Case Study Description of Burlington Northern: The ARES Decision (A)
Burlington Northern's decision whether to invest in ARES, an automated train control system, is a ($350 million) strategic investment in information technology. Although set in a service industry (railroad) the issues around this decision arise in many organizations and require the company to analyze the project from many perspectives. ARES offers the potential to change the basis of competition in the industry through technology. The company must consider the value, if any, of being first in the industry to adopt a technology; the potential impact on customer services, quality, and reliability; and the role and value of information systems technology. Burlington grapples with how to quantify both tangible and intangible benefits, and deliberates whether investments that yield improvement in hard-to-quantify factors such as reduced delivery time and improved service reliability can be subjected to the same financial scrutiny as equipment replacement decisions such as new locomotives. Demonstrates thoughtful, creative approaches to measuring hard-to-quantify benefits.
Swot Analysis of "Burlington Northern: The ARES Decision (A)" written by Julie H. Hertenstein, Robert S. Kaplan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ares Burlington facing as an external strategic factors. Some of the topics covered in Burlington Northern: The ARES Decision (A) case study are - Strategic Management Strategies, Competitive strategy, Corporate governance, Customers, IT, Strategic planning and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Burlington Northern: The ARES Decision (A) casestudy better are - – supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, geopolitical disruptions, increasing transportation and logistics costs, increasing energy prices, cloud computing is disrupting traditional business models,
wage bills are increasing, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Burlington Northern: The ARES Decision (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Burlington Northern: The ARES Decision (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ares Burlington, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ares Burlington 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 Burlington Northern: The ARES Decision (A) can be done for the following purposes –
1. Strategic planning using facts provided in Burlington Northern: The ARES Decision (A) case study
2. Improving business portfolio management of Ares Burlington
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 Ares Burlington
Strengths Burlington Northern: The ARES Decision (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ares Burlington in Burlington Northern: The ARES Decision (A) Harvard Business Review case study are -
Sustainable margins compare to other players in Finance & Accounting industry
– Burlington Northern: The ARES Decision (A) firm has clearly differentiated products in the market place. This has enabled Ares Burlington to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Ares Burlington to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Ares Burlington 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 Burlington Northern: The ARES Decision (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Ares Burlington is one of the leading recruiters in the industry. Managers in the Burlington Northern: The ARES Decision (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Ares Burlington
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ares Burlington does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Ares Burlington in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Ares Burlington has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ares Burlington 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.
Low bargaining power of suppliers
– Suppliers of Ares Burlington in the sector have low bargaining power. Burlington Northern: The ARES Decision (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ares Burlington to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Ares Burlington is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Burlington Northern: The ARES Decision (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.
Training and development
– Ares Burlington has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Burlington Northern: The ARES Decision (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.
High switching costs
– The high switching costs that Ares Burlington 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
– Ares Burlington 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 Julie H. Hertenstein, Robert S. Kaplan 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.
Weaknesses Burlington Northern: The ARES Decision (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Burlington Northern: The ARES Decision (A) are -
Capital Spending Reduction
– Even during the low interest decade, Ares Burlington 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.
Slow decision making process
– As mentioned earlier in the report, Ares Burlington 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. Ares Burlington even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Burlington Northern: The ARES Decision (A), it seems that the employees of Ares Burlington 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 bargaining power of channel partners
– Because of the regulatory requirements, Julie H. Hertenstein, Robert S. Kaplan suggests that, Ares Burlington 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.
Aligning sales with marketing
– It come across in the case study Burlington Northern: The ARES Decision (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 Burlington Northern: The ARES Decision (A) can leverage the sales team experience to cultivate customer relationships as Ares Burlington is planning to shift buying processes online.
Skills based hiring
– The stress on hiring functional specialists at Ares Burlington 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.
Need for greater diversity
– Ares Burlington 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.
Products dominated business model
– Even though Ares Burlington has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Burlington Northern: The ARES Decision (A) should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Ares Burlington, firm in the HBR case study Burlington Northern: The ARES Decision (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Burlington Northern: The ARES Decision (A), is just above the industry average. Ares Burlington 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
Ares Burlington 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 Burlington Northern: The ARES Decision (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 Burlington Northern: The ARES Decision (A) are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Ares Burlington 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ares Burlington can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Ares Burlington 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.
Using analytics as competitive advantage
– Ares Burlington 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 Burlington Northern: The ARES Decision (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ares Burlington to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Ares Burlington can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Burlington Northern: The ARES Decision (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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ares Burlington 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 Ares Burlington to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ares Burlington can use these opportunities to build new business models that can help the communities that Ares Burlington operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Ares Burlington 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.
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. Ares Burlington can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Ares Burlington in the consumer business. Now Ares Burlington can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ares Burlington 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ares Burlington 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, Burlington Northern: The ARES Decision (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.
Manufacturing automation
– Ares Burlington 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.
Threats Burlington Northern: The ARES Decision (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Burlington Northern: The ARES Decision (A) are -
Environmental challenges
– Ares Burlington 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. Ares Burlington can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Shortening product life cycle
– it is one of the major threat that Ares Burlington is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Ares Burlington in the Finance & Accounting sector and impact the bottomline of the organization.
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. Ares Burlington can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Ares Burlington 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.
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 Ares Burlington business can come under increasing regulations regarding data privacy, data security, etc.
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. Ares Burlington 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Burlington Northern: The ARES Decision (A), Ares Burlington 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 .
Technology acceleration in Forth Industrial Revolution
– Ares Burlington has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Ares Burlington 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.
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 Ares Burlington.
High dependence on third party suppliers
– Ares Burlington 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ares Burlington 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 Burlington Northern: The ARES Decision (A) .
Increasing wage structure of Ares Burlington
– 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 Ares Burlington.
Weighted SWOT Analysis of Burlington Northern: The ARES Decision (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 Burlington Northern: The ARES Decision (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 Burlington Northern: The ARES Decision (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 Burlington Northern: The ARES Decision (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 Burlington Northern: The ARES Decision (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 Ares Burlington needs to make to build a sustainable competitive advantage.