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 - – challanges to central banks by blockchain based private currencies, wage bills are increasing, increasing energy prices, technology disruption, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, increasing commodity prices,
increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, 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 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.
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.
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 (B) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
Operational resilience
– The operational resilience strategy in the Accounting for Political Risk at AES (B) 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.
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 (B) 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.
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.
Organizational Resilience of Aes Impairments
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Aes Impairments 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 Aes Impairments in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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 -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Accounting for Political Risk at AES (B) 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.
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.
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 (B) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Accounting for Political Risk at AES (B), 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.
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 (B) should strive to include more intangible value offerings along with its core products and services.
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.
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.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Aes Impairments supply chain. Even after few cautionary changes mentioned in the HBR case study - Accounting for Political Risk at AES (B), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Aes Impairments vulnerable to further global disruptions in South East Asia.
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.
No frontier risks strategy
– After analyzing the HBR case study Accounting for Political Risk at AES (B), 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.
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 -
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.
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 (B), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Aes Impairments 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.
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 -
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.
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.
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.
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.
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.
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 .
High dependence on third party suppliers
– Aes Impairments 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
– 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) .
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.
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.
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.
