City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit
Since 2004, City of Somerville Mayor Joseph Curtatone has undertaken a series of fiscal reforms that have allowed the City to improve municipal services during financial hard times. A key reform has been the City's adoption of the budgeting approach called activity-based costing (ABC budgeting). With ABC budgeting, City officials have been able to make budgetary decisions based on detailed information about the expenses and revenues associated with discrete City activities. The transition to ABC budgeting from line-item budgeting that most municipalities use has not been easy, however.As first step, Somerville officials developed an inventory of the main programs of each of Somerville's 18 departments and the costs associated with each program. Calculating costs at the program level required a less detailed analysis than calculating costs at the activity level. They identified the activities associated with each program and established performance objectives for each activity. During the fall of 2004, HKS Prof. Linda Bilmes and her students helped Somerville officials accomplish these steps. Together, this information allowed officials and residents to understand for the first time how the City's expenditure of tax dollars translated directly into the City's delivery of services that constituents valued. Encouraged by the results, the Mayor asked Prof. Bilmes and her students to focus on a municipal activity of particular concern to officials and residents: traffic enforcement. Mayor Curtatone asked whether increasing enforcement of the City's traffic laws might pay for itself through increased citation revenue. The case walks through the steps Bilmes and her students took to determine the answer, including allocating personnel expenditures to the activity of traffic enforcement, allocating non-personnel expenditures to that activity through selection and use of an appropriate cost driver, and calculation of the revenue generated from traffic enforcement.
Swot Analysis of "City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit" written by Linda J. Bilmes includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Budgeting Somerville facing as an external strategic factors. Some of the topics covered in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit case study are - Strategic Management Strategies, Assessing performance, Costs, Government, Leadership and Global Business.
Some of the macro environment factors that can be used to understand the City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit casestudy better are - – increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, increasing energy prices, technology disruption, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic ,
increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Budgeting Somerville, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Budgeting Somerville operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit can be done for the following purposes –
1. Strategic planning using facts provided in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit case study
2. Improving business portfolio management of Budgeting Somerville
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Budgeting Somerville
Strengths City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Budgeting Somerville in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit Harvard Business Review case study are -
Ability to recruit top talent
– Budgeting Somerville is one of the leading recruiters in the industry. Managers in the City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Budgeting Somerville in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Budgeting Somerville has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Operational resilience
– The operational resilience strategy in the City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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.
Analytics focus
– Budgeting Somerville is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Linda J. Bilmes can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Global Business field
– Budgeting Somerville 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 Budgeting Somerville in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Budgeting Somerville has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Budgeting Somerville 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.
Organizational Resilience of Budgeting Somerville
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Budgeting Somerville does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Budgeting Somerville is one of the most innovative firm in sector. Manager in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Budgeting Somerville 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.
High brand equity
– Budgeting Somerville has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Budgeting Somerville to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Budgeting Somerville has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit are -
Lack of clear differentiation of Budgeting Somerville products
– To increase the profitability and margins on the products, Budgeting Somerville needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit can leverage the sales team experience to cultivate customer relationships as Budgeting Somerville is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit, is just above the industry average. Budgeting Somerville 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 cash cycle compare to competitors
Budgeting Somerville 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 existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Budgeting Somerville supply chain. Even after few cautionary changes mentioned in the HBR case study - City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Budgeting Somerville vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Budgeting Somerville, firm in the HBR case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Budgeting Somerville is dominated by functional specialists. It is not different from other players in the Global Business segment. Budgeting Somerville needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Budgeting Somerville to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit, it seems that the employees of Budgeting Somerville don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow decision making process
– As mentioned earlier in the report, Budgeting Somerville 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. Budgeting Somerville 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Budgeting Somerville has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Linda J. Bilmes suggests that, Budgeting Somerville is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Opportunities City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Budgeting Somerville can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Budgeting Somerville has opened avenues for new revenue streams for the organization in the industry. This can help Budgeting Somerville to build a more holistic ecosystem as suggested in the City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit case study. Budgeting Somerville can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Budgeting Somerville to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Budgeting Somerville can use these opportunities to build new business models that can help the communities that Budgeting Somerville operates in. Secondly it can use opportunities from government spending in Global Business sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Budgeting Somerville to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Budgeting Somerville to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Budgeting Somerville to increase its market reach. Budgeting Somerville 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Budgeting Somerville 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Budgeting Somerville is facing challenges because of the dominance of functional experts in the organization. City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Budgeting Somerville can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Budgeting Somerville 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.
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. Budgeting Somerville can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Budgeting Somerville 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
– Budgeting Somerville 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit are -
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. Budgeting Somerville can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Budgeting Somerville needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
Increasing wage structure of Budgeting Somerville
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Budgeting Somerville.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Budgeting Somerville can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Budgeting Somerville with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit, Budgeting Somerville 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 .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Budgeting Somerville in the Global Business sector and impact the bottomline of the organization.
Environmental challenges
– Budgeting Somerville 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. Budgeting Somerville 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 Budgeting Somerville in the Global Business industry. The Global Business industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Budgeting Somerville.
High dependence on third party suppliers
– Budgeting Somerville 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.
Consumer confidence and its impact on Budgeting Somerville demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Weighted SWOT Analysis of City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Budgeting Somerville needs to make to build a sustainable competitive advantage.
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