Case Study Description of A123 Systems: Power. Safety. Life.
A123 Systems, the largest manufacturer of lithium ion batteries in North America, is producing and selling batteries for electric vehicles in China and electric buses in Europe and America. It just opened two plants in Michigan, partially funded by a grant from America's stimulus fund. At the same time, the company is expanding its business in large, grid stabilization systems, in California, Chile and New York. The simultaneous pressures of these two businesses, plus dozens of potential deals pending, are testing the company's management skills, cash reserves and abilities to execute.
Swot Analysis of "A123 Systems: Power. Safety. Life." written by Richard H.K. Vietor includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that A123 Batteries facing as an external strategic factors. Some of the topics covered in A123 Systems: Power. Safety. Life. case study are - Strategic Management Strategies, Competition, Entrepreneurship, Government, International business, Marketing, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the A123 Systems: Power. Safety. Life. casestudy better are - – there is increasing trade war between United States & China, supply chains are disrupted by pandemic , technology disruption, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, wage bills are increasing, increasing commodity prices,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of A123 Systems: Power. Safety. Life.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in A123 Systems: Power. Safety. Life. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the A123 Batteries, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which A123 Batteries 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 A123 Systems: Power. Safety. Life. can be done for the following purposes –
1. Strategic planning using facts provided in A123 Systems: Power. Safety. Life. case study
2. Improving business portfolio management of A123 Batteries
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 A123 Batteries
Strengths A123 Systems: Power. Safety. Life. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of A123 Batteries in A123 Systems: Power. Safety. Life. Harvard Business Review case study are -
Sustainable margins compare to other players in Strategy & Execution industry
– A123 Systems: Power. Safety. Life. firm has clearly differentiated products in the market place. This has enabled A123 Batteries to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped A123 Batteries to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– A123 Batteries 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 A123 Systems: Power. Safety. Life. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the A123 Batteries 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.
Ability to recruit top talent
– A123 Batteries is one of the leading recruiters in the industry. Managers in the A123 Systems: Power. Safety. Life. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the A123 Systems: Power. Safety. Life. Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to lead change in Strategy & Execution field
– A123 Batteries 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 A123 Batteries in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– A123 Batteries 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 Richard H.K. Vietor 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.
High brand equity
– A123 Batteries has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled A123 Batteries to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– A123 Batteries is present in almost all the verticals within the industry. This has provided firm in A123 Systems: Power. Safety. Life. 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.
Strong track record of project management
– A123 Batteries is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– A123 Batteries has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. A123 Batteries 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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For A123 Batteries digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. A123 Batteries 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 A123 Systems: Power. Safety. Life. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of A123 Systems: Power. Safety. Life. are -
Low market penetration in new markets
– Outside its home market of A123 Batteries, firm in the HBR case study A123 Systems: Power. Safety. Life. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at A123 Batteries 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 bargaining power of channel partners
– Because of the regulatory requirements, Richard H.K. Vietor suggests that, A123 Batteries 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study A123 Systems: Power. Safety. Life., is just above the industry average. A123 Batteries 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.
High cash cycle compare to competitors
A123 Batteries 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.
Need for greater diversity
– A123 Batteries 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.
Slow decision making process
– As mentioned earlier in the report, A123 Batteries 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. A123 Batteries 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.
Increasing silos among functional specialists
– The organizational structure of A123 Batteries is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. A123 Batteries needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help A123 Batteries 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, A123 Batteries is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study A123 Systems: Power. Safety. Life. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, A123 Batteries 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.
Capital Spending Reduction
– Even during the low interest decade, A123 Batteries 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.
Opportunities A123 Systems: Power. Safety. Life. | 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 A123 Systems: Power. Safety. Life. are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, A123 Batteries 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, A123 Systems: Power. Safety. Life., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– A123 Batteries can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. A123 Systems: Power. Safety. Life. 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.
Better consumer reach
– The expansion of the 5G network will help A123 Batteries to increase its market reach. A123 Batteries 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, A123 Batteries can use these opportunities to build new business models that can help the communities that A123 Batteries operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, A123 Batteries is facing challenges because of the dominance of functional experts in the organization. A123 Systems: Power. Safety. Life. 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for A123 Batteries 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.
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 A123 Batteries in the consumer business. Now A123 Batteries can target international markets with far fewer capital restrictions requirements than the existing system.
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. A123 Batteries 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 A123 Batteries 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 A123 Batteries to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, A123 Batteries 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.
Loyalty marketing
– A123 Batteries 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.
Learning at scale
– Online learning technologies has now opened space for A123 Batteries 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.
Using analytics as competitive advantage
– A123 Batteries 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 A123 Systems: Power. Safety. Life. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help A123 Batteries to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats A123 Systems: Power. Safety. Life. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study A123 Systems: Power. Safety. Life. are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for A123 Batteries 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.
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 A123 Batteries 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 acceleration in Forth Industrial Revolution
– A123 Batteries has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, A123 Batteries 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents A123 Batteries with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 A123 Batteries 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. A123 Batteries needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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. A123 Batteries 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.
Increasing wage structure of A123 Batteries
– 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 A123 Batteries.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study A123 Systems: Power. Safety. Life., A123 Batteries 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 .
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 A123 Batteries.
Shortening product life cycle
– it is one of the major threat that A123 Batteries is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– A123 Batteries high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Weighted SWOT Analysis of A123 Systems: Power. Safety. Life. 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 A123 Systems: Power. Safety. Life. 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 A123 Systems: Power. Safety. Life. 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 A123 Systems: Power. Safety. Life. 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 A123 Systems: Power. Safety. Life. 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 A123 Batteries needs to make to build a sustainable competitive advantage.
