The Value of Imperfect Information SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of The Value of Imperfect Information
This set of exercises consists of two exercises, "Averias, S. A." and "Petroleos, S. A.," which show, (in a simple but at the same time practical and real) way, how to incorporate new information into the decision-making process. The two exercises raise probability problems to which the Bayes Theorem must be applied.?Averias S.A.? is inspired by the ?Bayes? case by Steven Lippman. ?Petroleos S.A.? is based on the case of the same name by Professor Pere Agell.
Swot Analysis of "The Value of Imperfect Information" written by Ines Alegre Tort-Martorell includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Averias Petroleos facing as an external strategic factors. Some of the topics covered in The Value of Imperfect Information case study are - Strategic Management Strategies, and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the The Value of Imperfect Information casestudy better are - – increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, there is increasing trade war between United States & China, wage bills are increasing,
central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of The Value of Imperfect Information
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The Value of Imperfect Information case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Averias Petroleos, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Averias Petroleos 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 The Value of Imperfect Information can be done for the following purposes –
1. Strategic planning using facts provided in The Value of Imperfect Information case study
2. Improving business portfolio management of Averias Petroleos
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Averias Petroleos
Strengths The Value of Imperfect Information | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Averias Petroleos in The Value of Imperfect Information Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the The Value of Imperfect Information 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.
Low bargaining power of suppliers
– Suppliers of Averias Petroleos in the sector have low bargaining power. The Value of Imperfect Information has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Averias Petroleos to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Averias Petroleos is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Averias Petroleos has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Averias Petroleos to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Averias Petroleos has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The Value of Imperfect Information 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.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Averias Petroleos digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Averias Petroleos 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.
Organizational Resilience of Averias Petroleos
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Averias Petroleos does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Averias Petroleos is present in almost all the verticals within the industry. This has provided firm in The Value of Imperfect Information 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.
Successful track record of launching new products
– Averias Petroleos has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Averias Petroleos 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 Averias Petroleos 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.
Innovation driven organization
– Averias Petroleos is one of the most innovative firm in sector. Manager in The Value of Imperfect Information Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Analytics focus
– Averias Petroleos 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 Ines Alegre Tort-Martorell 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 The Value of Imperfect Information | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Value of Imperfect Information are -
Aligning sales with marketing
– It come across in the case study The Value of Imperfect Information 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 The Value of Imperfect Information can leverage the sales team experience to cultivate customer relationships as Averias Petroleos is planning to shift buying processes online.
High cash cycle compare to competitors
Averias Petroleos 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.
Slow to strategic competitive environment developments
– As The Value of Imperfect Information HBR case study mentions - Averias Petroleos 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the The Value of Imperfect Information 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 Averias Petroleos has relatively successful track record of launching new products.
Skills based hiring
– The stress on hiring functional specialists at Averias Petroleos has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow decision making process
– As mentioned earlier in the report, Averias Petroleos 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. Averias Petroleos 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The Value of Imperfect Information, is just above the industry average. Averias Petroleos 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Averias Petroleos 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study The Value of Imperfect Information, in the dynamic environment Averias Petroleos has struggled to respond to the nimble upstart competition. Averias Petroleos has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Averias Petroleos has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study The Value of Imperfect Information, it seems that the employees of Averias Petroleos 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.
Opportunities The Value of Imperfect Information | 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 The Value of Imperfect Information are -
Creating value in data economy
– The success of analytics program of Averias Petroleos has opened avenues for new revenue streams for the organization in the industry. This can help Averias Petroleos to build a more holistic ecosystem as suggested in the The Value of Imperfect Information case study. Averias Petroleos can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Averias Petroleos 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Averias Petroleos 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. Averias Petroleos 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Averias Petroleos can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Averias Petroleos can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Averias Petroleos 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 Averias Petroleos 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 Averias Petroleos in the consumer business. Now Averias Petroleos can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Averias Petroleos 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Averias Petroleos in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
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. Averias Petroleos can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Averias Petroleos can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The Value of Imperfect Information 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.
Building a culture of innovation
– managers at Averias Petroleos 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 Leadership & Managing People segment.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Averias Petroleos 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, The Value of Imperfect Information, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats The Value of Imperfect Information External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The Value of Imperfect Information are -
Stagnating economy with rate increase
– Averias Petroleos 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 Averias Petroleos business can come under increasing regulations regarding data privacy, data security, 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 Averias Petroleos in the Leadership & Managing People sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Averias Petroleos in the Leadership & Managing People industry. The Leadership & Managing People 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 Averias Petroleos is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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.
High dependence on third party suppliers
– Averias Petroleos 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 Averias Petroleos
– 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 Averias Petroleos.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Averias Petroleos can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Averias Petroleos 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, Averias Petroleos 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 The Value of Imperfect Information .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study The Value of Imperfect Information, Averias Petroleos may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Technology acceleration in Forth Industrial Revolution
– Averias Petroleos has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Averias Petroleos needs to keep up with the evolution of technology in the Leadership & Managing People 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 The Value of Imperfect Information 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 The Value of Imperfect Information 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 The Value of Imperfect Information 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 The Value of Imperfect Information 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 The Value of Imperfect Information 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 Averias Petroleos needs to make to build a sustainable competitive advantage.