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 - – supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, cloud computing is disrupting traditional business models, technology disruption,
banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, 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 -
High switching costs
– The high switching costs that Aggregate Ad 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.
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.
Low bargaining power of suppliers
– Suppliers of Aggregate Ad in the sector have low bargaining power. The AS/AD Model has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aggregate Ad to manage not only supply disruptions but also source products at highly competitive prices.
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.
Innovation driven organization
– Aggregate Ad is one of the most innovative firm in sector. Manager in The AS/AD Model Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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.
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.
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.
Operational resilience
– The operational resilience strategy in the The AS/AD Model 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.
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.
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 -
Capital Spending Reduction
– Even during the low interest decade, Aggregate Ad 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Aggregate Ad is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study The AS/AD Model can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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.
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.
Interest costs
– Compare to the competition, Aggregate Ad 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.
Low market penetration in new markets
– Outside its home market of Aggregate Ad, firm in the HBR case study The AS/AD Model 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 Aggregate Ad supply chain. Even after few cautionary changes mentioned in the HBR case study - The AS/AD Model, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Aggregate Ad vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Aggregate Ad has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The AS/AD Model, is just above the industry average. Aggregate Ad 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.
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.
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 -
Low interest rates
– Even though inflation is raising its head in most developed economies, Aggregate Ad 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.
Developing new processes and practices
– Aggregate Ad can develop new processes and procedures in Global Business 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.
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. Aggregate Ad 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. Aggregate Ad 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.
Learning at scale
– Online learning technologies has now opened space for Aggregate Ad 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aggregate Ad can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Aggregate Ad to increase its market reach. Aggregate Ad 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.
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.
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.
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.
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.
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.
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.
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.
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.
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 Aggregate Ad business can come under increasing regulations regarding data privacy, data security, 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.
Consumer confidence and its impact on Aggregate Ad 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.
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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aggregate Ad 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 The AS/AD Model .
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.
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.