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 - – customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, increasing household debt because of falling income levels, there is backlash against globalization, technology disruption, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%,
competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, 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 -
Diverse revenue streams
– Budgeting Somerville is present in almost all the verticals within the industry. This has provided firm in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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.
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.
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.
Highly skilled collaborators
– Budgeting Somerville 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 City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
Strong track record of project management
– Budgeting Somerville is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Budgeting Somerville has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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 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.
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.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Budgeting Somerville digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Budgeting Somerville 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.
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.
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 -
Need for greater diversity
– Budgeting Somerville 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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Budgeting Somerville is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Budgeting Somerville 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 - City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Budgeting Somerville 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.
Capital Spending Reduction
– Even during the low interest decade, Budgeting Somerville 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.
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.
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.
Slow to strategic competitive environment developments
– As City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit HBR case study mentions - Budgeting Somerville takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High 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.
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.
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.
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.
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 Budgeting Somerville in the consumer business. Now Budgeting Somerville can target international markets with far fewer capital restrictions requirements than the existing system.
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. Budgeting Somerville 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. Budgeting Somerville 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.
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.
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.
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.
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.
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.
Loyalty marketing
– Budgeting Somerville 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.
Buying journey improvements
– Budgeting Somerville can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. City of Somerville:Using Activity-Based Budgeting to Improve Performance in the Somerville Traffic Unit 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.
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.
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 -
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.
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.
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.
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. Budgeting Somerville needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
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 Budgeting Somerville business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Budgeting Somerville has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Budgeting Somerville 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.
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.
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.
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.
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.
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.
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 .
Shortening product life cycle
– it is one of the major threat that Budgeting Somerville is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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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