Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc.
Korea Auto Insurance Co. Inc. (Korea Auto Insurance) incurred both direct and indirect costs. Direct costs were incurred at branches as they performed sales and operating activities, while indirect costs were incurred at headquarters as it supported branches through the activities of the information technology, operating support, investment, marketing and general administrative teams. Indirect costs accounted for a significant part (41 per cent) of the total costs incurred. However, they could be neither directly traceable nor logically related to specific sales activities. Korea Auto Insurance currently allocated indirect costs incurred by headquarters to branches based on sales revenue. Using the amount of sales revenue as an allocation base for overhead was not regarded as a reasonable method by the Taejon City branch manager. Branch managers had complained that the current allocation base was not related to the level of actual benefits they received from the headquarters. They argued that the allocation process distorted the operating performances of branches as reflected in the books. The manager of the Taejon branch suggested that the ABC (activity-based cost) method be applied to solve the problems related to the current overhead allocation process.
Authors :: Sangil Kim, Ho-Young Lee, Won-Wook Choi
Swot Analysis of "Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc." written by Sangil Kim, Ho-Young Lee, Won-Wook Choi includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Incurred Indirect facing as an external strategic factors. Some of the topics covered in Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. case study are - Strategic Management Strategies, Costs, Decision making, International business and Global Business.
Some of the macro environment factors that can be used to understand the Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. casestudy better are - – challanges to central banks by blockchain based private currencies, increasing energy prices, increasing transportation and logistics costs, central banks are concerned over increasing inflation, increasing commodity prices, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%,
supply chains are disrupted by pandemic , technology disruption, etc
Introduction to SWOT Analysis of Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Incurred Indirect, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Incurred Indirect 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 Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. can be done for the following purposes –
1. Strategic planning using facts provided in Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. case study
2. Improving business portfolio management of Incurred Indirect
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 Incurred Indirect
Strengths Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Incurred Indirect in Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. Harvard Business Review case study are -
Training and development
– Incurred Indirect has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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.
Operational resilience
– The operational resilience strategy in the Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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.
High switching costs
– The high switching costs that Incurred Indirect 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.
Organizational Resilience of Incurred Indirect
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Incurred Indirect does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Incurred Indirect has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Incurred Indirect to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Incurred Indirect 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.
Ability to recruit top talent
– Incurred Indirect is one of the leading recruiters in the industry. Managers in the Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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
– Incurred Indirect 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 Sangil Kim, Ho-Young Lee, Won-Wook Choi 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.
Superior customer experience
– The customer experience strategy of Incurred Indirect in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Global Business industry
– Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. firm has clearly differentiated products in the market place. This has enabled Incurred Indirect to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Incurred Indirect to invest into research and development (R&D) and innovation.
Innovation driven organization
– Incurred Indirect is one of the most innovative firm in sector. Manager in Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Incurred Indirect in the sector have low bargaining power. Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Incurred Indirect to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. are -
High cash cycle compare to competitors
Incurred Indirect 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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 Incurred Indirect has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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 Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. can leverage the sales team experience to cultivate customer relationships as Incurred Indirect is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Incurred Indirect, firm in the HBR case study Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the segment, Incurred Indirect 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc., in the dynamic environment Incurred Indirect has struggled to respond to the nimble upstart competition. Incurred Indirect has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Incurred Indirect 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 strategic competitive environment developments
– As Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. HBR case study mentions - Incurred Indirect 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.
Skills based hiring
– The stress on hiring functional specialists at Incurred Indirect 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.
Products dominated business model
– Even though Incurred Indirect has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. should strive to include more intangible value offerings along with its core products and services.
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 Incurred Indirect supply chain. Even after few cautionary changes mentioned in the HBR case study - Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Incurred Indirect vulnerable to further global disruptions in South East Asia.
Opportunities Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. | 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 Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. are -
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. Incurred Indirect can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Incurred Indirect 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Incurred Indirect 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, Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Incurred Indirect to increase its market reach. Incurred Indirect 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Incurred Indirect is facing challenges because of the dominance of functional experts in the organization. Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Incurred Indirect in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Loyalty marketing
– Incurred Indirect 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
– Incurred Indirect 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.
Manufacturing automation
– Incurred Indirect 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 Incurred Indirect has opened avenues for new revenue streams for the organization in the industry. This can help Incurred Indirect to build a more holistic ecosystem as suggested in the Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. case study. Incurred Indirect can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Incurred Indirect 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.
Buying journey improvements
– Incurred Indirect can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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.
Developing new processes and practices
– Incurred Indirect 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.
Threats Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Incurred Indirect.
Consumer confidence and its impact on Incurred Indirect 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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Incurred Indirect needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Incurred Indirect 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.
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 Incurred Indirect business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Incurred Indirect
– 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 Incurred Indirect.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Incurred Indirect with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Incurred Indirect 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.
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. Incurred Indirect can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Incurred Indirect is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Technology acceleration in Forth Industrial Revolution
– Incurred Indirect has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Incurred Indirect 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.
Weighted SWOT Analysis of Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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 Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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 Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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 Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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 Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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 Incurred Indirect needs to make to build a sustainable competitive advantage.