Profitability Drivers in Professional Service Firms SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
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Case Study SWOT Analysis Solution
Case Study Description of Profitability Drivers in Professional Service Firms
This csae presents a simple model of the drivers of profitability in a professional service partnership and conducts an empirical exploration of the determinants of profitability among AmLaw 100 firms over the period 1994 to 1999.
Swot Analysis of "Profitability Drivers in Professional Service Firms" written by Ashish Nanda includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Profitability Drivers facing as an external strategic factors. Some of the topics covered in Profitability Drivers in Professional Service Firms case study are - Strategic Management Strategies, Financial management, Joint ventures, Regulation and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Profitability Drivers in Professional Service Firms casestudy better are - – increasing transportation and logistics costs, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, there is backlash against globalization, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models,
increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, etc
Introduction to SWOT Analysis of Profitability Drivers in Professional Service Firms
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Profitability Drivers in Professional Service Firms case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Profitability Drivers, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Profitability Drivers 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 Profitability Drivers in Professional Service Firms can be done for the following purposes –
1. Strategic planning using facts provided in Profitability Drivers in Professional Service Firms case study
2. Improving business portfolio management of Profitability Drivers
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 Profitability Drivers
Strengths Profitability Drivers in Professional Service Firms | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Profitability Drivers in Profitability Drivers in Professional Service Firms Harvard Business Review case study are -
Diverse revenue streams
– Profitability Drivers is present in almost all the verticals within the industry. This has provided firm in Profitability Drivers in Professional Service Firms case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to recruit top talent
– Profitability Drivers is one of the leading recruiters in the industry. Managers in the Profitability Drivers in Professional Service Firms are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Strategy & Execution field
– Profitability Drivers 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 Profitability Drivers in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Profitability Drivers 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 Profitability Drivers in Professional Service Firms - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Profitability Drivers in the sector have low bargaining power. Profitability Drivers in Professional Service Firms has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Profitability Drivers to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Profitability Drivers has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Profitability Drivers to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Profitability Drivers 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.
Learning organization
- Profitability Drivers 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 Profitability Drivers is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Profitability Drivers in Professional Service Firms Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Profitability Drivers 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
– Profitability Drivers is one of the most innovative firm in sector. Manager in Profitability Drivers in Professional Service Firms Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– Profitability Drivers 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 Profitability Drivers in Professional Service Firms HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Profitability Drivers digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Profitability Drivers 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.
Weaknesses Profitability Drivers in Professional Service Firms | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Profitability Drivers in Professional Service Firms are -
Low market penetration in new markets
– Outside its home market of Profitability Drivers, firm in the HBR case study Profitability Drivers in Professional Service Firms needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at Profitability Drivers 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.
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 Profitability Drivers supply chain. Even after few cautionary changes mentioned in the HBR case study - Profitability Drivers in Professional Service Firms, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Profitability Drivers vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Profitability Drivers 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Ashish Nanda suggests that, Profitability Drivers 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.
Slow decision making process
– As mentioned earlier in the report, Profitability Drivers 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. Profitability Drivers 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 Profitability Drivers in Professional Service Firms HBR case study mentions - Profitability Drivers 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.
Increasing silos among functional specialists
– The organizational structure of Profitability Drivers is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Profitability Drivers needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Profitability Drivers to focus more on services rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Profitability Drivers is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Profitability Drivers in Professional Service Firms can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Need for greater diversity
– Profitability Drivers 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.
High cash cycle compare to competitors
Profitability Drivers 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.
Opportunities Profitability Drivers in Professional Service Firms | 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 Profitability Drivers in Professional Service Firms are -
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. Profitability Drivers can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Profitability Drivers 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, Profitability Drivers in Professional Service Firms, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Profitability Drivers 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. Profitability Drivers 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.
Better consumer reach
– The expansion of the 5G network will help Profitability Drivers to increase its market reach. Profitability Drivers will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Profitability Drivers can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Profitability Drivers 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Profitability Drivers 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 Profitability Drivers to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Profitability Drivers can use these opportunities to build new business models that can help the communities that Profitability Drivers operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Manufacturing automation
– Profitability Drivers 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Profitability Drivers is facing challenges because of the dominance of functional experts in the organization. Profitability Drivers in Professional Service Firms 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
– Profitability Drivers can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Profitability Drivers in Professional Service Firms 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.
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 Profitability Drivers 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.
Building a culture of innovation
– managers at Profitability Drivers 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.
Threats Profitability Drivers in Professional Service Firms External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Profitability Drivers in Professional Service Firms are -
High dependence on third party suppliers
– Profitability Drivers 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.
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 Profitability Drivers.
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. Profitability Drivers 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.
Environmental challenges
– Profitability Drivers 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. Profitability Drivers can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Profitability Drivers 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 Profitability Drivers in Professional Service Firms .
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. Profitability Drivers can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Profitability Drivers 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.
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.
Increasing wage structure of Profitability Drivers
– 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 Profitability Drivers.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Profitability Drivers with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Profitability Drivers in Professional Service Firms, Profitability Drivers 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 .
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 Profitability Drivers in the Strategy & Execution sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Profitability Drivers is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Profitability Drivers in Professional Service Firms 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 Profitability Drivers in Professional Service Firms 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 Profitability Drivers in Professional Service Firms 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 Profitability Drivers in Professional Service Firms 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 Profitability Drivers in Professional Service Firms 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 Profitability Drivers needs to make to build a sustainable competitive advantage.
