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 - – there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, cloud computing is disrupting traditional business models,
central banks are concerned over increasing inflation, increasing energy prices, 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 -
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.
Sustainable margins compare to other players in Strategy & Execution industry
– A123Systems firm has clearly differentiated products in the market place. This has enabled Electrode Battery to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Electrode Battery to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Electrode Battery is present in almost all the verticals within the industry. This has provided firm in A123Systems 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.
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.
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.
Superior customer experience
– The customer experience strategy of Electrode Battery in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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 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.
Learning organization
- Electrode Battery is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Electrode Battery is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in A123Systems Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
Successful track record of launching new products
– Electrode Battery has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Electrode Battery 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.
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.
Weaknesses A123Systems | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of A123Systems are -
Skills based hiring
– The stress on hiring functional specialists at Electrode Battery 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study A123Systems, it seems that the employees of Electrode Battery 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.
Capital Spending Reduction
– Even during the low interest decade, Electrode Battery 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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the A123Systems 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 Electrode Battery has relatively successful track record of launching new products.
Lack of clear differentiation of Electrode Battery products
– To increase the profitability and margins on the products, Electrode Battery needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Need for greater diversity
– Electrode Battery 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.
Interest costs
– Compare to the competition, Electrode Battery 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Electrode Battery 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.
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.
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 -
Developing new processes and practices
– Electrode Battery can develop new processes and procedures in Strategy & Execution 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.
Leveraging digital technologies
– Electrode Battery 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.
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.
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 Electrode Battery in the consumer business. Now Electrode Battery can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Creating value in data economy
– The success of analytics program of Electrode Battery has opened avenues for new revenue streams for the organization in the industry. This can help Electrode Battery to build a more holistic ecosystem as suggested in the A123Systems case study. Electrode Battery can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Electrode Battery can use these opportunities to build new business models that can help the communities that Electrode Battery operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
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.
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.
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.
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.
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.
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 -
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.
Technology acceleration in Forth Industrial Revolution
– Electrode Battery has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Electrode Battery needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study A123Systems, Electrode Battery may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Increasing wage structure of Electrode Battery
– 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 Electrode Battery.
Consumer confidence and its impact on Electrode Battery 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.
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.
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.
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.
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 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.
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.