Arthur Andersen (C): The Collapse of Arthur Andersen SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Arthur Andersen (C): The Collapse of Arthur Andersen
The cases describe the demise of Arthur Andersen, a firm that had long set the industry standard for professionalism in accounting and auditing. Once an example of strong corporate culture with a commitment to public service and independent integrity, Andersen saw its culture and standards weaken as it grew explosively and changed its mode of governance. The (A) case describes a crisis precipitated by the admission of Waste Management, a major Andersen client, that it overstated its pretax earnings by $1.43 billion from 1992 to 1996. The resulting Securities and Exchange Commission (SEC) investigation ended with Andersen paying a $7 million fine, the largest ever levied against an accounting firm, and agreeing to an injunction that effectively placed the accounting giant on probation. Students analyze the causes of Andersen's problems and advise Andersen leadership. The (B) case covers Arthur Andersen's relationship with Enron, one of the great success stories of the "new economy" boom. When Enron's aggressive use of off-balance sheet partnerships became impossible to hide in autumn 2001, news reports stated that Andersen auditors had engaged in extensive shredding of draft documents and associated communications with Enron. Students are asked to act as crisis management consultants to Andersen CEO Joe Berardino. The (C) case details Andersen's collapse following its indictment and conviction on criminal charges of obstructing justice in the Enron case. Its conviction was later overturned by the U.S. Supreme Court on narrow technical grounds, but by then Andersen had ceased to exist, eighty-nine years after Arthur E. Andersen had taken over a small accounting firm in Chicago. Students can focus on the impact of media on a reputational crisis.
Authors :: Daniel Diermeier, Robert J. Crawford, Charlotte Snyder
Swot Analysis of "Arthur Andersen (C): The Collapse of Arthur Andersen" written by Daniel Diermeier, Robert J. Crawford, Charlotte Snyder 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 (C): The Collapse of Arthur Andersen case study are - Strategic Management Strategies, Competitive strategy, Crisis management, Leadership, Organizational culture, Public relations and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Arthur Andersen (C): The Collapse of Arthur Andersen casestudy better are - – central banks are concerned over increasing inflation, geopolitical disruptions, increasing household debt because of falling income levels, there is increasing trade war between United States & China, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings,
there is backlash against globalization, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Arthur Andersen (C): The Collapse of Arthur Andersen
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Arthur Andersen (C): The Collapse of Arthur Andersen 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 (C): The Collapse of Arthur Andersen can be done for the following purposes –
1. Strategic planning using facts provided in Arthur Andersen (C): The Collapse of Arthur Andersen 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 (C): The Collapse of Arthur Andersen | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Andersen Arthur in Arthur Andersen (C): The Collapse of Arthur Andersen Harvard Business Review case study are -
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 (C): The Collapse of Arthur Andersen - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Highly skilled collaborators
– Andersen Arthur 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 Arthur Andersen (C): The Collapse of Arthur Andersen HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Andersen Arthur 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 Daniel Diermeier, Robert J. Crawford, Charlotte Snyder 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Arthur Andersen (C): The Collapse of Arthur Andersen 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.
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.
Innovation driven organization
– Andersen Arthur is one of the most innovative firm in sector. Manager in Arthur Andersen (C): The Collapse of Arthur Andersen Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Andersen Arthur digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Andersen Arthur 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.
Ability to recruit top talent
– Andersen Arthur is one of the leading recruiters in the industry. Managers in the Arthur Andersen (C): The Collapse of Arthur Andersen are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Diverse revenue streams
– Andersen Arthur is present in almost all the verticals within the industry. This has provided firm in Arthur Andersen (C): The Collapse of Arthur Andersen 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.
Weaknesses Arthur Andersen (C): The Collapse of Arthur Andersen | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arthur Andersen (C): The Collapse of Arthur Andersen are -
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.
Low market penetration in new markets
– Outside its home market of Andersen Arthur, firm in the HBR case study Arthur Andersen (C): The Collapse of Arthur Andersen needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 (C): The Collapse of Arthur Andersen can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, firm in the HBR case study Arthur Andersen (C): The Collapse of Arthur Andersen 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 Andersen Arthur 's lucrative customers.
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 Andersen Arthur supply chain. Even after few cautionary changes mentioned in the HBR case study - Arthur Andersen (C): The Collapse of Arthur Andersen, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Andersen Arthur vulnerable to further global disruptions in South East Asia.
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.
Interest costs
– Compare to the competition, Andersen Arthur 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Arthur Andersen (C): The Collapse of Arthur Andersen, 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.
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.
Slow decision making process
– As mentioned earlier in the report, Andersen Arthur 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. Andersen Arthur 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.
Slow to strategic competitive environment developments
– As Arthur Andersen (C): The Collapse of Arthur Andersen HBR case study mentions - Andersen Arthur 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.
Opportunities Arthur Andersen (C): The Collapse of Arthur Andersen | 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 (C): The Collapse of Arthur Andersen are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Andersen Arthur 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 Andersen Arthur to hire the very best people irrespective of their geographical location.
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.
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.
Building a culture of innovation
– managers at Andersen Arthur 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.
Leveraging digital technologies
– Andersen Arthur 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Andersen Arthur can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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 (C): The Collapse of Arthur Andersen - 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.
Better consumer reach
– The expansion of the 5G network will help Andersen Arthur to increase its market reach. Andersen Arthur 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.
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 (C): The Collapse of Arthur Andersen 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.
Learning at scale
– Online learning technologies has now opened space for Andersen Arthur 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.
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.
Threats Arthur Andersen (C): The Collapse of Arthur Andersen 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 (C): The Collapse of Arthur Andersen are -
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.
Regulatory challenges
– Andersen Arthur 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.
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.
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 Andersen Arthur.
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.
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.
Stagnating economy with rate increase
– Andersen Arthur 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.
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.
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.
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.
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.
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.
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.
Weighted SWOT Analysis of Arthur Andersen (C): The Collapse of Arthur Andersen 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 (C): The Collapse of Arthur Andersen 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 (C): The Collapse of Arthur Andersen 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 (C): The Collapse of Arthur Andersen 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 (C): The Collapse of Arthur Andersen 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.