AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D
Explores the issues of accounting for in-process research and development (IPRD) for an acquisition under purchase-method accounting. Provides information on acquisition accounting and the standards used for defining and treating IPRD. Also discusses practices that led to controversy over IPRD accounting in the mid-1990s. The situation is the acquisition of a small software company (Mirabilis) with a very popular Internet software product for instant messaging, but with no revenues. The acquiring company, America Online, indicated in the acquisition announcement that it intended to write off a substantial amount of the purchase price as IPRD. Shortly after that announcement, the new chief accountant of the SEC indicated that the SEC was concerned about the amount of such write-offs. Asks how the CFO of AOL should respond and what the impact of the IPRD write-off amount will be on the company's future earnings and stock price.
Swot Analysis of "AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D" written by Mary E. Barth, David W. Hoyt includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Iprd Accounting facing as an external strategic factors. Some of the topics covered in AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D case study are - Strategic Management Strategies, Government, Internet, IT, Mergers & acquisitions, Research & development and Finance & Accounting.
Some of the macro environment factors that can be used to understand the AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D casestudy better are - – increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, there is backlash against globalization,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Iprd Accounting, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Iprd Accounting 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's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D can be done for the following purposes –
1. Strategic planning using facts provided in AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D case study
2. Improving business portfolio management of Iprd Accounting
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 Iprd Accounting
Strengths AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Iprd Accounting in AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D Harvard Business Review case study are -
Highly skilled collaborators
– Iprd Accounting 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's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Finance & Accounting industry
– AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D firm has clearly differentiated products in the market place. This has enabled Iprd Accounting to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Iprd Accounting to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Iprd Accounting in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Iprd Accounting
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Iprd Accounting does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Iprd Accounting 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 Iprd Accounting is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Iprd Accounting is one of the most innovative firm in sector. Manager in AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Iprd Accounting in the sector have low bargaining power. AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Iprd Accounting to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D 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.
High switching costs
– The high switching costs that Iprd Accounting 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.
Analytics focus
– Iprd Accounting 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 Mary E. Barth, David W. Hoyt 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.
Cross disciplinary teams
– Horizontal connected teams at the Iprd Accounting 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
– Iprd Accounting is one of the leading recruiters in the industry. Managers in the AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D are -
Low market penetration in new markets
– Outside its home market of Iprd Accounting, firm in the HBR case study AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Iprd Accounting 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. Iprd Accounting 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D, is just above the industry average. Iprd Accounting 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.
Need for greater diversity
– Iprd Accounting 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Iprd Accounting 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.
Lack of clear differentiation of Iprd Accounting products
– To increase the profitability and margins on the products, Iprd Accounting needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Iprd Accounting has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Iprd Accounting 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.
Aligning sales with marketing
– It come across in the case study AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D 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 AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D can leverage the sales team experience to cultivate customer relationships as Iprd Accounting is planning to shift buying processes online.
High operating costs
– Compare to the competitors, firm in the HBR case study AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D 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 Iprd Accounting 's lucrative customers.
High cash cycle compare to competitors
Iprd Accounting has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Opportunities AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D | 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's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D are -
Creating value in data economy
– The success of analytics program of Iprd Accounting has opened avenues for new revenue streams for the organization in the industry. This can help Iprd Accounting to build a more holistic ecosystem as suggested in the AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D case study. Iprd Accounting can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Iprd Accounting 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Iprd Accounting 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 Iprd Accounting to increase its market reach. Iprd Accounting 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.
Using analytics as competitive advantage
– Iprd Accounting 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's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Iprd Accounting to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Iprd Accounting 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Iprd Accounting 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 Iprd Accounting to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Iprd Accounting can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Iprd Accounting 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.
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. Iprd Accounting can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Iprd Accounting 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.
Buying journey improvements
– Iprd Accounting can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D 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.
Loyalty marketing
– Iprd Accounting 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.
Threats AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D are -
Shortening product life cycle
– it is one of the major threat that Iprd Accounting is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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 Iprd Accounting.
Consumer confidence and its impact on Iprd Accounting 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. Iprd Accounting 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 Iprd Accounting business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Iprd Accounting
– 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 Iprd Accounting.
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. Iprd Accounting needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Environmental challenges
– Iprd Accounting 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. Iprd Accounting can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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.
Regulatory challenges
– Iprd Accounting 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Iprd Accounting 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Iprd Accounting can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D 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's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D 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's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D 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's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D 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's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D 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 Iprd Accounting needs to make to build a sustainable competitive advantage.
