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 - – increasing transportation and logistics costs, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, there is backlash against globalization, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels,
customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, 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 -
Diverse revenue streams
– Incurred Indirect is present in almost all the verticals within the industry. This has provided firm in Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. 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.
Learning organization
- Incurred Indirect 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 Incurred Indirect is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Incurred Indirect 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 Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Incurred Indirect 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 Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Incurred Indirect digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Incurred Indirect 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.
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.
Strong track record of project management
– Incurred Indirect is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Successful track record of launching new products
– Incurred Indirect has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Incurred Indirect 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.
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.
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.
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 -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Incurred Indirect is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc., is just above the industry average. Incurred Indirect 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.
Need for greater diversity
– Incurred Indirect 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.
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.
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.
Interest costs
– Compare to the competition, Incurred Indirect 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.
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.
Increasing silos among functional specialists
– The organizational structure of Incurred Indirect is dominated by functional specialists. It is not different from other players in the Global Business segment. Incurred Indirect needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Incurred Indirect to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Incurred Indirect has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Incurred Indirect even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
No frontier risks strategy
– After analyzing the HBR case study Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc., 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.
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.
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 -
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.
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.
Using analytics as competitive advantage
– Incurred Indirect 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 Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Incurred Indirect to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Incurred Indirect 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.
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.
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. Incurred Indirect can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Incurred Indirect in the consumer business. Now Incurred Indirect can target international markets with far fewer capital restrictions requirements than the existing system.
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 Incurred Indirect 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Incurred Indirect 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 Incurred Indirect to hire the very best people irrespective of their geographical location.
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.
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 -
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Incurred Indirect 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 Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc. .
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.
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.
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.
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.
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 Incurred Indirect in the Global Business sector and impact the bottomline of the organization.
Regulatory challenges
– Incurred Indirect 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co. Inc., Incurred Indirect may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Environmental challenges
– Incurred Indirect 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. Incurred Indirect can take advantage of this fund but it will also bring new competitors in the Global Business industry.
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.
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.
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.
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.
