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 - – increasing energy prices, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, wage bills are increasing,
geopolitical disruptions, there is increasing trade war between United States & China, 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 -
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Venter Altron 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics firm has clearly differentiated products in the market place. This has enabled Venter Altron to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Venter Altron to invest into research and development (R&D) and innovation.
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.
Highly skilled collaborators
– Venter Altron 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 Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Venter Altron 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 Robert G. Eccles, George Serafeim, Shelley Xin Li, Alan Knight 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.
Strong track record of project management
– Venter Altron is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics 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.
Innovation driven organization
– Venter Altron is one of the most innovative firm in sector. Manager in Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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 -
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.
Aligning sales with marketing
– It come across in the case study Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics 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 Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics can leverage the sales team experience to cultivate customer relationships as Venter Altron is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics, 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.
High cash cycle compare to competitors
Venter Altron has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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.
Low market penetration in new markets
– Outside its home market of Venter Altron, firm in the HBR case study Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Venter Altron is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Venter Altron 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 - Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics, in the dynamic environment Venter Altron has struggled to respond to the nimble upstart competition. Venter Altron has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Allied Electronics Corporation Ltd: Linking Compensation to Sustainability Metrics, is just above the industry average. Venter Altron 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.
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 -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Venter Altron can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
Loyalty marketing
– Venter Altron 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.
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.
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.
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.
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 Venter Altron in the consumer business. Now Venter Altron can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Venter Altron can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Venter Altron can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Venter Altron 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 Venter Altron to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Venter Altron 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.
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 -
Shortening product life cycle
– it is one of the major threat that Venter Altron is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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. Venter Altron can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Technology acceleration in Forth Industrial Revolution
– Venter Altron has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Venter Altron 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.
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 .
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.
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 dependence on third party suppliers
– Venter Altron 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.
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.
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 Venter Altron.
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.
Increasing wage structure of Venter Altron
– 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 Venter Altron.
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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