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 - – wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices,
technology disruption, competitive advantages are harder to sustain because of technology dispersion, 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 -
Cross disciplinary teams
– Horizontal connected teams at the Olam Biological 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.
Diverse revenue streams
– Olam Biological is present in almost all the verticals within the industry. This has provided firm in Olam: Accounting for Biological Assets case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
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.
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.
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.
Strong track record of project management
– Olam Biological is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Olam Biological is one of the most innovative firm in sector. Manager in Olam: Accounting for Biological Assets Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– Olam Biological 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 Olam: Accounting for Biological Assets HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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 -
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.
Low market penetration in new markets
– Outside its home market of Olam Biological, firm in the HBR case study Olam: Accounting for Biological Assets needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Olam: Accounting for Biological Assets 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 Olam Biological has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Olam Biological 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 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.
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.
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.
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.
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.
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.
High cash cycle compare to competitors
Olam Biological 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 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 -
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Olam Biological 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
– Olam Biological 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
– 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Olam Biological 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, Olam: Accounting for Biological Assets, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, 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.
Buying journey improvements
– Olam Biological can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Olam: Accounting for Biological Assets 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.
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 Olam Biological 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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Olam Biological to increase its market reach. Olam Biological 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.
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.
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 -
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.
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.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Olam: Accounting for Biological Assets, Olam Biological 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 .
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 Olam Biological in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Olam Biological 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.
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.
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.
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.
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.
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.