Sierra On-Line, a fast growing software developer, is criticized by a Forbes journalist for excessively capitalizing software development costs. In contrast to most other software developers that typically capitalize about 20% of R&D costs, Sierra capitalizes 80%. Questions investors must address in valuing Sierra include: Does Sierra's account reflect economic reality? Is their accounting too aggressive or are their competitors too conservative? Is Sierra's business sufficiently different from its competitors to invalidate the comparison?
Swot Analysis of "Sierra On-Line (A)" written by G. Peter Wilson, Elizabeth H. McNair includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sierra Sierra's facing as an external strategic factors. Some of the topics covered in Sierra On-Line (A) case study are - Strategic Management Strategies, Entrepreneurial finance, Financial management, IT, Product development and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Sierra On-Line (A) casestudy better are - – increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, 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,
increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, etc
Introduction to SWOT Analysis of Sierra On-Line (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Sierra On-Line (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sierra Sierra's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sierra Sierra's 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 Sierra On-Line (A) can be done for the following purposes –
1. Strategic planning using facts provided in Sierra On-Line (A) case study
2. Improving business portfolio management of Sierra Sierra's
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 Sierra Sierra's
Strengths Sierra On-Line (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sierra Sierra's in Sierra On-Line (A) Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Sierra Sierra's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Sierra Sierra's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sierra Sierra's 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.
Operational resilience
– The operational resilience strategy in the Sierra On-Line (A) 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.
Analytics focus
– Sierra Sierra's 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 G. Peter Wilson, Elizabeth H. McNair 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.
Ability to lead change in Finance & Accounting field
– Sierra Sierra's 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 Sierra Sierra's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Sierra Sierra's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Sierra Sierra's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sierra Sierra's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Sierra Sierra's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Sierra On-Line (A) 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.
Organizational Resilience of Sierra Sierra's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sierra Sierra's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Sierra Sierra's is one of the most innovative firm in sector. Manager in Sierra On-Line (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Sierra Sierra's 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.
Low bargaining power of suppliers
– Suppliers of Sierra Sierra's in the sector have low bargaining power. Sierra On-Line (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sierra Sierra's to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Sierra On-Line (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sierra On-Line (A) are -
Capital Spending Reduction
– Even during the low interest decade, Sierra Sierra's 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 Sierra On-Line (A), in the dynamic environment Sierra Sierra's has struggled to respond to the nimble upstart competition. Sierra Sierra's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Sierra Sierra's 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
– Sierra Sierra's 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.
Aligning sales with marketing
– It come across in the case study Sierra On-Line (A) 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 Sierra On-Line (A) can leverage the sales team experience to cultivate customer relationships as Sierra Sierra's is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study Sierra On-Line (A), 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.
High bargaining power of channel partners
– Because of the regulatory requirements, G. Peter Wilson, Elizabeth H. McNair suggests that, Sierra Sierra's 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 to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sierra Sierra's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Sierra On-Line (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Sierra On-Line (A), it seems that the employees of Sierra Sierra's 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Sierra On-Line (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 Sierra Sierra's 's lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Sierra Sierra's is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Sierra Sierra's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sierra Sierra's to focus more on services rather than just following the product oriented approach.
Opportunities Sierra On-Line (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 Sierra On-Line (A) are -
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. Sierra Sierra's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Sierra Sierra's to increase its market reach. Sierra Sierra's 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.
Leveraging digital technologies
– Sierra Sierra's 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.
Buying journey improvements
– Sierra Sierra's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Sierra On-Line (A) 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sierra Sierra's 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, Sierra On-Line (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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sierra Sierra's can use these opportunities to build new business models that can help the communities that Sierra Sierra's operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Manufacturing automation
– Sierra Sierra's 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.
Creating value in data economy
– The success of analytics program of Sierra Sierra's has opened avenues for new revenue streams for the organization in the industry. This can help Sierra Sierra's to build a more holistic ecosystem as suggested in the Sierra On-Line (A) case study. Sierra Sierra's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sierra Sierra's 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.
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. Sierra Sierra's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Sierra Sierra's can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sierra Sierra's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Sierra Sierra's 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.
Threats Sierra On-Line (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Sierra On-Line (A) are -
Stagnating economy with rate increase
– Sierra Sierra's 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 Sierra Sierra's is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sierra Sierra's 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.
Technology acceleration in Forth Industrial Revolution
– Sierra Sierra's has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Sierra Sierra's needs to keep up with the evolution of technology in the Finance & Accounting 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.
Increasing wage structure of Sierra Sierra's
– 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 Sierra Sierra's.
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. Sierra Sierra's 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.
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 Sierra Sierra's business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Sierra Sierra's 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. Sierra Sierra's can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sierra Sierra's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Sierra Sierra's.
High dependence on third party suppliers
– Sierra Sierra's 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.
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. Sierra Sierra's needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Sierra On-Line (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 Sierra On-Line (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 Sierra On-Line (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 Sierra On-Line (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 Sierra On-Line (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 Sierra Sierra's needs to make to build a sustainable competitive advantage.
