Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

Case Study SWOT Analysis Solution

Case Study Description of Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities

The case discusses the current US and international accounting guidance regarding the disclosure of contingent and environmental liabilities, including FAS 5 and IAS 37. It then addresses the role of socially responsible investors and other factors that gave rise to the FASB revisiting its guidance. The case details the proposed new guidance and includes perspectives from various constituent groups (financial statement preparers and users) on its pros and cons. The case concludes with an example of existing guidance in practice using Novartis AG. It includes Novartis' financial and other quantitative disclosures regarding environmental liabilities, and its liability from a dumpsite in Bonfol, Switzerland, in particular.

Authors :: Alan D. Jagolinzer, Nathan T. Blair, C. Gregory Rogers

Topics :: Finance & Accounting

Tags :: Business law, Communication, Financial management, Social responsibility, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis

Swot Analysis of "Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities" written by Alan D. Jagolinzer, Nathan T. Blair, C. Gregory Rogers includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Guidance Liabilities facing as an external strategic factors. Some of the topics covered in Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities case study are - Strategic Management Strategies, Business law, Communication, Financial management, Social responsibility and Finance & Accounting.

Some of the macro environment factors that can be used to understand the Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities casestudy better are - – talent flight as more people leaving formal jobs, technology disruption, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc

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Introduction to SWOT Analysis of Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Guidance Liabilities, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Guidance Liabilities 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities can be done for the following purposes –
1. Strategic planning using facts provided in Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities case study
2. Improving business portfolio management of Guidance Liabilities
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 Guidance Liabilities

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Strengths Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Guidance Liabilities in Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities Harvard Business Review case study are -

Successful track record of launching new products

– Guidance Liabilities has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Guidance Liabilities 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.

Analytics focus

– Guidance Liabilities 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 Alan D. Jagolinzer, Nathan T. Blair, C. Gregory Rogers 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.

Ability to recruit top talent

– Guidance Liabilities is one of the leading recruiters in the industry. Managers in the Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities 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 Guidance Liabilities

– The covid-19 pandemic has put organizational resilience at the centre of everthing that Guidance Liabilities does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Highly skilled collaborators

– Guidance Liabilities 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 Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.

Superior customer experience

– The customer experience strategy of Guidance Liabilities in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Strong track record of project management

– Guidance Liabilities is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Digital Transformation in Finance & Accounting segment

- digital transformation varies from industry to industry. For Guidance Liabilities digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Guidance Liabilities 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

– Guidance Liabilities is one of the most innovative firm in sector. Manager in Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.

Operational resilience

– The operational resilience strategy in the Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities 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.

Low bargaining power of suppliers

– Suppliers of Guidance Liabilities in the sector have low bargaining power. Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Guidance Liabilities to manage not only supply disruptions but also source products at highly competitive prices.

Ability to lead change in Finance & Accounting field

– Guidance Liabilities 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 Guidance Liabilities in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

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Weaknesses Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities are -

Capital Spending Reduction

– Even during the low interest decade, Guidance Liabilities 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.

Employees’ incomplete understanding of strategy

– From the instances in the HBR case study Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities, it seems that the employees of Guidance Liabilities 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.

Workers concerns about automation

– As automation is fast increasing in the segment, Guidance Liabilities 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 cash cycle compare to competitors

Guidance Liabilities 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.

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 Guidance Liabilities supply chain. Even after few cautionary changes mentioned in the HBR case study - Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Guidance Liabilities vulnerable to further global disruptions in South East Asia.

No frontier risks strategy

– After analyzing the HBR case study Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities, 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.

Compensation and incentives

– The revenue per employee as mentioned in the HBR case study Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities, is just above the industry average. Guidance Liabilities 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.

Ability to respond to the competition

– As the decision making is very deliberative, highlighted in the case study Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities, in the dynamic environment Guidance Liabilities has struggled to respond to the nimble upstart competition. Guidance Liabilities has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

High dependence on star products

– The top 2 products and services of the firm as mentioned in the Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities 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 Guidance Liabilities has relatively successful track record of launching new products.

Aligning sales with marketing

– It come across in the case study Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities 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 Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities can leverage the sales team experience to cultivate customer relationships as Guidance Liabilities is planning to shift buying processes online.

Increasing silos among functional specialists

– The organizational structure of Guidance Liabilities is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Guidance Liabilities needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Guidance Liabilities to focus more on services rather than just following the product oriented approach.

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Opportunities Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities | 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 Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities are -

Buying journey improvements

– Guidance Liabilities can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities 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.

Creating value in data economy

– The success of analytics program of Guidance Liabilities has opened avenues for new revenue streams for the organization in the industry. This can help Guidance Liabilities to build a more holistic ecosystem as suggested in the Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities case study. Guidance Liabilities can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Guidance Liabilities can use these opportunities to build new business models that can help the communities that Guidance Liabilities 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 Guidance Liabilities in the consumer business. Now Guidance Liabilities can target international markets with far fewer capital restrictions requirements than the existing system.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Guidance Liabilities is facing challenges because of the dominance of functional experts in the organization. Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities 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.

Better consumer reach

– The expansion of the 5G network will help Guidance Liabilities to increase its market reach. Guidance Liabilities 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.

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. Guidance Liabilities 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. Guidance Liabilities 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Guidance Liabilities 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, Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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 Guidance Liabilities 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.

Building a culture of innovation

– managers at Guidance Liabilities 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 Guidance Liabilities 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 Guidance Liabilities to hire the very best people irrespective of their geographical location.

Loyalty marketing

– Guidance Liabilities 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.

Developing new processes and practices

– Guidance Liabilities 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.

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Threats Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats mentioned in the HBR case study Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities are -

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 Guidance Liabilities in the Finance & Accounting sector and impact the bottomline of the organization.

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 Guidance Liabilities.

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. Guidance Liabilities can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Guidance Liabilities with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.

Environmental challenges

– Guidance Liabilities 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. Guidance Liabilities can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.

Stagnating economy with rate increase

– Guidance Liabilities 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.

Shortening product life cycle

– it is one of the major threat that Guidance Liabilities is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

Consumer confidence and its impact on Guidance Liabilities 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 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. Guidance Liabilities needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.

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. Guidance Liabilities 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Guidance Liabilities 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.

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Weighted SWOT Analysis of Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities 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 Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities 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 Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities 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 Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities 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 Disclosure Dilemma: Financial Reporting of Contingent and Environmental Liabilities 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 Guidance Liabilities needs to make to build a sustainable competitive advantage.

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