Case Study Description of Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses
In December 2013, Reike Technology Co. Ltd. (Reike), a Chinese information technology and outsourcing company, faced an accounting revenue recognition problem. Reike had a well-deserved reputation in the software outsourcing industry, having built partnerships with Fortune 500 companies since the 1990s. However, in 2012, it collaborated on a project with a multinational software company that included a "pay-when-paid" clause in the contract. According to this clause, payments to Reike would be based on the percentage of the project completed upon review, as long as the software company received the corresponding proportion of payments from the owner. As the project progressed, Reike's managers became troubled by the following issues: Should the "pay-when-paid" contract containing legal risks have been signed? When should Reike recognize the project revenue? How should the company deal with the project costs considering there was unrecognized revenue at the end of the year? Would there be any effect on performance assessments? The authors Lixin Pan, Ying Yu and Lei Li are affiliated with Beihang University.
Swot Analysis of "Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses" written by Lixin Pan, Ying Yu, Lei Li includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Reike Project facing as an external strategic factors. Some of the topics covered in Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses case study are - Strategic Management Strategies, IT, Operations management and Global Business.
Some of the macro environment factors that can be used to understand the Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses casestudy better are - – increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion,
supply chains are disrupted by pandemic , wage bills are increasing, etc
Introduction to SWOT Analysis of Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Reike Project, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Reike Project 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 Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses can be done for the following purposes –
1. Strategic planning using facts provided in Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses case study
2. Improving business portfolio management of Reike Project
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Reike Project
Strengths Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Reike Project in Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses Harvard Business Review case study are -
Analytics focus
– Reike Project 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 Lixin Pan, Ying Yu, Lei Li 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.
Innovation driven organization
– Reike Project is one of the most innovative firm in sector. Manager in Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Reike Project has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Reike Project to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Reike Project digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Reike Project 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.
Sustainable margins compare to other players in Global Business industry
– Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses firm has clearly differentiated products in the market place. This has enabled Reike Project to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Reike Project to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Reike Project 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 Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Reike Project is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Reike Project is present in almost all the verticals within the industry. This has provided firm in Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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.
Ability to lead change in Global Business field
– Reike Project 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 Reike Project in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Reike Project in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Reike Project
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Reike Project does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses, it seems that the employees of Reike Project 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.
Capital Spending Reduction
– Even during the low interest decade, Reike Project 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.
Interest costs
– Compare to the competition, Reike Project 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 Reike Project products
– To increase the profitability and margins on the products, Reike Project needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses, in the dynamic environment Reike Project has struggled to respond to the nimble upstart competition. Reike Project 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 Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses HBR case study mentions - Reike Project 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 cash cycle compare to competitors
Reike Project 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Reike Project 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.
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 Reike Project supply chain. Even after few cautionary changes mentioned in the HBR case study - Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Reike Project vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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 Reike Project 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses, is just above the industry average. Reike Project 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.
Opportunities Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses | 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 Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Reike Project 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. Reike Project 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.
Manufacturing automation
– Reike Project can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
Loyalty marketing
– Reike Project 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.
Building a culture of innovation
– managers at Reike Project 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 Global Business segment.
Low interest rates
– Even though inflation is raising its head in most developed economies, Reike Project 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Reike Project can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Reike Project 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.
Learning at scale
– Online learning technologies has now opened space for Reike Project 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.
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 Reike Project 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, Reike Project can use these opportunities to build new business models that can help the communities that Reike Project operates in. Secondly it can use opportunities from government spending in Global Business sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Reike Project 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 Reike Project to hire the very best people irrespective of their geographical location.
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 Reike Project in the consumer business. Now Reike Project can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Reike Project can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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.
Threats Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Reike Project with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Reike Project 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.
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 Reike Project business can come under increasing regulations regarding data privacy, data security, etc.
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.
Consumer confidence and its impact on Reike Project 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.
Increasing wage structure of Reike Project
– 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 Reike Project.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Reike Project 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 Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses .
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Reike Project can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Reike Project in the Global Business sector and impact the bottomline of the organization.
Environmental challenges
– Reike Project 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. Reike Project can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Regulatory challenges
– Reike Project 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 Global Business industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Reike Project in the Global Business industry. The Global Business 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.
Shortening product life cycle
– it is one of the major threat that Reike Project is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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 Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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 Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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 Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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 Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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 Reike Project needs to make to build a sustainable competitive advantage.
