Case Study Description of Wilmont Chemical Corporation
The Wilmont Chemical Corporation produces a variety of industrial products, including a specialty chemical called SC. The company uses an actual costing system and the LIFO inventory method. At the beginning of each year, the company's controller estimates the total direct cost (omitting any manufacturing overhead allocation) per unit of producing SC. Unfortunately, the market demand and selling price are difficult to predict, as are the raw material and direct labor costs. Monthly budgets are prepared in advance, and are subsequently compared with actual results. The controller is wondering if the company's financial statements would be more "managerially relevant" if the company changed to an estimated costing system, where raw material inventory is kept at estimated costs and finished goods inventory is kept at estimated production costs. The case provides information for comparing the actual operating results for a month with the budgeted amounts. Students are asked to prepare three monthly income statements: one using the company's actual costing system; one using an estimated costing system; and, one using a hybrid costing system that incorporates both actual and estimated costs. They are then asked to take a position as to which of the three income statements presents the most managerially relevant information.
Swot Analysis of "Wilmont Chemical Corporation" written by E. Richard Brownlee II includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Costing Estimated facing as an external strategic factors. Some of the topics covered in Wilmont Chemical Corporation case study are - Strategic Management Strategies, Manufacturing and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Wilmont Chemical Corporation casestudy better are - – increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy,
challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Wilmont Chemical Corporation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Wilmont Chemical Corporation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Costing Estimated, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Costing Estimated 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 Wilmont Chemical Corporation can be done for the following purposes –
1. Strategic planning using facts provided in Wilmont Chemical Corporation case study
2. Improving business portfolio management of Costing Estimated
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 Costing Estimated
Strengths Wilmont Chemical Corporation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Costing Estimated in Wilmont Chemical Corporation Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Costing Estimated 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.
Innovation driven organization
– Costing Estimated is one of the most innovative firm in sector. Manager in Wilmont Chemical Corporation Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– Costing Estimated 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 Wilmont Chemical Corporation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Costing Estimated 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 Wilmont Chemical Corporation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Costing Estimated 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.
Learning organization
- Costing Estimated 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 Costing Estimated is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Wilmont Chemical Corporation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Costing Estimated is present in almost all the verticals within the industry. This has provided firm in Wilmont Chemical Corporation 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.
Strong track record of project management
– Costing Estimated is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Costing Estimated digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Costing Estimated 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.
Ability to lead change in Finance & Accounting field
– Costing Estimated 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 Costing Estimated in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Costing Estimated 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 E. Richard Brownlee II 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.
Organizational Resilience of Costing Estimated
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Costing Estimated does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Wilmont Chemical Corporation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Wilmont Chemical Corporation are -
Slow to strategic competitive environment developments
– As Wilmont Chemical Corporation HBR case study mentions - Costing Estimated 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.
Products dominated business model
– Even though Costing Estimated has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Wilmont Chemical Corporation should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Wilmont Chemical Corporation, is just above the industry average. Costing Estimated 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.
Aligning sales with marketing
– It come across in the case study Wilmont Chemical Corporation 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 Wilmont Chemical Corporation can leverage the sales team experience to cultivate customer relationships as Costing Estimated is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Costing Estimated 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. Costing Estimated 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Wilmont Chemical Corporation, in the dynamic environment Costing Estimated has struggled to respond to the nimble upstart competition. Costing Estimated has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Costing Estimated 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Costing Estimated is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Wilmont Chemical Corporation can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Costing Estimated 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 bargaining power of channel partners
– Because of the regulatory requirements, E. Richard Brownlee II suggests that, Costing Estimated is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Increasing silos among functional specialists
– The organizational structure of Costing Estimated is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Costing Estimated needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Costing Estimated to focus more on services rather than just following the product oriented approach.
Opportunities Wilmont Chemical Corporation | 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 Wilmont Chemical Corporation are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Costing Estimated 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Costing Estimated 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 Costing Estimated to increase its market reach. Costing Estimated 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.
Leveraging digital technologies
– Costing Estimated 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.
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 Costing Estimated 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.
Building a culture of innovation
– managers at Costing Estimated 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 Finance & Accounting segment.
Buying journey improvements
– Costing Estimated can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Wilmont Chemical Corporation 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 Costing Estimated can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Costing Estimated 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 Costing Estimated 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 Costing Estimated in the consumer business. Now Costing Estimated can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Costing Estimated 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, Wilmont Chemical Corporation, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Costing Estimated 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.
Developing new processes and practices
– Costing Estimated 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.
Threats Wilmont Chemical Corporation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Wilmont Chemical Corporation are -
Regulatory challenges
– Costing Estimated 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Costing Estimated can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Costing Estimated
– 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 Costing Estimated.
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 Costing Estimated business can come under increasing regulations regarding data privacy, data security, etc.
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. Costing Estimated 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
– Costing Estimated has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Costing Estimated 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.
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 Wilmont Chemical Corporation, Costing Estimated 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 .
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 Costing Estimated in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Costing Estimated 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.
Environmental challenges
– Costing Estimated 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. Costing Estimated can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Consumer confidence and its impact on Costing Estimated 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.
High dependence on third party suppliers
– Costing Estimated 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.
Weighted SWOT Analysis of Wilmont Chemical Corporation 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 Wilmont Chemical Corporation 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 Wilmont Chemical Corporation 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 Wilmont Chemical Corporation 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 Wilmont Chemical Corporation 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 Costing Estimated needs to make to build a sustainable competitive advantage.