Case Study Description of Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics
Robert Venter, second-generation Chief Executive (CE) of family-owned Allied Electronics Corporation Ltd (Altron), considered the pros and cons of more clearly linking the firm's compensation system to sustainability performance. In June 2011, Altron, a conglomerate headquartered in Johannesburg, South Africa, controlled more than 200 companies in Africa, Europe, the US, the UK, Australia, and the Far East. More than 14,000 employees designed, developed, manufactured, and marketed a range of telecommunications, electronics, power electronics, and information technology systems and products. Having made a clear commitment to sustainable development, Venter was confident that the commitment was shared across the senior management team. However, there appeared to be more acceptance in the operating units for meeting financial targets than for meeting sustainability targets. Did the existing incentive structure send the correct message about the sustainability-oriented corporate strategy? Looking at the reshaped strategic themes, Venter considered the pros and cons of more clearly linking the firm's compensation system to sustainability performance.
Authors :: Robert G. Eccles, George Serafeim, Shelley Xin Li, Alan Knight
Swot Analysis of "Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics" written by Robert G. Eccles, George Serafeim, Shelley Xin Li, Alan Knight includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Venter Altron facing as an external strategic factors. Some of the topics covered in Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics case study are - Strategic Management Strategies, Decision making, Leadership, Motivating people, Strategy, Sustainability and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics casestudy better are - – central banks are concerned over increasing inflation, increasing energy prices, increasing commodity prices, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies,
customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Venter Altron, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Venter Altron 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 Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics can be done for the following purposes –
1. Strategic planning using facts provided in Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics case study
2. Improving business portfolio management of Venter Altron
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 Venter Altron
Strengths Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Venter Altron in Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics Harvard Business Review case study are -
High switching costs
– The high switching costs that Venter Altron 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
– Venter Altron has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Venter Altron 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.
Ability to recruit top talent
– Venter Altron is one of the leading recruiters in the industry. Managers in the Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Venter Altron in the sector have low bargaining power. Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Venter Altron to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Venter Altron has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics 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.
Diverse revenue streams
– Venter Altron is present in almost all the verticals within the industry. This has provided firm in Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics 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.
High brand equity
– Venter Altron has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Venter Altron to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Venter Altron 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 Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Venter Altron digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Venter Altron 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
– Venter Altron 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 Venter Altron in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Venter Altron 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 Venter Altron is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Venter Altron
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Venter Altron does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics are -
Capital Spending Reduction
– Even during the low interest decade, Venter Altron 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 strategic competitive environment developments
– As Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics HBR case study mentions - Venter Altron 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.
Interest costs
– Compare to the competition, Venter Altron 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.
Slow decision making process
– As mentioned earlier in the report, Venter Altron 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. Venter Altron 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics 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 Venter Altron 's lucrative customers.
Need for greater diversity
– Venter Altron 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Venter Altron 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.
Increasing silos among functional specialists
– The organizational structure of Venter Altron is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Venter Altron needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Venter Altron to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Venter Altron 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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Venter Altron supply chain. Even after few cautionary changes mentioned in the HBR case study - Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Venter Altron vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Venter Altron products
– To increase the profitability and margins on the products, Venter Altron needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics | 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 Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics are -
Buying journey improvements
– Venter Altron can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics 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.
Better consumer reach
– The expansion of the 5G network will help Venter Altron to increase its market reach. Venter Altron 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.
Learning at scale
– Online learning technologies has now opened space for Venter Altron 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.
Creating value in data economy
– The success of analytics program of Venter Altron has opened avenues for new revenue streams for the organization in the industry. This can help Venter Altron to build a more holistic ecosystem as suggested in the Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics case study. Venter Altron can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Venter Altron 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, Venter Altron can use these opportunities to build new business models that can help the communities that Venter Altron operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Venter Altron can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Venter Altron 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.
Leveraging digital technologies
– Venter Altron 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Venter Altron 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.
Manufacturing automation
– Venter Altron can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Venter Altron 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, Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Venter Altron 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 Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Venter Altron in the Finance & Accounting industry. The Finance & Accounting 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.
Consumer confidence and its impact on Venter Altron 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.
Environmental challenges
– Venter Altron 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. Venter Altron can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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.
Stagnating economy with rate increase
– Venter Altron 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Venter Altron with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Venter Altron 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.
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 Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics, Venter Altron 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 .
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. Venter Altron needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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. Venter Altron 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.
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 Venter Altron business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Venter Altron 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 Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics .
Weighted SWOT Analysis of Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics 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 Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics 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 Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics 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 Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics 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 Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics 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 Venter Altron needs to make to build a sustainable competitive advantage.
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