Budgets and Other Lies: Evidence of Bias in Financial Planning SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Budgets and Other Lies: Evidence of Bias in Financial Planning
Budgets are considered by many to be a necessary evil. Within organizations, budgets are used to allocate financial resources to individuals who are charged with managing funds. This allows them to accomplish corporate goals and objectives. When reviewing the differences between actual and planned spending for a number of cost centers evidenced in data covering a 4-year period, it was noted that favorable variances exceeded unfavorable ones more than 50% of the time, although probability suggests that favorable and unfavorable results are equally likely to occur. As budgets are only best guesses about the future, these results indicate that planned spending was intended to manage uncertainty. In other words, the budgets were intentionally misstated-that is, they were lies. This Executive Digest explores ways of uncovering these lies. The consequences of intentional misstatement of planned spending are serious. In such cases, financial resources are not only misallocated, but also allocated in a suboptimal way. This means that future borrowing costs may increase, important projects could be delayed, and necessary operating expenditures are not made.
Swot Analysis of "Budgets and Other Lies: Evidence of Bias in Financial Planning" written by Ron Messer includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Budgets Lies facing as an external strategic factors. Some of the topics covered in Budgets and Other Lies: Evidence of Bias in Financial Planning case study are - Strategic Management Strategies, Budgeting and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Budgets and Other Lies: Evidence of Bias in Financial Planning casestudy better are - – there is increasing trade war between United States & China, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, increasing transportation and logistics costs,
increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Budgets and Other Lies: Evidence of Bias in Financial Planning
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Budgets and Other Lies: Evidence of Bias in Financial Planning case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Budgets Lies, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Budgets Lies 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 Budgets and Other Lies: Evidence of Bias in Financial Planning can be done for the following purposes –
1. Strategic planning using facts provided in Budgets and Other Lies: Evidence of Bias in Financial Planning case study
2. Improving business portfolio management of Budgets Lies
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 Budgets Lies
Strengths Budgets and Other Lies: Evidence of Bias in Financial Planning | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Budgets Lies in Budgets and Other Lies: Evidence of Bias in Financial Planning Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Budgets Lies 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 Budgets Lies 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.
Successful track record of launching new products
– Budgets Lies has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Budgets Lies 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.
Training and development
– Budgets Lies has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Budgets and Other Lies: Evidence of Bias in Financial Planning 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 lead change in Finance & Accounting field
– Budgets Lies 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 Budgets Lies in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Budgets Lies in the sector have low bargaining power. Budgets and Other Lies: Evidence of Bias in Financial Planning has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Budgets Lies to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Budgets Lies is present in almost all the verticals within the industry. This has provided firm in Budgets and Other Lies: Evidence of Bias in Financial Planning 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.
Organizational Resilience of Budgets Lies
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Budgets Lies does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Budgets Lies digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Budgets Lies 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.
Learning organization
- Budgets Lies 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 Budgets Lies is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Budgets and Other Lies: Evidence of Bias in Financial Planning Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Budgets Lies 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 Budgets and Other Lies: Evidence of Bias in Financial Planning HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Budgets Lies 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 Ron Messer 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.
Weaknesses Budgets and Other Lies: Evidence of Bias in Financial Planning | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Budgets and Other Lies: Evidence of Bias in Financial Planning are -
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 Budgets Lies supply chain. Even after few cautionary changes mentioned in the HBR case study - Budgets and Other Lies: Evidence of Bias in Financial Planning, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Budgets Lies vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Budgets Lies has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Budgets Lies even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High cash cycle compare to competitors
Budgets Lies 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 Budgets Lies is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Budgets Lies needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Budgets Lies to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Budgets Lies products
– To increase the profitability and margins on the products, Budgets Lies needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Budgets and Other Lies: Evidence of Bias in Financial Planning, it seems that the employees of Budgets Lies 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Budgets Lies 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 operating costs
– Compare to the competitors, firm in the HBR case study Budgets and Other Lies: Evidence of Bias in Financial Planning 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 Budgets Lies 's lucrative customers.
Need for greater diversity
– Budgets Lies 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Budgets and Other Lies: Evidence of Bias in Financial Planning, is just above the industry average. Budgets Lies 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.
Capital Spending Reduction
– Even during the low interest decade, Budgets Lies 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.
Opportunities Budgets and Other Lies: Evidence of Bias in Financial Planning | 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 Budgets and Other Lies: Evidence of Bias in Financial Planning are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Budgets Lies 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.
Manufacturing automation
– Budgets Lies 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.
Buying journey improvements
– Budgets Lies can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Budgets and Other Lies: Evidence of Bias in Financial Planning 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Budgets Lies 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, Budgets Lies 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, Budgets and Other Lies: Evidence of Bias in Financial Planning, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Budgets Lies 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 Budgets and Other Lies: Evidence of Bias in Financial Planning - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Budgets Lies to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Budgets Lies 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 Budgets Lies to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Budgets Lies 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.
Learning at scale
– Online learning technologies has now opened space for Budgets Lies 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.
Creating value in data economy
– The success of analytics program of Budgets Lies has opened avenues for new revenue streams for the organization in the industry. This can help Budgets Lies to build a more holistic ecosystem as suggested in the Budgets and Other Lies: Evidence of Bias in Financial Planning case study. Budgets Lies can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Budgets Lies 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, Budgets Lies is facing challenges because of the dominance of functional experts in the organization. Budgets and Other Lies: Evidence of Bias in Financial Planning 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.
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. Budgets Lies can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Budgets and Other Lies: Evidence of Bias in Financial Planning External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Budgets and Other Lies: Evidence of Bias in Financial Planning are -
Increasing wage structure of Budgets Lies
– 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 Budgets Lies.
Shortening product life cycle
– it is one of the major threat that Budgets Lies is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Budgets Lies 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.
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 Budgets Lies.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Budgets Lies will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology acceleration in Forth Industrial Revolution
– Budgets Lies has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Budgets Lies 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Budgets Lies 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.
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. Budgets Lies needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Budgets Lies with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Budgets and Other Lies: Evidence of Bias in Financial Planning, Budgets Lies 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 .
Stagnating economy with rate increase
– Budgets Lies 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.
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.
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.
Weighted SWOT Analysis of Budgets and Other Lies: Evidence of Bias in Financial Planning 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 Budgets and Other Lies: Evidence of Bias in Financial Planning 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 Budgets and Other Lies: Evidence of Bias in Financial Planning 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 Budgets and Other Lies: Evidence of Bias in Financial Planning 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 Budgets and Other Lies: Evidence of Bias in Financial Planning 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 Budgets Lies needs to make to build a sustainable competitive advantage.
