This case highlights the history of Arthur Andersen and the collapse of the firm following the Enron Corp. audit and the Department of Justice obstruction of justice conviction.
Swot Analysis of "Arthur Andersen LLP" written by David F. Hawkins, Jacob Cohen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Andersen Arthur facing as an external strategic factors. Some of the topics covered in Arthur Andersen LLP case study are - Strategic Management Strategies, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Arthur Andersen LLP casestudy better are - – increasing government debt because of Covid-19 spendings, increasing energy prices, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion,
increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Arthur Andersen LLP
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Arthur Andersen LLP case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Andersen Arthur, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Andersen Arthur 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 Arthur Andersen LLP can be done for the following purposes –
1. Strategic planning using facts provided in Arthur Andersen LLP case study
2. Improving business portfolio management of Andersen Arthur
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 Andersen Arthur
Strengths Arthur Andersen LLP | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Andersen Arthur in Arthur Andersen LLP Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Andersen Arthur in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Andersen Arthur has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Andersen Arthur 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.
High brand equity
– Andersen Arthur has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Andersen Arthur to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Andersen Arthur 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 Arthur Andersen LLP - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Andersen Arthur is one of the leading recruiters in the industry. Managers in the Arthur Andersen LLP are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Finance & Accounting industry
– Arthur Andersen LLP firm has clearly differentiated products in the market place. This has enabled Andersen Arthur to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Andersen Arthur to invest into research and development (R&D) and innovation.
Strong track record of project management
– Andersen Arthur is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Andersen Arthur is one of the most innovative firm in sector. Manager in Arthur Andersen LLP 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 Arthur Andersen LLP 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 Andersen Arthur in the sector have low bargaining power. Arthur Andersen LLP has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Andersen Arthur to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Finance & Accounting field
– Andersen Arthur 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 Andersen Arthur in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Andersen Arthur
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Andersen Arthur does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Arthur Andersen LLP | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arthur Andersen LLP are -
High bargaining power of channel partners
– Because of the regulatory requirements, David F. Hawkins, Jacob Cohen suggests that, Andersen Arthur is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Workers concerns about automation
– As automation is fast increasing in the segment, Andersen Arthur needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Arthur Andersen LLP 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 Andersen Arthur has relatively successful track record of launching new products.
High cash cycle compare to competitors
Andersen Arthur 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.
No frontier risks strategy
– After analyzing the HBR case study Arthur Andersen LLP, 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 Arthur Andersen LLP, is just above the industry average. Andersen Arthur 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.
Need for greater diversity
– Andersen Arthur 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.
Lack of clear differentiation of Andersen Arthur products
– To increase the profitability and margins on the products, Andersen Arthur needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Andersen Arthur is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Arthur Andersen LLP can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Andersen Arthur is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Andersen Arthur needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Andersen Arthur to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Andersen Arthur 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.
Opportunities Arthur Andersen LLP | 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 Arthur Andersen LLP are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Andersen Arthur 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, Arthur Andersen LLP, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Andersen Arthur 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Andersen Arthur is facing challenges because of the dominance of functional experts in the organization. Arthur Andersen LLP 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.
Buying journey improvements
– Andersen Arthur can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Arthur Andersen LLP 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.
Using analytics as competitive advantage
– Andersen Arthur 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 Arthur Andersen LLP - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Andersen Arthur to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Andersen Arthur can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Andersen Arthur can use these opportunities to build new business models that can help the communities that Andersen Arthur operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Manufacturing automation
– Andersen Arthur 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Andersen Arthur 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.
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. Andersen Arthur can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Andersen Arthur 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.
Developing new processes and practices
– Andersen Arthur 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.
Loyalty marketing
– Andersen Arthur 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.
Threats Arthur Andersen LLP External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Arthur Andersen LLP are -
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 Andersen Arthur business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Andersen Arthur 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.
Shortening product life cycle
– it is one of the major threat that Andersen Arthur 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. Andersen Arthur 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.
Increasing wage structure of Andersen Arthur
– 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 Andersen Arthur.
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. Andersen Arthur can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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. Andersen Arthur needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Andersen Arthur with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Andersen Arthur 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.
Environmental challenges
– Andersen Arthur 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. Andersen Arthur can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Andersen Arthur 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.
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 Andersen Arthur in the Finance & Accounting sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Arthur Andersen LLP 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 Arthur Andersen LLP 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 Arthur Andersen LLP 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 Arthur Andersen LLP 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 Arthur Andersen LLP 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 Andersen Arthur needs to make to build a sustainable competitive advantage.
