Accounting for Political Risk at AES (B) 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 (B)
Supplement to case 118023. 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 (B)" 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 (B) 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 (B) casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, cloud computing is disrupting traditional business models, there is backlash against globalization,
digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Accounting for Political Risk at AES (B)
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 (B) 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 (B) can be done for the following purposes –
1. Strategic planning using facts provided in Accounting for Political Risk at AES (B) 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 (B) | 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 (B) Harvard Business Review case study are -
Ability to recruit top talent
– Aes Impairments is one of the leading recruiters in the industry. Managers in the Accounting for Political Risk at AES (B) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Aes Impairments 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.
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 (B) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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 (B) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Aes Impairments digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aes Impairments 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.
Low bargaining power of suppliers
– Suppliers of Aes Impairments in the sector have low bargaining power. Accounting for Political Risk at AES (B) 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.
Ability to lead change in Finance & Accounting field
– Aes Impairments 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 Aes Impairments in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Sustainable margins compare to other players in Finance & Accounting industry
– Accounting for Political Risk at AES (B) firm has clearly differentiated products in the market place. This has enabled Aes Impairments to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Aes Impairments to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Aes Impairments in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Innovation driven organization
– Aes Impairments is one of the most innovative firm in sector. Manager in Accounting for Political Risk at AES (B) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Accounting for Political Risk at AES (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Accounting for Political Risk at AES (B) are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Aes Impairments is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Accounting for Political Risk at AES (B) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Gerardo Perez Cavazos, Suraj Srinivasan suggests that, Aes Impairments 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 cash cycle compare to competitors
Aes Impairments 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.
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.
Capital Spending Reduction
– Even during the low interest decade, Aes Impairments 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.
Need for greater diversity
– Aes Impairments 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Accounting for Political Risk at AES (B), it seems that the employees of Aes Impairments 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.
Lack of clear differentiation of Aes Impairments products
– To increase the profitability and margins on the products, Aes Impairments needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Accounting for Political Risk at AES (B), is just above the industry average. Aes Impairments 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.
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.
Opportunities Accounting for Political Risk at AES (B) | 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 (B) are -
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 (B) 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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Aes Impairments 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.
Manufacturing automation
– Aes Impairments 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.
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.
Building a culture of innovation
– managers at Aes Impairments 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.
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. Aes Impairments can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aes Impairments can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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 (B) 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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Aes Impairments 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 Aes Impairments to hire the very best people irrespective of their geographical location.
Threats Accounting for Political Risk at AES (B) 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 (B) are -
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aes Impairments 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.
Regulatory challenges
– Aes Impairments 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.
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 (B), 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 .
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.
Technology acceleration in Forth Industrial Revolution
– Aes Impairments has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Aes Impairments needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Aes Impairments.
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 Aes Impairments business can come under increasing regulations regarding data privacy, data security, etc.
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 (B) .
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.
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.
Weighted SWOT Analysis of Accounting for Political Risk at AES (B) 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 (B) 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 (B) 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 (B) 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 (B) 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.