The AS/AD Model SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of The AS/AD Model
The Aggregate Supply-Aggregate Demand model (AS/AD for short) is designed for analyzing the short-run behavior of a closed economy. The main feature of such an economy is the following cycle: output Y oscillates around its potential or full-employment level Y*. If Y>Y*, higher inflation is the result; if Y
Product #: IES400-HCB-ENG
Pages: 12
Related Topics:
Economy
Marketing
Policy
Swot Analysis of "The AS/AD Model" written by Alfredo Pastor Bodmer includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aggregate Ad facing as an external strategic factors. Some of the topics covered in The AS/AD Model case study are - Strategic Management Strategies, Economy, Marketing, Policy and Global Business.
Some of the macro environment factors that can be used to understand the The AS/AD Model casestudy better are - – increasing transportation and logistics costs, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , wage bills are increasing, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, technology disruption,
digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The AS/AD Model case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aggregate Ad, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aggregate Ad 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 The AS/AD Model can be done for the following purposes –
1. Strategic planning using facts provided in The AS/AD Model case study
2. Improving business portfolio management of Aggregate Ad
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 Aggregate Ad
Strengths The AS/AD Model | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aggregate Ad in The AS/AD Model Harvard Business Review case study are -
Ability to recruit top talent
– Aggregate Ad is one of the leading recruiters in the industry. Managers in the The AS/AD Model are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Aggregate Ad 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 Alfredo Pastor Bodmer 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.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Aggregate Ad digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aggregate Ad 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.
Highly skilled collaborators
– Aggregate Ad 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 The AS/AD Model HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Aggregate Ad is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Aggregate Ad 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 Aggregate Ad is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The AS/AD Model Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Aggregate Ad has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Aggregate Ad has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Cross disciplinary teams
– Horizontal connected teams at the Aggregate Ad 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
– Aggregate Ad has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The AS/AD Model 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.
Ability to lead change in Global Business field
– Aggregate Ad 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 Aggregate Ad in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Aggregate Ad in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Aggregate Ad
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Aggregate Ad does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses The AS/AD Model | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The AS/AD Model are -
High operating costs
– Compare to the competitors, firm in the HBR case study The AS/AD Model 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 Aggregate Ad 's lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study The AS/AD Model, in the dynamic environment Aggregate Ad has struggled to respond to the nimble upstart competition. Aggregate Ad has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the The AS/AD Model 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 Aggregate Ad has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As The AS/AD Model HBR case study mentions - Aggregate Ad 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Alfredo Pastor Bodmer suggests that, Aggregate Ad 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.
Increasing silos among functional specialists
– The organizational structure of Aggregate Ad is dominated by functional specialists. It is not different from other players in the Global Business segment. Aggregate Ad needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aggregate Ad to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Aggregate Ad 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.
No frontier risks strategy
– After analyzing the HBR case study The AS/AD Model, 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.
Aligning sales with marketing
– It come across in the case study The AS/AD Model 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 The AS/AD Model can leverage the sales team experience to cultivate customer relationships as Aggregate Ad is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study The AS/AD Model, it seems that the employees of Aggregate Ad 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 cash cycle compare to competitors
Aggregate Ad 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.
Opportunities The AS/AD Model | 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 The AS/AD Model are -
Using analytics as competitive advantage
– Aggregate Ad 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 The AS/AD Model - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Aggregate Ad to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Aggregate Ad 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 Global Business segment.
Buying journey improvements
– Aggregate Ad can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The AS/AD Model 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Aggregate Ad can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Aggregate Ad 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.
Creating value in data economy
– The success of analytics program of Aggregate Ad has opened avenues for new revenue streams for the organization in the industry. This can help Aggregate Ad to build a more holistic ecosystem as suggested in the The AS/AD Model case study. Aggregate Ad can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Aggregate Ad can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Aggregate Ad 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.
Leveraging digital technologies
– Aggregate Ad 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 Aggregate Ad in the consumer business. Now Aggregate Ad can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Aggregate Ad 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 Aggregate Ad 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 Aggregate Ad 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, Aggregate Ad can use these opportunities to build new business models that can help the communities that Aggregate Ad operates in. Secondly it can use opportunities from government spending in Global Business sector.
Threats The AS/AD Model External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The AS/AD Model are -
Shortening product life cycle
– it is one of the major threat that Aggregate Ad is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Aggregate Ad in the Global Business sector and impact the bottomline of the organization.
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. Aggregate Ad 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.
Stagnating economy with rate increase
– Aggregate Ad 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 Aggregate Ad with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aggregate Ad 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.
High dependence on third party suppliers
– Aggregate Ad 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.
Increasing wage structure of Aggregate Ad
– 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 Aggregate Ad.
Regulatory challenges
– Aggregate Ad 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.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Aggregate Ad can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Aggregate Ad has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Aggregate Ad needs to keep up with the evolution of technology in the Global Business 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 Aggregate Ad.
Environmental challenges
– Aggregate Ad 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. Aggregate Ad can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Weighted SWOT Analysis of The AS/AD Model 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 The AS/AD Model 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 The AS/AD Model 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 The AS/AD Model 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 The AS/AD Model 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 Aggregate Ad needs to make to build a sustainable competitive advantage.