Accounting for Political Risk at AES SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Accounting for Political Risk at AES
As a global energy generating company, AES frequently faces challenges from political changes and instability. This is exacerbated by the fact that in many instances AES' primary customer is the government, which is also in charge of law-making. For example, AES' management team has encountered expropriation risks in Venezuela, collection problems in the Dominican Republic, and regulatory changes in the United States that have led to asset impairments. More recently, the Bulgarian energy regulator announced its intentions to seek a 30% price reduction on a power purchase agreement signed over 10 years ago with AES. Accordingly, AES' management is evaluating whether the renegotiation will lead to any asset impairments and the overall effects on its financial statements.
Swot Analysis of "Accounting for Political Risk at AES" written by Gerardo Perez Cavazos, Suraj Srinivasan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aes Impairments facing as an external strategic factors. Some of the topics covered in Accounting for Political Risk at AES case study are - Strategic Management Strategies, Financial management, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Accounting for Political Risk at AES casestudy better are - – there is increasing trade war between United States & China, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, technology disruption, geopolitical disruptions, increasing commodity prices, there is backlash against globalization,
central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Accounting for Political Risk at AES
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Accounting for Political Risk at AES case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aes Impairments, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aes Impairments 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 Accounting for Political Risk at AES can be done for the following purposes –
1. Strategic planning using facts provided in Accounting for Political Risk at AES case study
2. Improving business portfolio management of Aes Impairments
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 Aes Impairments
Strengths Accounting for Political Risk at AES | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aes Impairments in Accounting for Political Risk at AES Harvard Business Review case study are -
Strong track record of project management
– Aes Impairments is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Aes Impairments 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 Gerardo Perez Cavazos, Suraj Srinivasan can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Cross disciplinary teams
– Horizontal connected teams at the Aes Impairments 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.
Operational resilience
– The operational resilience strategy in the Accounting for Political Risk at AES 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.
Low bargaining power of suppliers
– Suppliers of Aes Impairments in the sector have low bargaining power. Accounting for Political Risk at AES has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aes Impairments to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Aes Impairments has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Aes Impairments 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.
Diverse revenue streams
– Aes Impairments is present in almost all the verticals within the industry. This has provided firm in Accounting for Political Risk at AES 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.
Innovation driven organization
– Aes Impairments is one of the most innovative firm in sector. Manager in Accounting for Political Risk at AES Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Effective Research and Development (R&D)
– Aes Impairments 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 Accounting for Political Risk at AES - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Aes Impairments 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 Aes Impairments is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Accounting for Political Risk at AES Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Aes Impairments 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 Accounting for Political Risk at AES HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Aes Impairments has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Accounting for Political Risk at AES 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.
Weaknesses Accounting for Political Risk at AES | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Accounting for Political Risk at AES are -
Low market penetration in new markets
– Outside its home market of Aes Impairments, firm in the HBR case study Accounting for Political Risk at AES needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the segment, Aes Impairments 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.
Slow to strategic competitive environment developments
– As Accounting for Political Risk at AES HBR case study mentions - Aes Impairments 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Accounting for Political Risk at AES 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 Aes Impairments has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Accounting for Political Risk at AES 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 Aes Impairments 's lucrative customers.
Interest costs
– Compare to the competition, Aes Impairments 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Accounting for Political Risk at AES, in the dynamic environment Aes Impairments has struggled to respond to the nimble upstart competition. Aes Impairments has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Aes Impairments is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Aes Impairments needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aes Impairments to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Aes Impairments 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 - Accounting for Political Risk at AES should strive to include more intangible value offerings along with its core products and services.
Skills based hiring
– The stress on hiring functional specialists at Aes Impairments 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.
Aligning sales with marketing
– It come across in the case study Accounting for Political Risk at AES 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 Accounting for Political Risk at AES can leverage the sales team experience to cultivate customer relationships as Aes Impairments is planning to shift buying processes online.
Opportunities Accounting for Political Risk at AES | 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 Accounting for Political Risk at AES are -
Loyalty marketing
– Aes Impairments 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.
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 Aes Impairments 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Aes Impairments can use these opportunities to build new business models that can help the communities that Aes Impairments operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Buying journey improvements
– Aes Impairments can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Accounting for Political Risk at AES 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.
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 Aes Impairments in the consumer business. Now Aes Impairments can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Aes Impairments 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 Accounting for Political Risk at AES - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Aes Impairments 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, Aes Impairments 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, Accounting for Political Risk at AES, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Aes Impairments 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. Aes Impairments 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.
Better consumer reach
– The expansion of the 5G network will help Aes Impairments to increase its market reach. Aes Impairments 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.
Creating value in data economy
– The success of analytics program of Aes Impairments has opened avenues for new revenue streams for the organization in the industry. This can help Aes Impairments to build a more holistic ecosystem as suggested in the Accounting for Political Risk at AES case study. Aes Impairments can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Aes Impairments 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aes Impairments 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aes Impairments is facing challenges because of the dominance of functional experts in the organization. Accounting for Political Risk at AES 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 Accounting for Political Risk at AES External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Accounting for Political Risk at AES are -
Increasing wage structure of Aes Impairments
– 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 Aes Impairments.
Stagnating economy with rate increase
– Aes Impairments 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aes Impairments 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 Accounting for Political Risk at AES .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Aes Impairments with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Aes Impairments can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Accounting for Political Risk at AES, Aes Impairments 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 Aes Impairments in the Finance & Accounting sector and impact the bottomline of the organization.
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. Aes Impairments 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.
Shortening product life cycle
– it is one of the major threat that Aes Impairments is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Aes Impairments.
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.
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. Aes Impairments needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Consumer confidence and its impact on Aes Impairments 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.
Weighted SWOT Analysis of Accounting for Political Risk at AES 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 Accounting for Political Risk at AES 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 Accounting for Political Risk at AES 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 Accounting for Political Risk at AES 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 Accounting for Political Risk at AES 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 Aes Impairments needs to make to build a sustainable competitive advantage.