Transfer Pricing at Timken SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Transfer Pricing at Timken
In December 2003, the management teams at the automotive and steel businesses of The Timken Corp., headquartered in Canton, Ohio, were principally in agreement that market price was the appropriate instrument for valuing internal steel transfers. At the same time, both management teams had reservations about details of the implementation of market-based transfer pricing as it stood. Asks students to assess whether the transfer pricing policy for steel transfers inhibited the automotive division from exercising its market power as a purchaser of bearings quality steel. Also asks students to comment on the usefulness of the Minimum Rule, assess Timken's policy of market-based transfer pricing rules for steel, and compare cost-based transfer prices to market-based prices.
Swot Analysis of "Transfer Pricing at Timken" written by Stefan Reichelstein, Nicole Bastian includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Steel Transfer facing as an external strategic factors. Some of the topics covered in Transfer Pricing at Timken case study are - Strategic Management Strategies, Pricing and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Transfer Pricing at Timken casestudy better are - – central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies,
digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, etc
Introduction to SWOT Analysis of Transfer Pricing at Timken
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Transfer Pricing at Timken case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Steel Transfer, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Steel Transfer 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 Transfer Pricing at Timken can be done for the following purposes –
1. Strategic planning using facts provided in Transfer Pricing at Timken case study
2. Improving business portfolio management of Steel Transfer
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 Steel Transfer
Strengths Transfer Pricing at Timken | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Steel Transfer in Transfer Pricing at Timken Harvard Business Review case study are -
High brand equity
– Steel Transfer has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Steel Transfer to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Steel Transfer 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Transfer Pricing at Timken firm has clearly differentiated products in the market place. This has enabled Steel Transfer to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Steel Transfer to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Steel Transfer has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Steel Transfer 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.
Low bargaining power of suppliers
– Suppliers of Steel Transfer in the sector have low bargaining power. Transfer Pricing at Timken has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Steel Transfer to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Steel Transfer 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 Stefan Reichelstein, Nicole Bastian 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.
Learning organization
- Steel Transfer 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 Steel Transfer is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Transfer Pricing at Timken Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Steel Transfer 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 Transfer Pricing at Timken HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Steel Transfer 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 Transfer Pricing at Timken - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Steel Transfer in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Steel Transfer is present in almost all the verticals within the industry. This has provided firm in Transfer Pricing at Timken 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.
High switching costs
– The high switching costs that Steel Transfer 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.
Weaknesses Transfer Pricing at Timken | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Transfer Pricing at Timken are -
Need for greater diversity
– Steel Transfer 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.
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 Steel Transfer supply chain. Even after few cautionary changes mentioned in the HBR case study - Transfer Pricing at Timken, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Steel Transfer vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Steel Transfer 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 decision making process
– As mentioned earlier in the report, Steel Transfer 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. Steel Transfer 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Transfer Pricing at Timken, is just above the industry average. Steel Transfer needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Transfer Pricing at Timken, it seems that the employees of Steel Transfer 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.
Low market penetration in new markets
– Outside its home market of Steel Transfer, firm in the HBR case study Transfer Pricing at Timken needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Transfer Pricing at Timken 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 Steel Transfer 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 Transfer Pricing at Timken, in the dynamic environment Steel Transfer has struggled to respond to the nimble upstart competition. Steel Transfer has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Steel Transfer is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Steel Transfer needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Steel Transfer to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Steel Transfer 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.
Opportunities Transfer Pricing at Timken | 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 Transfer Pricing at Timken are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Steel Transfer can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Steel Transfer can use these opportunities to build new business models that can help the communities that Steel Transfer operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Using analytics as competitive advantage
– Steel Transfer 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 Transfer Pricing at Timken - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Steel Transfer to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Steel Transfer 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Steel Transfer 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, Transfer Pricing at Timken, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Steel Transfer 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.
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. Steel Transfer can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Steel Transfer 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.
Learning at scale
– Online learning technologies has now opened space for Steel Transfer 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.
Buying journey improvements
– Steel Transfer can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Transfer Pricing at Timken 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Steel Transfer is facing challenges because of the dominance of functional experts in the organization. Transfer Pricing at Timken 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 Steel Transfer 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.
Leveraging digital technologies
– Steel Transfer 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.
Threats Transfer Pricing at Timken External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Transfer Pricing at Timken are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Steel Transfer 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.
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. Steel Transfer 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.
Stagnating economy with rate increase
– Steel Transfer 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.
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.
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. Steel Transfer can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Steel Transfer 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 Transfer Pricing at Timken .
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 Steel Transfer in the Finance & Accounting 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 Transfer Pricing at Timken, Steel Transfer 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 .
Environmental challenges
– Steel Transfer 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. Steel Transfer can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Regulatory challenges
– Steel Transfer 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.
Technology acceleration in Forth Industrial Revolution
– Steel Transfer has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Steel Transfer 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Steel Transfer with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Steel Transfer 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 Transfer Pricing at Timken 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 Transfer Pricing at Timken 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 Transfer Pricing at Timken 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 Transfer Pricing at Timken 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 Transfer Pricing at Timken 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 Steel Transfer needs to make to build a sustainable competitive advantage.
