Case Study Description of Ahold versus Tesco--Analyzing Performance
The case relates to understanding and comparing the performance of two leading retail companies-Ahold and Tesco. The case introduces the tools of Dupont and Modified Dupont Decomposition. While performance as measured by return on equity has been similar for the two companies, Ahold has had significantly better stock market performance compared to Tesco. Ahold also has a significant amount of cash on its balance sheet leading to low levels of net debt. The case requires students to analyze performance using Modified Dupont Decomposition techniques to assess if firm performance is resulting from operating profitability or from financial leverage and then suggest strategies to improve performance. To perform the modified Dupont Decomposition, students learn how to reformat and condense the balance sheet and income statement to separately measure profitability arising from operating activities and financing activities. Students also see how excess cash holdings can depress profitability and what factors should drive the appropriate level of leverage for a company.
Swot Analysis of "Ahold versus Tesco--Analyzing Performance" written by Suraj Srinivasan, Penelope Rossano includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ahold Dupont facing as an external strategic factors. Some of the topics covered in Ahold versus Tesco--Analyzing Performance case study are - Strategic Management Strategies, Assessing performance, Financial analysis, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Ahold versus Tesco--Analyzing Performance casestudy better are - – challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, there is backlash against globalization, increasing energy prices, increasing transportation and logistics costs, there is increasing trade war between United States & China,
digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Ahold versus Tesco--Analyzing Performance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Ahold versus Tesco--Analyzing Performance case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ahold Dupont, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ahold Dupont 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 Ahold versus Tesco--Analyzing Performance can be done for the following purposes –
1. Strategic planning using facts provided in Ahold versus Tesco--Analyzing Performance case study
2. Improving business portfolio management of Ahold Dupont
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 Ahold Dupont
Strengths Ahold versus Tesco--Analyzing Performance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ahold Dupont in Ahold versus Tesco--Analyzing Performance Harvard Business Review case study are -
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Ahold Dupont digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ahold Dupont 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.
Superior customer experience
– The customer experience strategy of Ahold Dupont in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Ahold Dupont has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Ahold versus Tesco--Analyzing Performance 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.
High switching costs
– The high switching costs that Ahold Dupont 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.
Cross disciplinary teams
– Horizontal connected teams at the Ahold Dupont 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Ahold versus Tesco--Analyzing Performance firm has clearly differentiated products in the market place. This has enabled Ahold Dupont to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Ahold Dupont to invest into research and development (R&D) and innovation.
Innovation driven organization
– Ahold Dupont is one of the most innovative firm in sector. Manager in Ahold versus Tesco--Analyzing Performance Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Ahold Dupont 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 Ahold Dupont is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Ahold versus Tesco--Analyzing Performance Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Ahold Dupont in the sector have low bargaining power. Ahold versus Tesco--Analyzing Performance has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ahold Dupont to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Ahold Dupont 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 Ahold versus Tesco--Analyzing Performance - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Ahold Dupont has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ahold Dupont to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Finance & Accounting field
– Ahold Dupont 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 Ahold Dupont in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Ahold versus Tesco--Analyzing Performance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Ahold versus Tesco--Analyzing Performance are -
Aligning sales with marketing
– It come across in the case study Ahold versus Tesco--Analyzing Performance 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 Ahold versus Tesco--Analyzing Performance can leverage the sales team experience to cultivate customer relationships as Ahold Dupont is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Ahold versus Tesco--Analyzing Performance HBR case study mentions - Ahold Dupont 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.
No frontier risks strategy
– After analyzing the HBR case study Ahold versus Tesco--Analyzing Performance, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ahold Dupont is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Ahold versus Tesco--Analyzing Performance can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Ahold Dupont 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Ahold versus Tesco--Analyzing Performance, in the dynamic environment Ahold Dupont has struggled to respond to the nimble upstart competition. Ahold Dupont has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study Ahold versus Tesco--Analyzing Performance 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 Ahold Dupont 's lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Ahold Dupont is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Ahold Dupont needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ahold Dupont to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Ahold Dupont products
– To increase the profitability and margins on the products, Ahold Dupont needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Ahold Dupont 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. Ahold Dupont 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.
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 Ahold Dupont supply chain. Even after few cautionary changes mentioned in the HBR case study - Ahold versus Tesco--Analyzing Performance, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ahold Dupont vulnerable to further global disruptions in South East Asia.
Opportunities Ahold versus Tesco--Analyzing Performance | 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 Ahold versus Tesco--Analyzing Performance are -
Building a culture of innovation
– managers at Ahold Dupont 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ahold Dupont in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ahold Dupont 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.
Better consumer reach
– The expansion of the 5G network will help Ahold Dupont to increase its market reach. Ahold Dupont 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.
Buying journey improvements
– Ahold Dupont can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Ahold versus Tesco--Analyzing Performance 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 Finance & Accounting industry, but it has also influenced the consumer preferences. Ahold Dupont can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ahold Dupont 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, Ahold versus Tesco--Analyzing Performance, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Ahold Dupont 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 Ahold versus Tesco--Analyzing Performance - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ahold Dupont to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ahold Dupont 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. Ahold Dupont 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.
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 Ahold Dupont 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.
Manufacturing automation
– Ahold Dupont 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.
Loyalty marketing
– Ahold Dupont has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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. Ahold Dupont can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Ahold versus Tesco--Analyzing Performance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Ahold versus Tesco--Analyzing Performance are -
Regulatory challenges
– Ahold Dupont 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.
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.
Shortening product life cycle
– it is one of the major threat that Ahold Dupont is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Ahold Dupont
– 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 Ahold Dupont.
High dependence on third party suppliers
– Ahold Dupont 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ahold Dupont in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Ahold Dupont in the Finance & Accounting sector and impact the bottomline of the organization.
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 Ahold Dupont.
Consumer confidence and its impact on Ahold Dupont 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.
Stagnating economy with rate increase
– Ahold Dupont 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.
Environmental challenges
– Ahold Dupont 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. Ahold Dupont can take advantage of this fund but it will also bring new competitors in the Finance & Accounting 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 Ahold Dupont business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Ahold versus Tesco--Analyzing Performance 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 Ahold versus Tesco--Analyzing Performance 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 Ahold versus Tesco--Analyzing Performance 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 Ahold versus Tesco--Analyzing Performance 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 Ahold versus Tesco--Analyzing Performance 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 Ahold Dupont needs to make to build a sustainable competitive advantage.
