ALAC was a small importer of specialty industrial chemicals. The case explores the different financing alternatives to facilitate the company's explosive growth in working capital. At the end of 2009, the company was awarded the United States distributorship for the specialty chemical di-isononyl phthalate (DINP) from a large Taiwanese producer and had almost tripled its sales in 2010. It expected to double its sales in 2011 and to dramatically increase its profits. ALAC critically needed to obtain financing for the explosive growth in its inventory and accounts receivable balances.
Swot Analysis of "ALAC International" written by Richard S. Ruback, Royce Yudkoff includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Alac Explosive facing as an external strategic factors. Some of the topics covered in ALAC International case study are - Strategic Management Strategies, Entrepreneurial finance, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the ALAC International casestudy better are - – increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, increasing government debt because of Covid-19 spendings,
there is backlash against globalization, wage bills are increasing, etc
Introduction to SWOT Analysis of ALAC International
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in ALAC International case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Alac Explosive, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Alac Explosive 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 ALAC International can be done for the following purposes –
1. Strategic planning using facts provided in ALAC International case study
2. Improving business portfolio management of Alac Explosive
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Alac Explosive
Strengths ALAC International | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Alac Explosive in ALAC International Harvard Business Review case study are -
Analytics focus
– Alac Explosive 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 Richard S. Ruback, Royce Yudkoff 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.
Effective Research and Development (R&D)
– Alac Explosive 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 ALAC International - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Alac Explosive is present in almost all the verticals within the industry. This has provided firm in ALAC International 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.
Strong track record of project management
– Alac Explosive is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Alac Explosive 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.
Superior customer experience
– The customer experience strategy of Alac Explosive 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 Finance & Accounting industry
– ALAC International firm has clearly differentiated products in the market place. This has enabled Alac Explosive to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Alac Explosive to invest into research and development (R&D) and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Alac Explosive digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Alac Explosive 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.
Ability to recruit top talent
– Alac Explosive is one of the leading recruiters in the industry. Managers in the ALAC International are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Alac Explosive in the sector have low bargaining power. ALAC International has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Alac Explosive to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Alac Explosive has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Alac Explosive to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Alac Explosive 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.
Weaknesses ALAC International | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of ALAC International are -
Workers concerns about automation
– As automation is fast increasing in the segment, Alac Explosive 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the ALAC International 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 Alac Explosive has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study ALAC International 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 ALAC International can leverage the sales team experience to cultivate customer relationships as Alac Explosive is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Alac Explosive, firm in the HBR case study ALAC International needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Alac Explosive 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.
Slow decision making process
– As mentioned earlier in the report, Alac Explosive 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. Alac Explosive 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 operating costs
– Compare to the competitors, firm in the HBR case study ALAC International has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Alac Explosive 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Alac Explosive 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.
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 Alac Explosive supply chain. Even after few cautionary changes mentioned in the HBR case study - ALAC International, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Alac Explosive vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study ALAC International, it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study ALAC International, in the dynamic environment Alac Explosive has struggled to respond to the nimble upstart competition. Alac Explosive has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities ALAC International | 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 ALAC International are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Alac Explosive in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for Alac Explosive 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.
Using analytics as competitive advantage
– Alac Explosive 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 ALAC International - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Alac Explosive to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Alac Explosive 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. Alac Explosive 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.
Buying journey improvements
– Alac Explosive can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. ALAC International 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.
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 Alac Explosive in the consumer business. Now Alac Explosive can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Alac Explosive to increase its market reach. Alac Explosive 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.
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. Alac Explosive can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Alac Explosive 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.
Developing new processes and practices
– Alac Explosive can develop new processes and procedures in Finance & Accounting 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, Alac Explosive can use these opportunities to build new business models that can help the communities that Alac Explosive operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Alac Explosive can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Alac Explosive 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.
Threats ALAC International External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study ALAC International are -
Regulatory challenges
– Alac Explosive 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 Finance & Accounting industry regulations.
Environmental challenges
– Alac Explosive 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. Alac Explosive can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 Alac Explosive.
Technology acceleration in Forth Industrial Revolution
– Alac Explosive has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Alac Explosive needs to keep up with the evolution of technology in the Finance & Accounting 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.
Consumer confidence and its impact on Alac Explosive 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study ALAC International, Alac Explosive may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Alac Explosive 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, Alac Explosive 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 ALAC International .
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 Alac Explosive in the Finance & Accounting sector and impact the bottomline of the organization.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Alac Explosive will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing wage structure of Alac Explosive
– 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 Alac Explosive.
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. Alac Explosive needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Alac Explosive can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Weighted SWOT Analysis of ALAC International 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 ALAC International 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 ALAC International 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 ALAC International 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 ALAC International 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 Alac Explosive needs to make to build a sustainable competitive advantage.
