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 government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, geopolitical disruptions, increasing commodity prices, 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,
technology disruption, competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
Successful track record of launching new products
– Iprd Accounting has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Iprd Accounting 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.
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.
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 lead change in Finance & Accounting field
– Iprd Accounting 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 Iprd Accounting in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Iprd Accounting 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's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
Strong track record of project management
– Iprd Accounting is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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 -
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.
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.
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.
Skills based hiring
– The stress on hiring functional specialists at Iprd Accounting 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.
Increasing silos among functional specialists
– The organizational structure of Iprd Accounting is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Iprd Accounting needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Iprd Accounting to focus more on services rather than just following the product oriented approach.
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.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Iprd Accounting supply chain. Even after few cautionary changes mentioned in the HBR case study - AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Iprd Accounting vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Iprd Accounting 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.
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.
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.
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 -
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Iprd Accounting can use these opportunities to build new business models that can help the communities that Iprd Accounting operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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.
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. Iprd Accounting can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Iprd Accounting is facing challenges because of the dominance of functional experts in the organization. AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Iprd Accounting 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's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Iprd Accounting can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
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 Iprd Accounting in the consumer business. Now Iprd Accounting can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Iprd Accounting 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.
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.
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.
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 -
Stagnating economy with rate increase
– Iprd Accounting 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.
High dependence on third party suppliers
– Iprd Accounting 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 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study AOL's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D, Iprd Accounting may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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.
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.
Technology acceleration in Forth Industrial Revolution
– Iprd Accounting has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Iprd Accounting 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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Iprd Accounting 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's Acquisition of Mirabilis (A): Accounting for Acquired In-Process R&D .
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.
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.