A 123Systems was a young company that was founded on basic materials science research at the Massachusetts Institute of Technology. A co-founder of the company, Yet-Ming Chiang, was a full professor at MIT and served as scientific adviser. Intellectual property based on the science, which offered a radical way to construct lithium-ion batteries that promised higher energy densities, was licensed from MIT. The concept for the company was based on laboratory demonstrations that the three components of battery cells could be selected and treated so that they would self-assemble (due to intrinsic molecular forces). This resulted in finer battery structures and better performance. Following 14 months of research and development, the company found that it required more time and resources than originally anticipated to take the self-assembled battery to market. However, additional IP for a new cathode material, which presented an intermediate market opportunity, had also been licensed from Chiang's lab at MIT. The new material had advantages over the incumbent electrode material: It met the criteria for self-assembly, and it could replace the electrode in the millions of lithium-ion batteries currently in production. The management team needed to decide whether to pursue the breakthrough self-assembly technology or move resources to commercialize the new electrode material and then return to the original breakthrough technology.
Authors :: H. Kent Bowen, Kenneth P. Morse, Douglas Cannon
Swot Analysis of "A123Systems" written by H. Kent Bowen, Kenneth P. Morse, Douglas Cannon includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Electrode Battery facing as an external strategic factors. Some of the topics covered in A123Systems case study are - Strategic Management Strategies, Entrepreneurship, Innovation, Intellectual property, Marketing, Technology and Strategy & Execution.
Some of the macro environment factors that can be used to understand the A123Systems casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, technology disruption, geopolitical disruptions, there is increasing trade war between United States & China, increasing household debt because of falling income levels, there is backlash against globalization, increasing energy prices,
supply chains are disrupted by pandemic , wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in A123Systems case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Electrode Battery, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Electrode Battery 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 A123Systems can be done for the following purposes –
1. Strategic planning using facts provided in A123Systems case study
2. Improving business portfolio management of Electrode Battery
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Electrode Battery
Strengths A123Systems | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Electrode Battery in A123Systems Harvard Business Review case study are -
Highly skilled collaborators
– Electrode Battery 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 A123Systems HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Electrode Battery 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.
High switching costs
– The high switching costs that Electrode Battery 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.
Training and development
– Electrode Battery has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in A123Systems 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.
Low bargaining power of suppliers
– Suppliers of Electrode Battery in the sector have low bargaining power. A123Systems has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Electrode Battery to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Electrode Battery has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Electrode Battery to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Strategy & Execution field
– Electrode Battery 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 Electrode Battery in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Electrode Battery is one of the most innovative firm in sector. Manager in A123Systems Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Electrode Battery is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the A123Systems 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.
Effective Research and Development (R&D)
– Electrode Battery 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 A123Systems - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Electrode Battery 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 H. Kent Bowen, Kenneth P. Morse, Douglas Cannon 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.
Weaknesses A123Systems | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of A123Systems are -
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 Electrode Battery supply chain. Even after few cautionary changes mentioned in the HBR case study - A123Systems, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Electrode Battery vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Electrode Battery is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Electrode Battery needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Electrode Battery to focus more on services rather than just following the product oriented approach.
High cash cycle compare to competitors
Electrode Battery 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.
Products dominated business model
– Even though Electrode Battery 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 - A123Systems should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, firm in the HBR case study A123Systems 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 Electrode Battery 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study A123Systems, is just above the industry average. Electrode Battery 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.
Low market penetration in new markets
– Outside its home market of Electrode Battery, firm in the HBR case study A123Systems needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Electrode Battery 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. Electrode Battery 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study A123Systems, in the dynamic environment Electrode Battery has struggled to respond to the nimble upstart competition. Electrode Battery has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study A123Systems 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 A123Systems can leverage the sales team experience to cultivate customer relationships as Electrode Battery is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Electrode Battery is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study A123Systems can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities A123Systems | 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 A123Systems are -
Using analytics as competitive advantage
– Electrode Battery 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 A123Systems - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Electrode Battery to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Electrode Battery 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 Strategy & Execution segment.
Learning at scale
– Online learning technologies has now opened space for Electrode Battery 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Electrode Battery 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. Electrode Battery 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, Electrode Battery 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, A123Systems, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Electrode Battery can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
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. Electrode Battery can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Electrode Battery 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 Electrode Battery to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Electrode Battery in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Buying journey improvements
– Electrode Battery can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. A123Systems 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Electrode Battery can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Electrode Battery to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Electrode Battery is facing challenges because of the dominance of functional experts in the organization. A123Systems 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.
Threats A123Systems External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study A123Systems are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Electrode Battery 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 A123Systems .
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Electrode Battery can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Electrode Battery 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. Electrode Battery can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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 Electrode Battery business can come under increasing regulations regarding data privacy, data security, 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. Electrode Battery 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.
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 Electrode Battery in the Strategy & Execution sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Electrode Battery in the Strategy & Execution industry. The Strategy & Execution 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Electrode Battery with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Electrode Battery 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.
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. Electrode Battery needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Electrode Battery is facing in Strategy & Execution 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.
High dependence on third party suppliers
– Electrode Battery 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 A123Systems 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 A123Systems 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 A123Systems 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 A123Systems 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 A123Systems 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 Electrode Battery needs to make to build a sustainable competitive advantage.