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 - – competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, supply chains are disrupted by pandemic , increasing household debt because of falling income levels,
wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
Successful track record of launching new products
– Reike Project has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Reike Project 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.
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.
High switching costs
– The high switching costs that Reike Project 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.
Cross disciplinary teams
– Horizontal connected teams at the Reike Project 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 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.
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.
Effective Research and Development (R&D)
– Reike Project 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 Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Training and development
– Reike Project has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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.
Ability to recruit top talent
– Reike Project is one of the leading recruiters in the industry. Managers in the Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Reike Project in the sector have low bargaining power. Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Reike Project to manage not only supply disruptions but also source products at highly competitive prices.
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 -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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 Reike Project has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Reike Project, firm in the HBR case study Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Need for greater diversity
– Reike Project 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.
No frontier risks strategy
– After analyzing the HBR case study Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses, it seems that company is thinking about the frontier risks that can impact Global Business 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Reike Project is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– It come across in the case study Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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 Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses can leverage the sales team experience to cultivate customer relationships as Reike Project is planning to shift buying processes online.
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.
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.
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.
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.
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 -
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.
Using analytics as competitive advantage
– Reike Project 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 Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Reike Project to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Reike Project to increase its market reach. Reike Project 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.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Reike Project is facing challenges because of the dominance of functional experts in the organization. Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses 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.
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.
Developing new processes and practices
– Reike Project can develop new processes and procedures in Global Business 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.
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.
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.
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 -
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Reike Technology: Revenue Recognition and "Pay-When-Paid" Clauses, Reike Project may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
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.
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 Reike Project.
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.
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 .
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. Reike Project needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
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.
High dependence on third party suppliers
– Reike Project 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.
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.
Technology acceleration in Forth Industrial Revolution
– Reike Project has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Reike Project needs to keep up with the evolution of technology in the Global Business 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.
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.