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 Withdrawn 08/15/02.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 - – increasing commodity prices, central banks are concerned over increasing inflation, geopolitical disruptions, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, there is backlash against globalization,
challanges to central banks by blockchain based private currencies, 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 -
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.
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.
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.
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.
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.
Innovation driven organization
– Aol's Metrics is one of the most innovative firm in sector. Manager in America Online, Inc.: Disclosure Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Aol's Metrics in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
High switching costs
– The high switching costs that Aol's Metrics 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
– Aol's Metrics has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Aol's Metrics 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.
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.
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 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.
No frontier risks strategy
– After analyzing the HBR case study America Online, Inc.: Disclosure Strategy, 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.
Aligning sales with marketing
– It come across in the case study America Online, Inc.: Disclosure Strategy 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 America Online, Inc.: Disclosure Strategy can leverage the sales team experience to cultivate customer relationships as Aol's Metrics is planning to shift buying processes online.
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.
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.
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.
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 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.
Products dominated business model
– Even though Aol's Metrics 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 - America Online, Inc.: Disclosure Strategy should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study America Online, Inc.: Disclosure Strategy, is just above the industry average. Aol's Metrics 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.
Slow decision making process
– As mentioned earlier in the report, Aol's Metrics 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. Aol's Metrics 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.
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 -
Buying journey improvements
– Aol's Metrics can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. America Online, Inc.: Disclosure Strategy 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.
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.
Leveraging digital technologies
– Aol's Metrics 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.
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.
Manufacturing automation
– Aol's Metrics 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Aol's Metrics can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Aol's Metrics 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 Aol's Metrics to hire the very best people irrespective of their geographical location.
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.
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.
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.
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.
Creating value in data economy
– The success of analytics program of Aol's Metrics has opened avenues for new revenue streams for the organization in the industry. This can help Aol's Metrics to build a more holistic ecosystem as suggested in the America Online, Inc.: Disclosure Strategy case study. Aol's Metrics can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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 -
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. Aol's Metrics 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
– 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.
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.
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.
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.
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.
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.
High dependence on third party suppliers
– Aol's Metrics 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.
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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aol's Metrics 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 America Online, Inc.: Disclosure Strategy .
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.