AOL Time Warner (A): Accounting for Goodwill SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of AOL Time Warner (A): Accounting for Goodwill
Reviews the impact of SFAS 142--Goodwill and Other Intangible Assets--in the context of the AOL Time Warner merger. Under SFAS 142, companies were required to perform periodic testing to determine whether economic goodwill had been impaired. Includes a detailed account of the AOL Time Warner merger from its announcement in 2000 through its completion in 2001. Students are asked to assess what the likely impact is of SFAS 142 on the combined AOL Time Warner balance sheet.
Swot Analysis of "AOL Time Warner (A): Accounting for Goodwill" written by Ron Kasznik, Brian Tayan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aol 142 facing as an external strategic factors. Some of the topics covered in AOL Time Warner (A): Accounting for Goodwill case study are - Strategic Management Strategies, Budgeting, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the AOL Time Warner (A): Accounting for Goodwill casestudy better are - – digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies,
cloud computing is disrupting traditional business models, technology disruption, etc
Introduction to SWOT Analysis of AOL Time Warner (A): Accounting for Goodwill
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in AOL Time Warner (A): Accounting for Goodwill case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aol 142, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aol 142 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 AOL Time Warner (A): Accounting for Goodwill can be done for the following purposes –
1. Strategic planning using facts provided in AOL Time Warner (A): Accounting for Goodwill case study
2. Improving business portfolio management of Aol 142
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 142
Strengths AOL Time Warner (A): Accounting for Goodwill | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aol 142 in AOL Time Warner (A): Accounting for Goodwill Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the AOL Time Warner (A): Accounting for Goodwill 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.
Analytics focus
– Aol 142 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 Ron Kasznik, Brian Tayan 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.
Cross disciplinary teams
– Horizontal connected teams at the Aol 142 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.
Training and development
– Aol 142 has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in AOL Time Warner (A): Accounting for Goodwill 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Aol 142 digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aol 142 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.
High brand equity
– Aol 142 has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aol 142 to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Aol 142
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Aol 142 does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Aol 142 is one of the most innovative firm in sector. Manager in AOL Time Warner (A): Accounting for Goodwill Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Aol 142 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 Aol 142 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in AOL Time Warner (A): Accounting for Goodwill Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Aol 142 is one of the leading recruiters in the industry. Managers in the AOL Time Warner (A): Accounting for Goodwill are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Finance & Accounting industry
– AOL Time Warner (A): Accounting for Goodwill firm has clearly differentiated products in the market place. This has enabled Aol 142 to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Aol 142 to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Aol 142 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 AOL Time Warner (A): Accounting for Goodwill HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses AOL Time Warner (A): Accounting for Goodwill | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AOL Time Warner (A): Accounting for Goodwill are -
Capital Spending Reduction
– Even during the low interest decade, Aol 142 has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study AOL Time Warner (A): Accounting for Goodwill, in the dynamic environment Aol 142 has struggled to respond to the nimble upstart competition. Aol 142 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, Aol 142 is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study AOL Time Warner (A): Accounting for Goodwill can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Aol 142 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 142 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study AOL Time Warner (A): Accounting for Goodwill, is just above the industry average. Aol 142 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Aol 142 needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High bargaining power of channel partners
– Because of the regulatory requirements, Ron Kasznik, Brian Tayan suggests that, Aol 142 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 AOL Time Warner (A): Accounting for Goodwill, 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.
Low market penetration in new markets
– Outside its home market of Aol 142, firm in the HBR case study AOL Time Warner (A): Accounting for Goodwill needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the AOL Time Warner (A): Accounting for Goodwill 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 Aol 142 has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As AOL Time Warner (A): Accounting for Goodwill HBR case study mentions - Aol 142 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.
Opportunities AOL Time Warner (A): Accounting for Goodwill | 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 AOL Time Warner (A): Accounting for Goodwill are -
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 142 can use these opportunities to build new business models that can help the communities that Aol 142 operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Leveraging digital technologies
– Aol 142 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Aol 142 to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Aol 142 to hire the very best people irrespective of their geographical location.
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 142 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
– Aol 142 can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. AOL Time Warner (A): Accounting for Goodwill 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.
Learning at scale
– Online learning technologies has now opened space for Aol 142 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.
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 142 in the consumer business. Now Aol 142 can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Aol 142 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.
Building a culture of innovation
– managers at Aol 142 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.
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. Aol 142 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. Aol 142 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.
Developing new processes and practices
– Aol 142 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.
Creating value in data economy
– The success of analytics program of Aol 142 has opened avenues for new revenue streams for the organization in the industry. This can help Aol 142 to build a more holistic ecosystem as suggested in the AOL Time Warner (A): Accounting for Goodwill case study. Aol 142 can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aol 142 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.
Threats AOL Time Warner (A): Accounting for Goodwill External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study AOL Time Warner (A): Accounting for Goodwill are -
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.
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 Aol 142 business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Aol 142 with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Aol 142 in the Finance & Accounting sector and impact the bottomline of the organization.
Environmental challenges
– Aol 142 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 142 can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 142 can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Aol 142
– 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 142.
Stagnating economy with rate increase
– Aol 142 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.
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 142 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study AOL Time Warner (A): Accounting for Goodwill, Aol 142 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 .
High dependence on third party suppliers
– Aol 142 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.
Consumer confidence and its impact on Aol 142 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, Aol 142 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 AOL Time Warner (A): Accounting for Goodwill .
Weighted SWOT Analysis of AOL Time Warner (A): Accounting for Goodwill 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 AOL Time Warner (A): Accounting for Goodwill 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 AOL Time Warner (A): Accounting for Goodwill 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 AOL Time Warner (A): Accounting for Goodwill 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 AOL Time Warner (A): Accounting for Goodwill 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 142 needs to make to build a sustainable competitive advantage.