AOL Europe vs. Freeserve (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of AOL Europe vs. Freeserve (A)
AOL Europe must decide how to respond to Freeserve, a free Internet Service Provider (ISP) that has signed up 1.6 million British customers in its first six months. After becoming the leading ISP in the United States, AOL has formed a joint venture with Bertelsmann to expand into Europe. By early 1999, the new company, AOL Europe, has 2.6 million subscribers, but it has fallen behind the market leaders in Germany, France, and now, the United Kingdom. This case asks how AOL Europe should respond to the Freeserve challenge and provides information on the economics of ISPs, AOL, Europe's history and growth, and the U.K. regulatory environment to help students frame their responses. A rewritten version of an earlier case.
Swot Analysis of "AOL Europe vs. Freeserve (A)" written by David B. Yoffie, Mary Kwak includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aol Freeserve facing as an external strategic factors. Some of the topics covered in AOL Europe vs. Freeserve (A) case study are - Strategic Management Strategies, Globalization, Internet, Joint ventures and Strategy & Execution.
Some of the macro environment factors that can be used to understand the AOL Europe vs. Freeserve (A) casestudy better are - – increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing energy prices, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of AOL Europe vs. Freeserve (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in AOL Europe vs. Freeserve (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aol Freeserve, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aol Freeserve 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 AOL Europe vs. Freeserve (A) can be done for the following purposes –
1. Strategic planning using facts provided in AOL Europe vs. Freeserve (A) case study
2. Improving business portfolio management of Aol Freeserve
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 Aol Freeserve
Strengths AOL Europe vs. Freeserve (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aol Freeserve in AOL Europe vs. Freeserve (A) Harvard Business Review case study are -
Organizational Resilience of Aol Freeserve
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Aol Freeserve does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Aol Freeserve is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Aol Freeserve 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 AOL Europe vs. Freeserve (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Aol Freeserve 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 AOL Europe vs. Freeserve (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Aol Freeserve is present in almost all the verticals within the industry. This has provided firm in AOL Europe vs. Freeserve (A) 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.
Learning organization
- Aol Freeserve 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 Aol Freeserve is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in AOL Europe vs. Freeserve (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Aol Freeserve digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aol Freeserve 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 Aol Freeserve in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Aol Freeserve 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 Aol Freeserve 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.
Successful track record of launching new products
– Aol Freeserve has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Aol Freeserve 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.
High brand equity
– Aol Freeserve has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aol Freeserve to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses AOL Europe vs. Freeserve (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AOL Europe vs. Freeserve (A) are -
High bargaining power of channel partners
– Because of the regulatory requirements, David B. Yoffie, Mary Kwak suggests that, Aol Freeserve 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.
Lack of clear differentiation of Aol Freeserve products
– To increase the profitability and margins on the products, Aol Freeserve needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Aol Freeserve, firm in the HBR case study AOL Europe vs. Freeserve (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As AOL Europe vs. Freeserve (A) HBR case study mentions - Aol Freeserve 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.
High operating costs
– Compare to the competitors, firm in the HBR case study AOL Europe vs. Freeserve (A) 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 Aol Freeserve 's lucrative customers.
Interest costs
– Compare to the competition, Aol Freeserve 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.
Slow decision making process
– As mentioned earlier in the report, Aol Freeserve 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. Aol Freeserve 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study AOL Europe vs. Freeserve (A), it seems that the employees of Aol Freeserve 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study AOL Europe vs. Freeserve (A), in the dynamic environment Aol Freeserve has struggled to respond to the nimble upstart competition. Aol Freeserve has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Aol Freeserve 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.
Need for greater diversity
– Aol Freeserve 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.
Opportunities AOL Europe vs. Freeserve (A) | 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 AOL Europe vs. Freeserve (A) are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aol Freeserve 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, AOL Europe vs. Freeserve (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Aol Freeserve 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, Aol Freeserve is facing challenges because of the dominance of functional experts in the organization. AOL Europe vs. Freeserve (A) 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.
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. Aol Freeserve can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Aol Freeserve 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aol Freeserve can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Aol Freeserve has opened avenues for new revenue streams for the organization in the industry. This can help Aol Freeserve to build a more holistic ecosystem as suggested in the AOL Europe vs. Freeserve (A) case study. Aol Freeserve can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Aol Freeserve 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.
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. Aol Freeserve 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. Aol Freeserve 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Aol Freeserve can use these opportunities to build new business models that can help the communities that Aol Freeserve operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aol Freeserve 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.
Using analytics as competitive advantage
– Aol Freeserve 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 AOL Europe vs. Freeserve (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Aol Freeserve to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Aol Freeserve 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.
Threats AOL Europe vs. Freeserve (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study AOL Europe vs. Freeserve (A) are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aol Freeserve 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 AOL Europe vs. Freeserve (A) .
Regulatory challenges
– Aol Freeserve 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 Strategy & Execution industry regulations.
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 Aol Freeserve business can come under increasing regulations regarding data privacy, data security, etc.
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 Aol Freeserve.
Environmental challenges
– Aol Freeserve 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. Aol Freeserve can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
High dependence on third party suppliers
– Aol Freeserve 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.
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.
Consumer confidence and its impact on Aol Freeserve 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.
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. Aol Freeserve 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.
Stagnating economy with rate increase
– Aol Freeserve 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.
Shortening product life cycle
– it is one of the major threat that Aol Freeserve is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Aol Freeserve
– 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 Aol Freeserve.
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.
Weighted SWOT Analysis of AOL Europe vs. Freeserve (A) 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 AOL Europe vs. Freeserve (A) 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 AOL Europe vs. Freeserve (A) 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 AOL Europe vs. Freeserve (A) 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 AOL Europe vs. Freeserve (A) 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 Aol Freeserve needs to make to build a sustainable competitive advantage.