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 Withdrawn 08/15/02.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 - – digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, geopolitical disruptions, wage bills are increasing, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, increasing energy prices,
cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
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 recruit top talent
– Aol's Metrics is one of the leading recruiters in the industry. Managers in the America Online, Inc.: Disclosure Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
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.
Training and development
– Aol's Metrics has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in America Online, Inc.: Disclosure Strategy 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.
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.
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.
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 -
Increasing silos among functional specialists
– The organizational structure of Aol's Metrics is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Aol's Metrics needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aol's Metrics to focus more on services rather than just following the product 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 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.
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.
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 cash cycle compare to competitors
Aol's Metrics 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.
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.
Interest costs
– Compare to the competition, Aol's Metrics 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, 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.
Low market penetration in new markets
– Outside its home market of Aol's Metrics, firm in the HBR case study America Online, Inc.: Disclosure Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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 -
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.
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.
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. Aol's Metrics can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
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.
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 Aol's Metrics 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.
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.
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.
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.
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.
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.
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 -
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 .
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.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study America Online, Inc.: Disclosure Strategy, Aol's Metrics 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 .
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.
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.
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.
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.
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.
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.
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.
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.