Case Study Description of Sears: Accounting for Uncollectible Accounts
Sarah Simons, an investment analyst for the retail industry, has just received the Sears, Roebuck and Co. 1999 annual report. Sears has had trouble in the past with the collectibility of receivables from customer credit purchases using the Sears card. These problems have led to past write-offs, as well as legal problems, which have depressed the stock. Sarah must evaluate the provisions that the company has made for possible problems in collecting the receivables. This case provides background information on Sears' business and past problems, an introduction to accounting for contingencies, and financial information from public sources on Sears and the industry.
Swot Analysis of "Sears: Accounting for Uncollectible Accounts" written by Karen Nelson, David W. Hoyt includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sears Receivables facing as an external strategic factors. Some of the topics covered in Sears: Accounting for Uncollectible Accounts case study are - Strategic Management Strategies, Business law and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Sears: Accounting for Uncollectible Accounts casestudy better are - – increasing commodity prices, central banks are concerned over increasing inflation, increasing transportation and logistics costs, there is increasing trade war between United States & China, increasing energy prices, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion,
wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Sears: Accounting for Uncollectible Accounts
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Sears: Accounting for Uncollectible Accounts case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sears Receivables, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sears Receivables 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 Sears: Accounting for Uncollectible Accounts can be done for the following purposes –
1. Strategic planning using facts provided in Sears: Accounting for Uncollectible Accounts case study
2. Improving business portfolio management of Sears Receivables
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 Sears Receivables
Strengths Sears: Accounting for Uncollectible Accounts | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sears Receivables in Sears: Accounting for Uncollectible Accounts Harvard Business Review case study are -
Effective Research and Development (R&D)
– Sears Receivables 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 Sears: Accounting for Uncollectible Accounts - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Sears Receivables is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Sears Receivables 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.
High switching costs
– The high switching costs that Sears Receivables has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Successful track record of launching new products
– Sears Receivables has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sears Receivables 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.
Operational resilience
– The operational resilience strategy in the Sears: Accounting for Uncollectible Accounts 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Sears Receivables digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sears Receivables 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.
High brand equity
– Sears Receivables has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sears Receivables to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Sears Receivables in the sector have low bargaining power. Sears: Accounting for Uncollectible Accounts has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sears Receivables to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Sears Receivables 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 Sears: Accounting for Uncollectible Accounts HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Finance & Accounting industry
– Sears: Accounting for Uncollectible Accounts firm has clearly differentiated products in the market place. This has enabled Sears Receivables to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Sears Receivables to invest into research and development (R&D) and innovation.
Learning organization
- Sears Receivables 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 Sears Receivables is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Sears: Accounting for Uncollectible Accounts Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Sears: Accounting for Uncollectible Accounts | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sears: Accounting for Uncollectible Accounts are -
Aligning sales with marketing
– It come across in the case study Sears: Accounting for Uncollectible Accounts 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 Sears: Accounting for Uncollectible Accounts can leverage the sales team experience to cultivate customer relationships as Sears Receivables is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Sears Receivables 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Karen Nelson, David W. Hoyt suggests that, Sears Receivables 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Sears: Accounting for Uncollectible Accounts, is just above the industry average. Sears Receivables 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Sears: Accounting for Uncollectible Accounts 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 Sears Receivables 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Sears Receivables 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. Sears Receivables 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.
Need for greater diversity
– Sears Receivables 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.
Slow to strategic competitive environment developments
– As Sears: Accounting for Uncollectible Accounts HBR case study mentions - Sears Receivables 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 Sears: Accounting for Uncollectible Accounts 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 Sears Receivables has relatively successful track record of launching new products.
Lack of clear differentiation of Sears Receivables products
– To increase the profitability and margins on the products, Sears Receivables needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Sears Receivables is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Sears Receivables needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sears Receivables to focus more on services rather than just following the product oriented approach.
Opportunities Sears: Accounting for Uncollectible Accounts | 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 Sears: Accounting for Uncollectible Accounts are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sears Receivables is facing challenges because of the dominance of functional experts in the organization. Sears: Accounting for Uncollectible Accounts 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.
Building a culture of innovation
– managers at Sears Receivables 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sears Receivables can use these opportunities to build new business models that can help the communities that Sears Receivables operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Developing new processes and practices
– Sears Receivables 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.
Creating value in data economy
– The success of analytics program of Sears Receivables has opened avenues for new revenue streams for the organization in the industry. This can help Sears Receivables to build a more holistic ecosystem as suggested in the Sears: Accounting for Uncollectible Accounts case study. Sears Receivables can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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. Sears Receivables can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sears Receivables can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Sears Receivables has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sears Receivables 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, Sears: Accounting for Uncollectible Accounts, 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 Sears Receivables 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, Sears Receivables 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.
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 Sears Receivables in the consumer business. Now Sears Receivables can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Sears Receivables 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.
Threats Sears: Accounting for Uncollectible Accounts External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Sears: Accounting for Uncollectible Accounts are -
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.
Increasing wage structure of Sears Receivables
– 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 Sears Receivables.
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.
Technology acceleration in Forth Industrial Revolution
– Sears Receivables has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Sears Receivables 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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Sears Receivables needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Sears Receivables 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 Sears Receivables.
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. Sears Receivables 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.
High dependence on third party suppliers
– Sears Receivables 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sears Receivables with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Sears: Accounting for Uncollectible Accounts, Sears Receivables 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 .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sears Receivables 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 Sears: Accounting for Uncollectible Accounts .
Stagnating economy with rate increase
– Sears Receivables 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.
Weighted SWOT Analysis of Sears: Accounting for Uncollectible Accounts 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 Sears: Accounting for Uncollectible Accounts 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 Sears: Accounting for Uncollectible Accounts 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 Sears: Accounting for Uncollectible Accounts 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 Sears: Accounting for Uncollectible Accounts 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 Sears Receivables needs to make to build a sustainable competitive advantage.
