Revenue Recognition for a Services Contract SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Revenue Recognition for a Services Contract
On November 25, 2012, the head of Revenue Recognition at ESol Limited (ESol) India was preparing for a meeting with the company's sales team at the head office in Bangalore. ESol Limited was a large, U.S.-based multinational information technology corporation, which had moved into India in 2000. Since then, its management had insisted on the need for close monitoring of accounting procedures in strict adherence to Generally Accepted Accounting Principles. Although the sales team had negotiated the Request for Proposal with MoveForward, a large research firm in India handling and processing high volumes of sensitive data, in good faith, the revenue recognition team felt that clauses dealing with penalties, liquidated damages and termination put their company at risk and wished to defer all of the revenue proposed for the contract until these issues were resolved. The friction between the two teams put the entire deal in jeopardy.
Swot Analysis of "Revenue Recognition for a Services Contract" written by Pratibha Wasan, David J. Sharp includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Esol Recognition facing as an external strategic factors. Some of the topics covered in Revenue Recognition for a Services Contract case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Revenue Recognition for a Services Contract casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic ,
geopolitical disruptions, increasing energy prices, etc
Introduction to SWOT Analysis of Revenue Recognition for a Services Contract
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Revenue Recognition for a Services Contract case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Esol Recognition, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Esol Recognition 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 Revenue Recognition for a Services Contract can be done for the following purposes –
1. Strategic planning using facts provided in Revenue Recognition for a Services Contract case study
2. Improving business portfolio management of Esol Recognition
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 Esol Recognition
Strengths Revenue Recognition for a Services Contract | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Esol Recognition in Revenue Recognition for a Services Contract Harvard Business Review case study are -
Diverse revenue streams
– Esol Recognition is present in almost all the verticals within the industry. This has provided firm in Revenue Recognition for a Services Contract 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.
Low bargaining power of suppliers
– Suppliers of Esol Recognition in the sector have low bargaining power. Revenue Recognition for a Services Contract has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Esol Recognition to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Esol Recognition has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Esol Recognition to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Finance & Accounting industry
– Revenue Recognition for a Services Contract firm has clearly differentiated products in the market place. This has enabled Esol Recognition to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Esol Recognition to invest into research and development (R&D) and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Esol Recognition digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Esol Recognition 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.
High switching costs
– The high switching costs that Esol Recognition 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.
Organizational Resilience of Esol Recognition
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Esol Recognition 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 Esol Recognition in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Esol Recognition 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 Pratibha Wasan, David J. Sharp 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.
Strong track record of project management
– Esol Recognition is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Esol Recognition 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 Revenue Recognition for a Services Contract HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Esol Recognition has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Esol Recognition 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.
Weaknesses Revenue Recognition for a Services Contract | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Revenue Recognition for a Services Contract are -
High bargaining power of channel partners
– Because of the regulatory requirements, Pratibha Wasan, David J. Sharp suggests that, Esol Recognition 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.
No frontier risks strategy
– After analyzing the HBR case study Revenue Recognition for a Services Contract, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Lack of clear differentiation of Esol Recognition products
– To increase the profitability and margins on the products, Esol Recognition needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Esol Recognition 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Esol Recognition 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.
Increasing silos among functional specialists
– The organizational structure of Esol Recognition is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Esol Recognition needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Esol Recognition to focus more on services rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Revenue Recognition for a Services Contract, in the dynamic environment Esol Recognition has struggled to respond to the nimble upstart competition. Esol Recognition has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Revenue Recognition for a Services Contract HBR case study mentions - Esol Recognition 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Revenue Recognition for a Services Contract, it seems that the employees of Esol Recognition 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, Esol Recognition is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Revenue Recognition for a Services Contract can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
Esol Recognition 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 Revenue Recognition for a Services Contract | 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 Revenue Recognition for a Services Contract are -
Loyalty marketing
– Esol Recognition 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Esol Recognition can use these opportunities to build new business models that can help the communities that Esol Recognition operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Esol Recognition 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 Esol Recognition to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Esol Recognition 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Esol Recognition 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.
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. Esol Recognition can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Esol Recognition 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.
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. Esol Recognition 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. Esol Recognition 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.
Developing new processes and practices
– Esol Recognition 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.
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. Esol Recognition can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Esol Recognition 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.
Better consumer reach
– The expansion of the 5G network will help Esol Recognition to increase its market reach. Esol Recognition 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Esol Recognition is facing challenges because of the dominance of functional experts in the organization. Revenue Recognition for a Services Contract 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.
Threats Revenue Recognition for a Services Contract External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Revenue Recognition for a Services Contract are -
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 Esol Recognition business can come under increasing regulations regarding data privacy, data security, 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 Esol Recognition in the Finance & Accounting sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Esol Recognition 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.
Stagnating economy with rate increase
– Esol Recognition 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Esol Recognition with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Esol Recognition
– 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 Esol Recognition.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Esol Recognition 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 Revenue Recognition for a Services Contract .
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. Esol Recognition 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. Esol Recognition needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Environmental challenges
– Esol Recognition 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. Esol Recognition can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Technology acceleration in Forth Industrial Revolution
– Esol Recognition has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Esol Recognition 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.
Regulatory challenges
– Esol Recognition 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.
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.
Weighted SWOT Analysis of Revenue Recognition for a Services Contract 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 Revenue Recognition for a Services Contract 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 Revenue Recognition for a Services Contract 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 Revenue Recognition for a Services Contract 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 Revenue Recognition for a Services Contract 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 Esol Recognition needs to make to build a sustainable competitive advantage.
