Swot Analysis of "Financial Statement and Ratio Analysis" written by Paul M. Healy, Jacob Cohen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ratio Prepares facing as an external strategic factors. Some of the topics covered in Financial Statement and Ratio Analysis case study are - Strategic Management Strategies, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Financial Statement and Ratio Analysis casestudy better are - – increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, increasing energy prices, cloud computing is disrupting traditional business models, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%,
digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Financial Statement and Ratio Analysis
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Financial Statement and Ratio Analysis case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ratio Prepares, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ratio Prepares 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 Financial Statement and Ratio Analysis can be done for the following purposes –
1. Strategic planning using facts provided in Financial Statement and Ratio Analysis case study
2. Improving business portfolio management of Ratio Prepares
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 Ratio Prepares
Strengths Financial Statement and Ratio Analysis | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ratio Prepares in Financial Statement and Ratio Analysis Harvard Business Review case study are -
Innovation driven organization
– Ratio Prepares is one of the most innovative firm in sector. Manager in Financial Statement and Ratio Analysis Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Ratio Prepares 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
– Ratio Prepares 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 Financial Statement and Ratio Analysis HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Ratio Prepares digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ratio Prepares 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.
Strong track record of project management
– Ratio Prepares is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Ratio Prepares has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ratio Prepares 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.
Diverse revenue streams
– Ratio Prepares is present in almost all the verticals within the industry. This has provided firm in Financial Statement and Ratio Analysis 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.
Ability to lead change in Finance & Accounting field
– Ratio Prepares 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 Ratio Prepares in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Ratio Prepares 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Financial Statement and Ratio Analysis firm has clearly differentiated products in the market place. This has enabled Ratio Prepares to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Ratio Prepares to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Ratio Prepares in the sector have low bargaining power. Financial Statement and Ratio Analysis has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ratio Prepares to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Ratio Prepares has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Financial Statement and Ratio Analysis Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses Financial Statement and Ratio Analysis | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Financial Statement and Ratio Analysis are -
Interest costs
– Compare to the competition, Ratio Prepares has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow decision making process
– As mentioned earlier in the report, Ratio Prepares 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. Ratio Prepares 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.
Products dominated business model
– Even though Ratio Prepares has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Financial Statement and Ratio Analysis should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Financial Statement and Ratio Analysis, in the dynamic environment Ratio Prepares has struggled to respond to the nimble upstart competition. Ratio Prepares has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Financial Statement and Ratio Analysis, it seems that the employees of Ratio Prepares 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 Ratio Prepares, firm in the HBR case study Financial Statement and Ratio Analysis needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– It come across in the case study Financial Statement and Ratio Analysis 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 Financial Statement and Ratio Analysis can leverage the sales team experience to cultivate customer relationships as Ratio Prepares is planning to shift buying processes online.
Need for greater diversity
– Ratio Prepares 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.
Increasing silos among functional specialists
– The organizational structure of Ratio Prepares is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Ratio Prepares needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ratio Prepares to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Financial Statement and Ratio Analysis, 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.
Capital Spending Reduction
– Even during the low interest decade, Ratio Prepares 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.
Opportunities Financial Statement and Ratio Analysis | 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 Financial Statement and Ratio Analysis are -
Manufacturing automation
– Ratio Prepares 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.
Creating value in data economy
– The success of analytics program of Ratio Prepares has opened avenues for new revenue streams for the organization in the industry. This can help Ratio Prepares to build a more holistic ecosystem as suggested in the Financial Statement and Ratio Analysis case study. Ratio Prepares can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Ratio Prepares 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ratio Prepares can use these opportunities to build new business models that can help the communities that Ratio Prepares operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Better consumer reach
– The expansion of the 5G network will help Ratio Prepares to increase its market reach. Ratio Prepares 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.
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. Ratio Prepares can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Ratio Prepares in the consumer business. Now Ratio Prepares can target international markets with far fewer capital restrictions requirements than the existing system.
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. Ratio Prepares can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Ratio Prepares 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 Financial Statement and Ratio Analysis - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ratio Prepares to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Ratio Prepares 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ratio Prepares can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Ratio Prepares 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ratio Prepares 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.
Threats Financial Statement and Ratio Analysis External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Financial Statement and Ratio Analysis are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ratio Prepares 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, Ratio Prepares 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 Financial Statement and Ratio Analysis .
Regulatory challenges
– Ratio Prepares 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.
Shortening product life cycle
– it is one of the major threat that Ratio Prepares is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Ratio Prepares 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Financial Statement and Ratio Analysis, Ratio Prepares 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 .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ratio Prepares 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.
Increasing wage structure of Ratio Prepares
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Ratio Prepares.
Stagnating economy with rate increase
– Ratio Prepares 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. Ratio Prepares can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Ratio Prepares.
High dependence on third party suppliers
– Ratio Prepares 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 Financial Statement and Ratio Analysis 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 Financial Statement and Ratio Analysis 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 Financial Statement and Ratio Analysis 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 Financial Statement and Ratio Analysis 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 Financial Statement and Ratio Analysis 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 Ratio Prepares needs to make to build a sustainable competitive advantage.
