Policy problems, mainly organizational issues, face a young middle manager in the context of capital budgeting in a highly technological conglomerate firm with high market uncertainty.
Swot Analysis of "Basic Industries" written by Joseph L. Bower, John W. Rosenblum includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Budgeting Conglomerate facing as an external strategic factors. Some of the topics covered in Basic Industries case study are - Strategic Management Strategies, Corporate governance, IT and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Basic Industries casestudy better are - – increasing commodity prices, challanges to central banks by blockchain based private currencies, geopolitical disruptions, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs,
there is backlash against globalization, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Basic Industries case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Budgeting Conglomerate, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Budgeting Conglomerate 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 Basic Industries can be done for the following purposes –
1. Strategic planning using facts provided in Basic Industries case study
2. Improving business portfolio management of Budgeting Conglomerate
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 Budgeting Conglomerate
Strengths Basic Industries | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Budgeting Conglomerate in Basic Industries Harvard Business Review case study are -
Ability to lead change in Finance & Accounting field
– Budgeting Conglomerate 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 Budgeting Conglomerate in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Budgeting Conglomerate has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Basic Industries 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Basic Industries firm has clearly differentiated products in the market place. This has enabled Budgeting Conglomerate to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Budgeting Conglomerate to invest into research and development (R&D) and innovation.
Learning organization
- Budgeting Conglomerate 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 Budgeting Conglomerate is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Basic Industries Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Budgeting Conglomerate 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
– Budgeting Conglomerate has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Budgeting Conglomerate to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Budgeting Conglomerate digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Budgeting Conglomerate 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.
Superior customer experience
– The customer experience strategy of Budgeting Conglomerate in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Budgeting Conglomerate
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Budgeting Conglomerate does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Budgeting Conglomerate 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.
Effective Research and Development (R&D)
– Budgeting Conglomerate 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 Basic Industries - 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 Budgeting Conglomerate 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.
Weaknesses Basic Industries | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Basic Industries are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Basic Industries 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 Budgeting Conglomerate has relatively successful track record of launching new products.
Products dominated business model
– Even though Budgeting Conglomerate 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 - Basic Industries should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Basic Industries, it seems that the employees of Budgeting Conglomerate 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.
Interest costs
– Compare to the competition, Budgeting Conglomerate 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.
No frontier risks strategy
– After analyzing the HBR case study Basic Industries, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Basic Industries, in the dynamic environment Budgeting Conglomerate has struggled to respond to the nimble upstart competition. Budgeting Conglomerate has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Budgeting Conglomerate, firm in the HBR case study Basic Industries needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners
– Because of the regulatory requirements, Joseph L. Bower, John W. Rosenblum suggests that, Budgeting Conglomerate 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 Budgeting Conglomerate is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Budgeting Conglomerate needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Budgeting Conglomerate to focus more on services rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Budgeting Conglomerate is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Basic Industries can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring
– The stress on hiring functional specialists at Budgeting Conglomerate 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.
Opportunities Basic Industries | 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 Basic Industries are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Budgeting Conglomerate can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Budgeting Conglomerate 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.
Developing new processes and practices
– Budgeting Conglomerate 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.
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. Budgeting Conglomerate can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Budgeting Conglomerate can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Budgeting Conglomerate 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.
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 Budgeting Conglomerate in the consumer business. Now Budgeting Conglomerate can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Budgeting Conglomerate 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 Basic Industries - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Budgeting Conglomerate to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Budgeting Conglomerate is facing challenges because of the dominance of functional experts in the organization. Basic Industries 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Budgeting Conglomerate 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Budgeting Conglomerate can use these opportunities to build new business models that can help the communities that Budgeting Conglomerate operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Budgeting Conglomerate 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.
Creating value in data economy
– The success of analytics program of Budgeting Conglomerate has opened avenues for new revenue streams for the organization in the industry. This can help Budgeting Conglomerate to build a more holistic ecosystem as suggested in the Basic Industries case study. Budgeting Conglomerate can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Basic Industries External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Basic Industries are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Basic Industries, Budgeting Conglomerate 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
– Budgeting Conglomerate 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.
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. Budgeting Conglomerate can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Budgeting Conglomerate is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Budgeting Conglomerate.
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 Budgeting Conglomerate 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. Budgeting Conglomerate 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.
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.
Environmental challenges
– Budgeting Conglomerate 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. Budgeting Conglomerate can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Regulatory challenges
– Budgeting Conglomerate 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Budgeting Conglomerate 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 Basic Industries .
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.
Consumer confidence and its impact on Budgeting Conglomerate 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.
Weighted SWOT Analysis of Basic Industries 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 Basic Industries 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 Basic Industries 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 Basic Industries 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 Basic Industries 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 Budgeting Conglomerate needs to make to build a sustainable competitive advantage.
