Transfer Pricing for Aligning Divisional and Corporate Decisions SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Transfer Pricing for Aligning Divisional and Corporate Decisions
Discussions about transfer pricing normally presume the firm's objective is to maximize profit while making the best use of existing capacity. This article differs by exploring the impact of transfer pricing on capital budget decisions. In decentralized firms, decision authority for investment is assigned to division managers whose capital budgets include revenues from internal transfers. When a selling division is under capacity, economic theory recommends a transfer price based on differential cost. Here the seller generates sufficient revenues to recoup operating costs, but not enough to recover capital costs. Consequently, division managers will reject some investments that otherwise would have increased corporate shareholder value. Market-based transfer pricing overcomes this conflict by allocating savings on inter-company transactions to the selling division. However, market transfer pricing may result in shortfalls to corporate profit. Nonetheless, we argue in favor of the use of transfer pricing on the presumption that long-term value creation takes precedence over short-term profit.
Swot Analysis of "Transfer Pricing for Aligning Divisional and Corporate Decisions" written by Laurel Adams, Ralph Drtina includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Transfer Pricing facing as an external strategic factors. Some of the topics covered in Transfer Pricing for Aligning Divisional and Corporate Decisions case study are - Strategic Management Strategies, Manufacturing, Organizational structure, Pricing and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Transfer Pricing for Aligning Divisional and Corporate Decisions casestudy better are - – increasing energy prices, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic ,
talent flight as more people leaving formal jobs, geopolitical disruptions, etc
Introduction to SWOT Analysis of Transfer Pricing for Aligning Divisional and Corporate Decisions
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Transfer Pricing for Aligning Divisional and Corporate Decisions case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Transfer Pricing, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Transfer Pricing 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 Transfer Pricing for Aligning Divisional and Corporate Decisions can be done for the following purposes –
1. Strategic planning using facts provided in Transfer Pricing for Aligning Divisional and Corporate Decisions case study
2. Improving business portfolio management of Transfer Pricing
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 Transfer Pricing
Strengths Transfer Pricing for Aligning Divisional and Corporate Decisions | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Transfer Pricing in Transfer Pricing for Aligning Divisional and Corporate Decisions Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Transfer Pricing for Aligning Divisional and Corporate Decisions 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.
Effective Research and Development (R&D)
– Transfer Pricing 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 Transfer Pricing for Aligning Divisional and Corporate Decisions - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Transfer Pricing 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 Transfer Pricing is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Transfer Pricing for Aligning Divisional and Corporate Decisions Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Transfer Pricing 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 Laurel Adams, Ralph Drtina 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.
High brand equity
– Transfer Pricing has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Transfer Pricing to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Transfer Pricing 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.
Diverse revenue streams
– Transfer Pricing is present in almost all the verticals within the industry. This has provided firm in Transfer Pricing for Aligning Divisional and Corporate Decisions 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.
Ability to lead change in Finance & Accounting field
– Transfer Pricing 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 Transfer Pricing in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Transfer Pricing is one of the most innovative firm in sector. Manager in Transfer Pricing for Aligning Divisional and Corporate Decisions Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Finance & Accounting industry
– Transfer Pricing for Aligning Divisional and Corporate Decisions firm has clearly differentiated products in the market place. This has enabled Transfer Pricing to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Transfer Pricing to invest into research and development (R&D) and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Transfer Pricing digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Transfer Pricing 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.
Low bargaining power of suppliers
– Suppliers of Transfer Pricing in the sector have low bargaining power. Transfer Pricing for Aligning Divisional and Corporate Decisions has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Transfer Pricing to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Transfer Pricing for Aligning Divisional and Corporate Decisions | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Transfer Pricing for Aligning Divisional and Corporate Decisions are -
No frontier risks strategy
– After analyzing the HBR case study Transfer Pricing for Aligning Divisional and Corporate Decisions, 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.
Increasing silos among functional specialists
– The organizational structure of Transfer Pricing is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Transfer Pricing needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Transfer Pricing to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Transfer Pricing for Aligning Divisional and Corporate Decisions 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 Transfer Pricing 's lucrative customers.
High cash cycle compare to competitors
Transfer Pricing 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.
Need for greater diversity
– Transfer Pricing 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.
Slow to strategic competitive environment developments
– As Transfer Pricing for Aligning Divisional and Corporate Decisions HBR case study mentions - Transfer Pricing 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.
Lack of clear differentiation of Transfer Pricing products
– To increase the profitability and margins on the products, Transfer Pricing needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Transfer Pricing for Aligning Divisional and Corporate Decisions, in the dynamic environment Transfer Pricing has struggled to respond to the nimble upstart competition. Transfer Pricing has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Transfer Pricing needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Transfer Pricing supply chain. Even after few cautionary changes mentioned in the HBR case study - Transfer Pricing for Aligning Divisional and Corporate Decisions, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Transfer Pricing vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Transfer Pricing for Aligning Divisional and Corporate Decisions, it seems that the employees of Transfer Pricing 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.
Opportunities Transfer Pricing for Aligning Divisional and Corporate Decisions | 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 Transfer Pricing for Aligning Divisional and Corporate Decisions are -
Learning at scale
– Online learning technologies has now opened space for Transfer Pricing 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.
Better consumer reach
– The expansion of the 5G network will help Transfer Pricing to increase its market reach. Transfer Pricing 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. Transfer Pricing can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Transfer Pricing can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Transfer Pricing for Aligning Divisional and Corporate Decisions 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, Transfer Pricing 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, Transfer Pricing for Aligning Divisional and Corporate Decisions, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Transfer Pricing 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Transfer Pricing can use these opportunities to build new business models that can help the communities that Transfer Pricing operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Transfer Pricing can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Transfer Pricing has opened avenues for new revenue streams for the organization in the industry. This can help Transfer Pricing to build a more holistic ecosystem as suggested in the Transfer Pricing for Aligning Divisional and Corporate Decisions case study. Transfer Pricing can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Transfer Pricing 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.
Loyalty marketing
– Transfer Pricing 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 Transfer Pricing 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.
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. Transfer Pricing 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. Transfer Pricing 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.
Threats Transfer Pricing for Aligning Divisional and Corporate Decisions External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Transfer Pricing for Aligning Divisional and Corporate Decisions are -
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 Transfer Pricing.
Consumer confidence and its impact on Transfer Pricing 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Transfer Pricing with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Transfer Pricing can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Shortening product life cycle
– it is one of the major threat that Transfer Pricing 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. Transfer Pricing 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
– Transfer Pricing 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Transfer Pricing for Aligning Divisional and Corporate Decisions, Transfer Pricing 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 .
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. Transfer Pricing 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Transfer Pricing 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.
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.
Environmental challenges
– Transfer Pricing 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. Transfer Pricing can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Transfer Pricing 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 Transfer Pricing for Aligning Divisional and Corporate Decisions .
Weighted SWOT Analysis of Transfer Pricing for Aligning Divisional and Corporate Decisions 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 Transfer Pricing for Aligning Divisional and Corporate Decisions 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 Transfer Pricing for Aligning Divisional and Corporate Decisions 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 Transfer Pricing for Aligning Divisional and Corporate Decisions 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 Transfer Pricing for Aligning Divisional and Corporate Decisions 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 Transfer Pricing needs to make to build a sustainable competitive advantage.