Case Study Description of America Online, Inc.: Disclosure Strategy
Since going public, AOL had disclosed on a quarterly basis supplemental metrics meant to give analysts and investors a way of tracking growth in its subscriber base and the value created through its marketing efforts. These metrics gave management's conversations with sell-side analysts focus and armed analysts with the evidence they needed to sell AOL's emerging business to leery institutional investors. This case picks up in early 1998 when AOL is transitioning from being an Internet service provider with revenues generated primarily from subscribers to becoming an online media company with a significant proportion of its revenues coming from online advertising and e-commerce. As the company transitioned, management had to decide whether and which supplemental metrics to disclose on a quarterly basis. The challenge was to select metrics that gave the financial community a way of understanding AOL's performance as its business model evolved, without limiting AOL's future flexibility. Teaching Purpose: Provides an opportunity to discuss the advantages and disadvantages of supplemental disclosures as a tool to educate Wall Street about a firm's evolving business model. Withdrawn 08/15/02.
Swot Analysis of "America Online, Inc.: Disclosure Strategy" written by Amy P. Hutton, David Lane includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aol's Metrics facing as an external strategic factors. Some of the topics covered in America Online, Inc.: Disclosure Strategy case study are - Strategic Management Strategies, Communication, Disruptive innovation, Entrepreneurship, Financial management, Internet, Marketing and Finance & Accounting.
Some of the macro environment factors that can be used to understand the America Online, Inc.: Disclosure Strategy casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels,
competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, etc
Introduction to SWOT Analysis of America Online, Inc.: Disclosure Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in America Online, Inc.: Disclosure Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aol's Metrics, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aol's Metrics 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 America Online, Inc.: Disclosure Strategy can be done for the following purposes –
1. Strategic planning using facts provided in America Online, Inc.: Disclosure Strategy case study
2. Improving business portfolio management of Aol's Metrics
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 Aol's Metrics
Strengths America Online, Inc.: Disclosure Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aol's Metrics in America Online, Inc.: Disclosure Strategy Harvard Business Review case study are -
Analytics focus
– Aol's Metrics 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 Amy P. Hutton, David Lane 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.
Sustainable margins compare to other players in Finance & Accounting industry
– America Online, Inc.: Disclosure Strategy firm has clearly differentiated products in the market place. This has enabled Aol's Metrics to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Aol's Metrics to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Aol's Metrics 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 America Online, Inc.: Disclosure Strategy - 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 brand equity
– Aol's Metrics has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aol's Metrics to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Aol's Metrics in the sector have low bargaining power. America Online, Inc.: Disclosure Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aol's Metrics to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Aol's Metrics 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 Aol's Metrics 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.
Diverse revenue streams
– Aol's Metrics is present in almost all the verticals within the industry. This has provided firm in America Online, Inc.: Disclosure Strategy 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Aol's Metrics digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aol's Metrics 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.
Organizational Resilience of Aol's Metrics
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Aol's Metrics does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Finance & Accounting field
– Aol's Metrics 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 Aol's Metrics in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the America Online, Inc.: Disclosure Strategy 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.
Weaknesses America Online, Inc.: Disclosure Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of America Online, Inc.: Disclosure Strategy are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Aol's Metrics is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study America Online, Inc.: Disclosure Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the America Online, Inc.: Disclosure Strategy 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 Aol's Metrics has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Aol's Metrics needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High 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 Aol's Metrics supply chain. Even after few cautionary changes mentioned in the HBR case study - America Online, Inc.: Disclosure Strategy, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Aol's Metrics vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Aol's Metrics products
– To increase the profitability and margins on the products, Aol's Metrics needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study America Online, Inc.: Disclosure Strategy, in the dynamic environment Aol's Metrics has struggled to respond to the nimble upstart competition. Aol's Metrics has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study America Online, Inc.: Disclosure Strategy 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 Aol's Metrics 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Aol's Metrics 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.
Capital Spending Reduction
– Even during the low interest decade, Aol's Metrics 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 America Online, Inc.: Disclosure Strategy HBR case study mentions - Aol's Metrics 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 bargaining power of channel partners
– Because of the regulatory requirements, Amy P. Hutton, David Lane suggests that, Aol's Metrics 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.
Opportunities America Online, Inc.: Disclosure Strategy | 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 America Online, Inc.: Disclosure Strategy are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Aol's Metrics 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, Aol's Metrics can use these opportunities to build new business models that can help the communities that Aol's Metrics operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Building a culture of innovation
– managers at Aol's Metrics 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.
Learning at scale
– Online learning technologies has now opened space for Aol's Metrics 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.
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. Aol's Metrics 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. Aol's Metrics 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.
Loyalty marketing
– Aol's Metrics 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.
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 Aol's Metrics in the consumer business. Now Aol's Metrics can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aol's Metrics can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aol's Metrics can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Better consumer reach
– The expansion of the 5G network will help Aol's Metrics to increase its market reach. Aol's Metrics 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aol's Metrics is facing challenges because of the dominance of functional experts in the organization. America Online, Inc.: Disclosure Strategy 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.
Using analytics as competitive advantage
– Aol's Metrics 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 America Online, Inc.: Disclosure Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Aol's Metrics to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aol's Metrics 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, America Online, Inc.: Disclosure Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats America Online, Inc.: Disclosure Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study America Online, Inc.: Disclosure Strategy are -
Environmental challenges
– Aol's Metrics 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. Aol's Metrics can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Aol's Metrics in the Finance & Accounting sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Aol's Metrics with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aol's Metrics 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.
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. Aol's Metrics 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.
Increasing wage structure of Aol's Metrics
– 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 Aol's Metrics.
Consumer confidence and its impact on Aol's Metrics 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.
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 Aol's Metrics business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Aol's Metrics 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.
Shortening product life cycle
– it is one of the major threat that Aol's Metrics is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Aol's Metrics has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Aol's Metrics 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. Aol's Metrics needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 Aol's Metrics.
Weighted SWOT Analysis of America Online, Inc.: Disclosure Strategy 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 America Online, Inc.: Disclosure Strategy 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 America Online, Inc.: Disclosure Strategy 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 America Online, Inc.: Disclosure Strategy 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 America Online, Inc.: Disclosure Strategy 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 Aol's Metrics needs to make to build a sustainable competitive advantage.