Ayala Corporation is the oldest conglomerate in the Philippines and has been controlled by the Zobel de Ayala family for seven generations. Over the past 25 years, Ayala has evolved from a real estate family business into a highly diversified and professionally managed business group, with a significant number of non-family shareholders. Between the holding company and its four largest subsidiaries, the Ayala group accounts for a quarter of the market capitalization of the Philippines Stock Exchange. Provides data to assess the value created for Ayala's stockholders in the ten years leading up to 2006, when the transition to the seventh generation of the Zobel de Ayala family culminated.
Authors :: Belen Villalonga, Raphael Amit, Chris Hartman
Swot Analysis of "Ayala Corp." written by Belen Villalonga, Raphael Amit, Chris Hartman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ayala Zobel facing as an external strategic factors. Some of the topics covered in Ayala Corp. case study are - Strategic Management Strategies, Financial analysis, Financial management, Risk management and Organizational Development.
Some of the macro environment factors that can be used to understand the Ayala Corp. casestudy better are - – increasing energy prices, challanges to central banks by blockchain based private currencies, wage bills are increasing, cloud computing is disrupting traditional business models, there is backlash against globalization, increasing commodity prices, increasing transportation and logistics costs,
talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Ayala Corp. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ayala Zobel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ayala Zobel 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 Ayala Corp. can be done for the following purposes –
1. Strategic planning using facts provided in Ayala Corp. case study
2. Improving business portfolio management of Ayala Zobel
3. Assessing feasibility of the new initiative in Organizational Development field.
4. Making a Organizational Development topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ayala Zobel
Strengths Ayala Corp. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ayala Zobel in Ayala Corp. Harvard Business Review case study are -
High brand equity
– Ayala Zobel has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ayala Zobel to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Ayala Zobel is one of the leading recruiters in the industry. Managers in the Ayala Corp. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Ayala Zobel digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ayala Zobel 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.
Superior customer experience
– The customer experience strategy of Ayala Zobel in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Ayala Zobel 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 Belen Villalonga, Raphael Amit, Chris Hartman 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.
Operational resilience
– The operational resilience strategy in the Ayala Corp. 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.
Ability to lead change in Organizational Development field
– Ayala Zobel 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 Ayala Zobel 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 Ayala Zobel 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.
Highly skilled collaborators
– Ayala Zobel 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 Ayala Corp. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Ayala Zobel 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 Ayala Zobel is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Ayala Corp. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Ayala Zobel is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Organizational Development industry
– Ayala Corp. firm has clearly differentiated products in the market place. This has enabled Ayala Zobel to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Ayala Zobel to invest into research and development (R&D) and innovation.
Weaknesses Ayala Corp. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Ayala Corp. are -
Capital Spending Reduction
– Even during the low interest decade, Ayala Zobel 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.
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 Ayala Zobel supply chain. Even after few cautionary changes mentioned in the HBR case study - Ayala Corp., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ayala Zobel vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Ayala Zobel 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
– Ayala Zobel 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Ayala Zobel 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 star products
– The top 2 products and services of the firm as mentioned in the Ayala Corp. 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 Ayala Zobel has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Ayala Corp., in the dynamic environment Ayala Zobel has struggled to respond to the nimble upstart competition. Ayala Zobel has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Ayala Zobel products
– To increase the profitability and margins on the products, Ayala Zobel needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Ayala Zobel has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow decision making process
– As mentioned earlier in the report, Ayala Zobel 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. Ayala Zobel 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.
Aligning sales with marketing
– It come across in the case study Ayala Corp. 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 Ayala Corp. can leverage the sales team experience to cultivate customer relationships as Ayala Zobel is planning to shift buying processes online.
Opportunities Ayala Corp. | 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 Ayala Corp. are -
Buying journey improvements
– Ayala Zobel can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Ayala Corp. 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 Ayala Zobel in the consumer business. Now Ayala Zobel can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Ayala Zobel can develop new processes and procedures in Organizational Development 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ayala Zobel 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, Ayala Corp., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Ayala Zobel can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Ayala Zobel can use the latest technology developments to improve its manufacturing and designing process in Organizational Development 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ayala Zobel can use these opportunities to build new business models that can help the communities that Ayala Zobel operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Using analytics as competitive advantage
– Ayala Zobel 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 Ayala Corp. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ayala Zobel to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ayala Zobel 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ayala Zobel 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 Ayala Zobel to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Ayala Zobel 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.
Learning at scale
– Online learning technologies has now opened space for Ayala Zobel 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.
Better consumer reach
– The expansion of the 5G network will help Ayala Zobel to increase its market reach. Ayala Zobel 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.
Threats Ayala Corp. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Ayala Corp. are -
Consumer confidence and its impact on Ayala Zobel 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.
High dependence on third party suppliers
– Ayala Zobel 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.
Environmental challenges
– Ayala Zobel 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. Ayala Zobel can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
Shortening product life cycle
– it is one of the major threat that Ayala Zobel is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Ayala Zobel has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Ayala Zobel needs to keep up with the evolution of technology in the Organizational Development 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ayala Zobel with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ayala Zobel 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 Ayala Corp. .
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 Ayala Zobel in the Organizational Development sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Ayala Corp., Ayala Zobel may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Organizational Development .
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. Ayala Zobel needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Ayala Zobel 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.
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.
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 Ayala Zobel.
Weighted SWOT Analysis of Ayala Corp. 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 Ayala Corp. 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 Ayala Corp. 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 Ayala Corp. 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 Ayala Corp. 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 Ayala Zobel needs to make to build a sustainable competitive advantage.
