Case Study Description of Biovail Corporation: Revenue Recognition and FOB Sales Accounting
When students have the English-language PDF of this Brief Case in a coursepack, they will also have the option to purchase an audio version.Biovail Corporation, a major Canadian pharmaceutical company listed on the New York Stock Exchange, announces that it will miss its quarterly earnings target by $25 to $45 million, blaming $10 to $15 million of the shortfall on a truck accident involving a shipment that left its facility on the last day of the quarter. The case was ultimately prosecuted by the U.S. Securities and Exchange Commission (SEC). The case is centered on the question of revenue recognition and how the company should have accounted for the sales (FOB company or FOB destination). However, it also provides a rich setting permitting exploration of peripheral topics around the ethics of earnings management. For example, the case discusses stock analysts' reactions to the announcement; questions how much product was actually in the truck; questions how aggressively the company responds against the analysts who downgrade the stock; and highlights the role of the SEC in enforcement.
Swot Analysis of "Biovail Corporation: Revenue Recognition and FOB Sales Accounting" written by Craig J Chapman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Fob Truck facing as an external strategic factors. Some of the topics covered in Biovail Corporation: Revenue Recognition and FOB Sales Accounting case study are - Strategic Management Strategies, Ethics, Financial analysis, Financial management, Financial markets, Government, Knowledge management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Biovail Corporation: Revenue Recognition and FOB Sales Accounting casestudy better are - – increasing household debt because of falling income levels, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, challanges to central banks by blockchain based private currencies, there is backlash against globalization, increasing government debt because of Covid-19 spendings,
competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, etc
Introduction to SWOT Analysis of Biovail Corporation: Revenue Recognition and FOB Sales Accounting
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Biovail Corporation: Revenue Recognition and FOB Sales Accounting case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fob Truck, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fob Truck 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 Biovail Corporation: Revenue Recognition and FOB Sales Accounting can be done for the following purposes –
1. Strategic planning using facts provided in Biovail Corporation: Revenue Recognition and FOB Sales Accounting case study
2. Improving business portfolio management of Fob Truck
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 Fob Truck
Strengths Biovail Corporation: Revenue Recognition and FOB Sales Accounting | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fob Truck in Biovail Corporation: Revenue Recognition and FOB Sales Accounting Harvard Business Review case study are -
Learning organization
- Fob Truck 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 Fob Truck is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Biovail Corporation: Revenue Recognition and FOB Sales Accounting Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Fob Truck 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.
Operational resilience
– The operational resilience strategy in the Biovail Corporation: Revenue Recognition and FOB Sales Accounting 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 Fob Truck 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.
Successful track record of launching new products
– Fob Truck has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fob Truck 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.
Superior customer experience
– The customer experience strategy of Fob Truck in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Fob Truck has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Fob Truck to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Fob Truck digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fob Truck 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.
Innovation driven organization
– Fob Truck is one of the most innovative firm in sector. Manager in Biovail Corporation: Revenue Recognition and FOB Sales Accounting Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Finance & Accounting field
– Fob Truck 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 Fob Truck in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Fob Truck is one of the leading recruiters in the industry. Managers in the Biovail Corporation: Revenue Recognition and FOB Sales Accounting are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Fob Truck
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Fob Truck does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Biovail Corporation: Revenue Recognition and FOB Sales Accounting | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Biovail Corporation: Revenue Recognition and FOB Sales Accounting are -
Capital Spending Reduction
– Even during the low interest decade, Fob Truck 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 cash cycle compare to competitors
Fob Truck 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 Biovail Corporation: Revenue Recognition and FOB Sales Accounting HBR case study mentions - Fob Truck 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Biovail Corporation: Revenue Recognition and FOB Sales Accounting 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 Fob Truck 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Biovail Corporation: Revenue Recognition and FOB Sales Accounting, is just above the industry average. Fob Truck 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.
Slow decision making process
– As mentioned earlier in the report, Fob Truck 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. Fob Truck 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 Biovail Corporation: Revenue Recognition and FOB Sales Accounting 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 Biovail Corporation: Revenue Recognition and FOB Sales Accounting can leverage the sales team experience to cultivate customer relationships as Fob Truck is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study Biovail Corporation: Revenue Recognition and FOB Sales Accounting, 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.
Skills based hiring
– The stress on hiring functional specialists at Fob Truck 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Biovail Corporation: Revenue Recognition and FOB Sales Accounting 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 Fob Truck has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Biovail Corporation: Revenue Recognition and FOB Sales Accounting, it seems that the employees of Fob Truck 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.
Opportunities Biovail Corporation: Revenue Recognition and FOB Sales Accounting | 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 Biovail Corporation: Revenue Recognition and FOB Sales Accounting are -
Buying journey improvements
– Fob Truck can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Biovail Corporation: Revenue Recognition and FOB Sales Accounting 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fob Truck 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.
Loyalty marketing
– Fob Truck 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.
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. Fob Truck 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. Fob Truck 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.
Leveraging digital technologies
– Fob Truck 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
– Fob Truck 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.
Learning at scale
– Online learning technologies has now opened space for Fob Truck 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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Fob Truck to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Fob Truck is facing challenges because of the dominance of functional experts in the organization. Biovail Corporation: Revenue Recognition and FOB Sales Accounting 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.
Creating value in data economy
– The success of analytics program of Fob Truck has opened avenues for new revenue streams for the organization in the industry. This can help Fob Truck to build a more holistic ecosystem as suggested in the Biovail Corporation: Revenue Recognition and FOB Sales Accounting case study. Fob Truck can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fob Truck 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 Fob Truck to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Fob Truck can use these opportunities to build new business models that can help the communities that Fob Truck operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Fob Truck in the consumer business. Now Fob Truck can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Biovail Corporation: Revenue Recognition and FOB Sales Accounting External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Biovail Corporation: Revenue Recognition and FOB Sales Accounting are -
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 Fob Truck.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fob Truck 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 Biovail Corporation: Revenue Recognition and FOB Sales Accounting .
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 Fob Truck in the Finance & Accounting sector and impact the bottomline of the organization.
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 Fob Truck business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Fob Truck has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Fob Truck 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
– Fob Truck 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.
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. Fob Truck can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Fob Truck 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.
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. Fob Truck 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.
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.
Shortening product life cycle
– it is one of the major threat that Fob Truck is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Consumer confidence and its impact on Fob Truck 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.
Weighted SWOT Analysis of Biovail Corporation: Revenue Recognition and FOB Sales Accounting 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 Biovail Corporation: Revenue Recognition and FOB Sales Accounting 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 Biovail Corporation: Revenue Recognition and FOB Sales Accounting 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 Biovail Corporation: Revenue Recognition and FOB Sales Accounting 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 Biovail Corporation: Revenue Recognition and FOB Sales Accounting 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 Fob Truck needs to make to build a sustainable competitive advantage.
