Case Study Description of Olam: Accounting for Biological Assets
In 2012, an equity research firm based in California accused Singapore-based Olam International Limited (Olam) of engaging in potentially misleading and dangerous accounting practices. The firm - Muddy Waters Research - further stated that Olam was on the verge of bankruptcy. The primary complaint made against Olam by Muddy Waters was that Olam allegedly made aggressive use of "non-cash accounting gains," particularly when reporting on Olam's biological assets. Olam's share price tumbled after the accusations were made public. Olam defended itself by asserting that it had applied Singapore Financial Reporting Standard (FRS) 41 - Agriculture appropriately and that the fair value gains of the biological assets were justifiably derived. FRS 41, equivalent to International Financial Accounting Standards 41 - Agriculture, required Singapore-listed companies to use fair value in the measurement of biological assets. This case examines the complex challenges that valuators face when presented with different valuation models, the application of financial reporting standards and the fine balance between reliability and relevance in the accounting of assets in the real world. Yew Kee Ho is affiliated with National University of Singapore.
Swot Analysis of "Olam: Accounting for Biological Assets" written by Yew Kee Ho, Teo Chee Khiang, Sitoh Kheng Hoe includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Olam Biological facing as an external strategic factors. Some of the topics covered in Olam: Accounting for Biological Assets case study are - Strategic Management Strategies, International business and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Olam: Accounting for Biological Assets casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, geopolitical disruptions, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies,
competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Olam: Accounting for Biological Assets
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Olam: Accounting for Biological Assets case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Olam Biological, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Olam Biological 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 Olam: Accounting for Biological Assets can be done for the following purposes –
1. Strategic planning using facts provided in Olam: Accounting for Biological Assets case study
2. Improving business portfolio management of Olam Biological
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 Olam Biological
Strengths Olam: Accounting for Biological Assets | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Olam Biological in Olam: Accounting for Biological Assets Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Olam: Accounting for Biological Assets 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
– Olam Biological has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Olam: Accounting for Biological Assets 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.
Superior customer experience
– The customer experience strategy of Olam Biological in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Finance & Accounting field
– Olam Biological 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 Olam Biological in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Olam Biological 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 Olam Biological is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Olam: Accounting for Biological Assets Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Olam Biological in the sector have low bargaining power. Olam: Accounting for Biological Assets has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Olam Biological to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Olam Biological digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Olam Biological 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.
Organizational Resilience of Olam Biological
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Olam Biological does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Olam Biological is one of the leading recruiters in the industry. Managers in the Olam: Accounting for Biological Assets are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Olam Biological has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Olam Biological 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.
Effective Research and Development (R&D)
– Olam Biological 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 Olam: Accounting for Biological Assets - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Olam Biological 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.
Weaknesses Olam: Accounting for Biological Assets | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Olam: Accounting for Biological Assets are -
Interest costs
– Compare to the competition, Olam Biological 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Olam: Accounting for Biological Assets, is just above the industry average. Olam Biological 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
– Olam Biological has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to strategic competitive environment developments
– As Olam: Accounting for Biological Assets HBR case study mentions - Olam Biological takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Olam Biological 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. Olam Biological 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 operating costs
– Compare to the competitors, firm in the HBR case study Olam: Accounting for Biological Assets 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 Olam Biological 's lucrative customers.
Lack of clear differentiation of Olam Biological products
– To increase the profitability and margins on the products, Olam Biological needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Olam Biological has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Yew Kee Ho, Teo Chee Khiang, Sitoh Kheng Hoe suggests that, Olam Biological 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Olam: Accounting for Biological Assets, it seems that the employees of Olam Biological 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Olam Biological is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Olam: Accounting for Biological Assets can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Olam: Accounting for Biological Assets | 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 Olam: Accounting for Biological Assets are -
Learning at scale
– Online learning technologies has now opened space for Olam Biological 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Olam Biological is facing challenges because of the dominance of functional experts in the organization. Olam: Accounting for Biological Assets 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.
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. Olam Biological can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Olam Biological can use these opportunities to build new business models that can help the communities that Olam Biological operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Olam Biological can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Olam Biological 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 Olam: Accounting for Biological Assets - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Olam Biological to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Olam Biological 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Olam Biological 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 Olam Biological to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Olam Biological can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Olam Biological can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Creating value in data economy
– The success of analytics program of Olam Biological has opened avenues for new revenue streams for the organization in the industry. This can help Olam Biological to build a more holistic ecosystem as suggested in the Olam: Accounting for Biological Assets case study. Olam Biological can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Olam Biological 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 Olam Biological in the consumer business. Now Olam Biological 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 Olam Biological 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.
Threats Olam: Accounting for Biological Assets External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Olam: Accounting for Biological Assets are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Olam Biological with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Olam Biological 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. Olam Biological can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Olam Biological 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
– Olam Biological 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.
Consumer confidence and its impact on Olam Biological 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.
Shortening product life cycle
– it is one of the major threat that Olam Biological is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Olam Biological 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 Olam: Accounting for Biological Assets .
Technology acceleration in Forth Industrial Revolution
– Olam Biological has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Olam Biological 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.
High dependence on third party suppliers
– Olam Biological 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.
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.
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. Olam Biological 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.
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. Olam Biological needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Olam Biological 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.
Weighted SWOT Analysis of Olam: Accounting for Biological Assets 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 Olam: Accounting for Biological Assets 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 Olam: Accounting for Biological Assets 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 Olam: Accounting for Biological Assets 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 Olam: Accounting for Biological Assets 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 Olam Biological needs to make to build a sustainable competitive advantage.