Retail

Angel Bloodworth

MGT450: Strategic Planning

University of Arizona

21 March 2022

Introduction

Financial stability is advantageous to a company in several ways. It helps improve the company’s image, facilitates access to capital, and gives the company more influence in the industrial and political circles. Financial stability has so many benefits that it is considered one of the essential goals in business management. The success of any company is dependent on the stability with which it manages its finances. One of the characteristics of a financially sound company is the ability to boast about having a diverse variety of resources at its disposal. This is essential for the smooth functioning of the business and its long-term success.

This, however, is not the case with Simon Property Group, as it continues to struggle financially. As mentioned in the previous assignment, the company faces a financial crisis that severely impacts its strategic objectives. Its financial woes have forced the directors to release four of its malls that have accumulated mortgage debt amounting to $400 million. The company's stock, which has a market capitalization of $34 billion, has dropped by 41% in the last two years. One of the reasons this challenge is a problem for the company is that it reduces its chances of accessing funds. No firm or investor wants to be associated with or invest in an underperforming company (Dang, Gorton & Holmström, 2020). The fact that Simon Property Group is going through a rough patch financially limits the company's ability to raise financing. While the company may access some funding because of its clean history of profitability and its many assets, its capacity to obtain large sums of money may be constrained.

The other reason this challenge is a problem for the company is its rising debts. Too many debts are bad for any business since it inhibits the firm’s ability to generate surplus cash. Furthermore, common investors, who are the last to be reimbursed when a company goes bankrupt, may suffer from high debt levels. The fact that Simon Property Group is contemplating selling some of its malls to pay off debts indicates that it is on the verge of bankruptcy. Bad debts may harm a company in various ways, including limiting the amount of cash available to operate the firm daily and jeopardizing its capacity to pay its creditors.

A huge financial crisis for Simon Property Group also means inconsistent cash flow. Cash flow constancy should be a major goal for any firm in operation, be it big or small. Paying employees, bills, and suppliers is difficult when you don't have enough cash. Inconsistent cash flow is bad for Simon Property Group because it means that the management will be forced to make late payments or take additional loans. Late payments may also have a negative impact on a business's credit rating, making it more difficult for the firm to get credit account privileges and loans in the future (Roberts, 2019). The other reason why a financial crisis is a problem for Simon Property Group is because it means that the company does not have enough capital to quench its investments and diversification needs. Simon Property Group is well-known for its investing culture as a global corporation; nevertheless, this is difficult if the business is in debt and has no money available for investment.

Conclusion

Every company's worst enemy is a financial crisis. External aspects such as disasters or weakening economy or internal aspects such as poor cash-flow management may result in a financial crisis. If financial issues are not addressed properly and on time, they may severely harm the company. Even if the firm strives to avoid them, owing to the status of the market and resource prices, the company may get into debt; nonetheless, if these financial challenges develop, it is critical to understand how to manage them in the most efficient manner possible.

References

Dang, T. V., Gorton, G., & Holmström, B. (2020). The information view of financial crises. Annual Review of Financial Economics, 12, 39-65.

Roberts, R. (2019). Gambling with Other People's Money: How Perverse Incentives Caused the Financial Crisis. Hoover Press.