City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit
Since 2004, City of Somerville Mayor Joseph Curtatone has undertaken a series of fiscal reforms that have allowed the City to improve municipal services during financial hard times. A key reform has been the City's adoption of the budgeting approach called activity-based costing (ABC budgeting). With ABC budgeting, City officials have been able to make budgetary decisions based on detailed information about the expenses and revenues associated with discrete City activities. The transition to ABC budgeting from line-item budgeting that most municipalities use has not been easy, however.As first step, Somerville officials developed an inventory of the main programs of each of Somerville's 18 departments and the costs associated with each program. Calculating costs at the program level required a less detailed analysis than calculating costs at the activity level. They identified the activities associated with each program and established performance objectives for each activity. During the fall of 2004, HKS Prof. Linda Bilmes and her students helped Somerville officials accomplish these steps. Together, this information allowed officials and residents to understand for the first time how the City's expenditure of tax dollars translated directly into the City's delivery of services that constituents valued. Encouraged by the results, the Mayor asked Prof. Bilmes and her students to focus on a municipal activity of particular concern to officials and residents: traffic enforcement. Mayor Curtatone asked whether increasing enforcement of the City's traffic laws might pay for itself through increased citation revenue. The case walks through the steps Bilmes and her students took to determine the answer, including allocating personnel expenditures to the activity of traffic enforcement, allocating non-personnel expenditures to that activity through selection and use of an appropriate cost driver, and calculation of the revenue generated from traffic enforcement.
Swot Analysis of "City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit" written by Linda J. Bilmes includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Budgeting Somerville facing as an external strategic factors. Some of the topics covered in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit case study are - Strategic Management Strategies, Assessing performance, Costs, Government, Leadership and Global Business.
Some of the macro environment factors that can be used to understand the City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit casestudy better are - – there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, wage bills are increasing, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%,
increasing transportation and logistics costs, increasing energy prices, etc
Introduction to SWOT Analysis of City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Budgeting Somerville, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Budgeting Somerville 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit can be done for the following purposes –
1. Strategic planning using facts provided in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit case study
2. Improving business portfolio management of Budgeting Somerville
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Budgeting Somerville
Strengths City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Budgeting Somerville in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit Harvard Business Review case study are -
Diverse revenue streams
– Budgeting Somerville is present in almost all the verticals within the industry. This has provided firm in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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 Budgeting Somerville in the sector have low bargaining power. City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Budgeting Somerville to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Budgeting Somerville is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Global Business industry
– City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit firm has clearly differentiated products in the market place. This has enabled Budgeting Somerville to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Budgeting Somerville to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Budgeting Somerville in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Budgeting Somerville 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.
Learning organization
- Budgeting Somerville 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 Budgeting Somerville is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Budgeting Somerville digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Budgeting Somerville 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.
Ability to recruit top talent
– Budgeting Somerville is one of the leading recruiters in the industry. Managers in the City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Budgeting Somerville 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Budgeting Somerville has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Budgeting Somerville to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Budgeting Somerville 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 Linda J. Bilmes 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.
Weaknesses City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit are -
Aligning sales with marketing
– It come across in the case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit can leverage the sales team experience to cultivate customer relationships as Budgeting Somerville is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Budgeting Somerville is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, firm in the HBR case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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 Budgeting Somerville 's lucrative customers.
Interest costs
– Compare to the competition, Budgeting Somerville 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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 Budgeting Somerville has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Budgeting Somerville, firm in the HBR case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Budgeting Somerville supply chain. Even after few cautionary changes mentioned in the HBR case study - City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Budgeting Somerville vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Budgeting Somerville products
– To increase the profitability and margins on the products, Budgeting Somerville needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit, it seems that the employees of Budgeting Somerville 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 bargaining power of channel partners
– Because of the regulatory requirements, Linda J. Bilmes suggests that, Budgeting Somerville 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit, it seems that company is thinking about the frontier risks that can impact Global Business 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.
Opportunities City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit | 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Budgeting Somerville is facing challenges because of the dominance of functional experts in the organization. City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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.
Learning at scale
– Online learning technologies has now opened space for Budgeting Somerville 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Budgeting Somerville 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. Budgeting Somerville 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.
Manufacturing automation
– Budgeting Somerville can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Budgeting Somerville can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Budgeting Somerville in the consumer business. Now Budgeting Somerville can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Budgeting Somerville 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Budgeting Somerville to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Budgeting Somerville 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, City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Budgeting Somerville 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.
Creating value in data economy
– The success of analytics program of Budgeting Somerville has opened avenues for new revenue streams for the organization in the industry. This can help Budgeting Somerville to build a more holistic ecosystem as suggested in the City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit case study. Budgeting Somerville can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Budgeting Somerville 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 Budgeting Somerville to hire the very best people irrespective of their geographical location.
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 Budgeting Somerville 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Budgeting Somerville can use these opportunities to build new business models that can help the communities that Budgeting Somerville operates in. Secondly it can use opportunities from government spending in Global Business sector.
Threats City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit are -
Consumer confidence and its impact on Budgeting Somerville 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, Budgeting Somerville 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit .
Stagnating economy with rate increase
– Budgeting Somerville 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Budgeting Somerville with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Budgeting Somerville 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 Global Business industry regulations.
Increasing wage structure of Budgeting Somerville
– 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 Budgeting Somerville.
Shortening product life cycle
– it is one of the major threat that Budgeting Somerville is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Budgeting Somerville 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.
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 Budgeting Somerville.
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 Budgeting Somerville business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Budgeting Somerville in the Global Business industry. The Global Business 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.
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 Budgeting Somerville in the Global Business sector and impact the bottomline of the organization.
Weighted SWOT Analysis of City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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 Budgeting Somerville needs to make to build a sustainable competitive advantage.
Feel free to connect with us if you need business research.
You can download Excel Template of Case Study Solution & Analysis of City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit