Case Study Description of Variance Analysis and Flexible Budgeting
Facilitates the teaching of cases on variance analysis and flexible budgeting. Uses algebra, diagrams, and numerical examples to illustrate the calculation of price, quantity, and mix variances for revenues and costs, and a flexible budget for analyzing indirect and support costs.
Swot Analysis of "Variance Analysis and Flexible Budgeting" written by Robert S. Kaplan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Flexible Variance facing as an external strategic factors. Some of the topics covered in Variance Analysis and Flexible Budgeting case study are - Strategic Management Strategies, Budgeting, Costs, Financial analysis, Pricing and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Variance Analysis and Flexible Budgeting casestudy better are - – increasing transportation and logistics costs, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, increasing government debt because of Covid-19 spendings,
increasing energy prices, increasing commodity prices, etc
Introduction to SWOT Analysis of Variance Analysis and Flexible Budgeting
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Variance Analysis and Flexible Budgeting case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Flexible Variance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Flexible Variance 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 Variance Analysis and Flexible Budgeting can be done for the following purposes –
1. Strategic planning using facts provided in Variance Analysis and Flexible Budgeting case study
2. Improving business portfolio management of Flexible Variance
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 Flexible Variance
Strengths Variance Analysis and Flexible Budgeting | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Flexible Variance in Variance Analysis and Flexible Budgeting Harvard Business Review case study are -
Learning organization
- Flexible Variance is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Flexible Variance is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Variance Analysis and Flexible Budgeting Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Flexible Variance
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Flexible Variance does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Flexible Variance has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Variance Analysis and Flexible Budgeting 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.
Superior customer experience
– The customer experience strategy of Flexible Variance in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Flexible Variance has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Flexible Variance to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Flexible Variance is present in almost all the verticals within the industry. This has provided firm in Variance Analysis and Flexible Budgeting 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.
Low bargaining power of suppliers
– Suppliers of Flexible Variance in the sector have low bargaining power. Variance Analysis and Flexible Budgeting has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Flexible Variance to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Finance & Accounting industry
– Variance Analysis and Flexible Budgeting firm has clearly differentiated products in the market place. This has enabled Flexible Variance to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Flexible Variance to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Flexible Variance 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.
Ability to lead change in Finance & Accounting field
– Flexible Variance 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 Flexible Variance in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Flexible Variance has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Variance Analysis and Flexible Budgeting HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Flexible Variance is one of the most innovative firm in sector. Manager in Variance Analysis and Flexible Budgeting Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Variance Analysis and Flexible Budgeting | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Variance Analysis and Flexible Budgeting are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Variance Analysis and Flexible Budgeting, it seems that the employees of Flexible Variance don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High operating costs
– Compare to the competitors, firm in the HBR case study Variance Analysis and Flexible Budgeting 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 Flexible Variance 's lucrative customers.
Slow to strategic competitive environment developments
– As Variance Analysis and Flexible Budgeting HBR case study mentions - Flexible Variance 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.
Increasing silos among functional specialists
– The organizational structure of Flexible Variance is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Flexible Variance needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Flexible Variance to focus more on services rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Flexible Variance 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.
Need for greater diversity
– Flexible Variance has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Aligning sales with marketing
– It come across in the case study Variance Analysis and Flexible Budgeting 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 Variance Analysis and Flexible Budgeting can leverage the sales team experience to cultivate customer relationships as Flexible Variance is planning to shift buying processes online.
High bargaining power of channel partners
– Because of the regulatory requirements, Robert S. Kaplan suggests that, Flexible Variance 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.
No frontier risks strategy
– After analyzing the HBR case study Variance Analysis and Flexible Budgeting, 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Variance Analysis and Flexible Budgeting, in the dynamic environment Flexible Variance has struggled to respond to the nimble upstart competition. Flexible Variance has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Flexible Variance is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Variance Analysis and Flexible Budgeting can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Variance Analysis and Flexible Budgeting | 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 Variance Analysis and Flexible Budgeting are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Flexible Variance 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 Flexible Variance to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Flexible Variance 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, Variance Analysis and Flexible Budgeting, 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. Flexible Variance can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Flexible Variance is facing challenges because of the dominance of functional experts in the organization. Variance Analysis and Flexible Budgeting 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Flexible Variance 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 Flexible Variance 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.
Manufacturing automation
– Flexible Variance 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.
Building a culture of innovation
– managers at Flexible Variance 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.
Buying journey improvements
– Flexible Variance can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Variance Analysis and Flexible Budgeting 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.
Leveraging digital technologies
– Flexible Variance 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.
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 Flexible Variance in the consumer business. Now Flexible Variance can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Flexible Variance 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. Flexible Variance 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Flexible Variance can use these opportunities to build new business models that can help the communities that Flexible Variance operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Threats Variance Analysis and Flexible Budgeting External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Variance Analysis and Flexible Budgeting are -
Regulatory challenges
– Flexible Variance needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
High dependence on third party suppliers
– Flexible Variance 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.
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 Flexible Variance in the Finance & Accounting sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Flexible Variance is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Flexible Variance 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 Variance Analysis and Flexible Budgeting .
Technology acceleration in Forth Industrial Revolution
– Flexible Variance has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Flexible Variance 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.
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 Flexible Variance.
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. Flexible Variance needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.
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. Flexible Variance 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Variance Analysis and Flexible Budgeting, Flexible Variance 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 .
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. Flexible Variance can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Variance Analysis and Flexible Budgeting 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 Variance Analysis and Flexible Budgeting 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 Variance Analysis and Flexible Budgeting 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 Variance Analysis and Flexible Budgeting 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 Variance Analysis and Flexible Budgeting 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 Flexible Variance needs to make to build a sustainable competitive advantage.