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 - – cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, increasing energy prices, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, geopolitical disruptions, supply chains are disrupted by pandemic ,
technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Averias Petroleos 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.
Ability to lead change in Leadership & Managing People field
– Averias Petroleos 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 Averias Petroleos in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Averias Petroleos 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 The Value of Imperfect Information HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
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.
Sustainable margins compare to other players in Leadership & Managing People industry
– The Value of Imperfect Information firm has clearly differentiated products in the market place. This has enabled Averias Petroleos to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Averias Petroleos to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Averias Petroleos 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 The Value of Imperfect Information - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 -
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.
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.
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.
Interest costs
– Compare to the competition, Averias Petroleos 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.
Increasing silos among functional specialists
– The organizational structure of Averias Petroleos is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Averias Petroleos needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Averias Petroleos to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study The Value of Imperfect Information 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 Averias Petroleos 's lucrative customers.
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.
Lack of clear differentiation of Averias Petroleos products
– To increase the profitability and margins on the products, Averias Petroleos 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 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.
Capital Spending Reduction
– Even during the low interest decade, Averias Petroleos 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 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 -
Manufacturing automation
– Averias Petroleos can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
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.
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.
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.
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.
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.
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 Averias Petroleos 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.
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Averias Petroleos to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats 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 -
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.
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.
Environmental challenges
– Averias Petroleos 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. Averias Petroleos can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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 .
Regulatory challenges
– Averias Petroleos 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 Leadership & Managing People industry regulations.
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.
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.
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 Averias Petroleos.
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.
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.
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. Averias Petroleos 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.
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.
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.
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.