This case provides a context wherein a variety of financial accounting issues can be discussed, particularly those related to the multi-period dependence of accounting accruals. A less direct but nonetheless important issue relates to earnings management and ends up being a central theme of the case. The case focuses on three basic accounting topics-LIFO inventory reserves, the allowance for doubtful accounts, and depreciation policies and assumptions-that span the range of earnings management considerations. It was written as a capstone case for a 9-minute graduate-level introductory financial accounting course. The appropriate audience would be graduate- or undergraduate-level business students, executives, or those studying or working in financial fields. The case lends itself to team-teaching opportunities within accounting, ethics, finance, and leadership.
Swot Analysis of "Peyton Enterprises" written by Elizabeth Demers, Paul J Simko includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Accounting Accruals facing as an external strategic factors. Some of the topics covered in Peyton Enterprises case study are - Strategic Management Strategies, IPO, Manufacturing, Reorganization and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Peyton Enterprises casestudy better are - – increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion,
there is backlash against globalization, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Peyton Enterprises
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Peyton Enterprises case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Accounting Accruals, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Accounting Accruals 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 Peyton Enterprises can be done for the following purposes –
1. Strategic planning using facts provided in Peyton Enterprises case study
2. Improving business portfolio management of Accounting Accruals
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 Accounting Accruals
Strengths Peyton Enterprises | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Accounting Accruals in Peyton Enterprises Harvard Business Review case study are -
Successful track record of launching new products
– Accounting Accruals has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Accounting Accruals 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.
Innovation driven organization
– Accounting Accruals is one of the most innovative firm in sector. Manager in Peyton Enterprises Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the Peyton Enterprises 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.
Ability to recruit top talent
– Accounting Accruals is one of the leading recruiters in the industry. Managers in the Peyton Enterprises are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Accounting Accruals 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 Elizabeth Demers, Paul J Simko 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
– Accounting Accruals 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 Accounting Accruals in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Accounting Accruals 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.
Cross disciplinary teams
– Horizontal connected teams at the Accounting Accruals 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.
Low bargaining power of suppliers
– Suppliers of Accounting Accruals in the sector have low bargaining power. Peyton Enterprises has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Accounting Accruals to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Accounting Accruals 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 Peyton Enterprises - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Accounting Accruals has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Peyton Enterprises 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
– Accounting Accruals has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Accounting Accruals to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Peyton Enterprises | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Peyton Enterprises are -
Slow decision making process
– As mentioned earlier in the report, Accounting Accruals 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. Accounting Accruals 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.
No frontier risks strategy
– After analyzing the HBR case study Peyton Enterprises, 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.
Products dominated business model
– Even though Accounting Accruals 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 - Peyton Enterprises should strive to include more intangible value offerings along with its core products and services.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Peyton Enterprises 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 Accounting Accruals has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Elizabeth Demers, Paul J Simko suggests that, Accounting Accruals 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.
Aligning sales with marketing
– It come across in the case study Peyton Enterprises 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 Peyton Enterprises can leverage the sales team experience to cultivate customer relationships as Accounting Accruals is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Accounting Accruals, firm in the HBR case study Peyton Enterprises needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Accounting Accruals 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Peyton Enterprises 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 Accounting Accruals '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 Accounting Accruals supply chain. Even after few cautionary changes mentioned in the HBR case study - Peyton Enterprises, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Accounting Accruals vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Peyton Enterprises, is just above the industry average. Accounting Accruals 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 Peyton Enterprises | 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 Peyton Enterprises are -
Developing new processes and practices
– Accounting Accruals 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Accounting Accruals 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 Accounting Accruals to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Accounting Accruals 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.
Creating value in data economy
– The success of analytics program of Accounting Accruals has opened avenues for new revenue streams for the organization in the industry. This can help Accounting Accruals to build a more holistic ecosystem as suggested in the Peyton Enterprises case study. Accounting Accruals can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Accounting Accruals 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.
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. Accounting Accruals 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. Accounting Accruals 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 Accounting Accruals to increase its market reach. Accounting Accruals 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.
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. Accounting Accruals can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Accounting Accruals 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 Peyton Enterprises - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Accounting Accruals to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Accounting Accruals can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Accounting Accruals 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, Accounting Accruals 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.
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 Accounting Accruals 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.
Threats Peyton Enterprises External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Peyton Enterprises are -
Consumer confidence and its impact on Accounting Accruals 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Accounting Accruals 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 Peyton Enterprises .
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 Accounting Accruals in the Finance & Accounting sector and impact the bottomline of the organization.
Environmental challenges
– Accounting Accruals 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. Accounting Accruals can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Accounting Accruals with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Stagnating economy with rate increase
– Accounting Accruals 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
– Accounting Accruals has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Accounting Accruals 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Peyton Enterprises, Accounting Accruals 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 .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Accounting Accruals 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.
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. Accounting Accruals can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Accounting Accruals 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 Accounting Accruals business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Peyton Enterprises 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 Peyton Enterprises 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 Peyton Enterprises 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 Peyton Enterprises 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 Peyton Enterprises 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 Accounting Accruals needs to make to build a sustainable competitive advantage.
