Valuing the AOL Time Warner Merger SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Valuing the AOL Time Warner Merger
On January 11, 2000, AOL and Time Warner announced their intention to merge, creating what AOL CEO Stephen Case and Time Warner CEO Gerald Levin called the 21st century's first fully integrated communications, media, and entertainment company. This case, prepared from public sources, enables in-depth analysis of the value of AOL Time Warner from the viewpoint of executives and analysts before their merger six months later.
Swot Analysis of "Valuing the AOL Time Warner Merger" written by Lynda M. Applegate includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aol Warner facing as an external strategic factors. Some of the topics covered in Valuing the AOL Time Warner Merger case study are - Strategic Management Strategies, Collaboration, Corporate communications, Demographics, Financial analysis, IT, Mergers & acquisitions and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Valuing the AOL Time Warner Merger casestudy better are - – cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, geopolitical disruptions,
increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Valuing the AOL Time Warner Merger
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Valuing the AOL Time Warner Merger case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aol Warner, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aol Warner 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 Valuing the AOL Time Warner Merger can be done for the following purposes –
1. Strategic planning using facts provided in Valuing the AOL Time Warner Merger case study
2. Improving business portfolio management of Aol Warner
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Aol Warner
Strengths Valuing the AOL Time Warner Merger | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aol Warner in Valuing the AOL Time Warner Merger Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Aol Warner in the sector have low bargaining power. Valuing the AOL Time Warner Merger has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aol Warner to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Valuing the AOL Time Warner Merger firm has clearly differentiated products in the market place. This has enabled Aol Warner to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Aol Warner to invest into research and development (R&D) and innovation.
High brand equity
– Aol Warner has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aol Warner to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Aol Warner has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Valuing the AOL Time Warner Merger 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.
Strong track record of project management
– Aol Warner is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Innovation & Entrepreneurship field
– Aol Warner 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 Aol Warner in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Aol Warner is one of the most innovative firm in sector. Manager in Valuing the AOL Time Warner Merger Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– Aol Warner 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 Valuing the AOL Time Warner Merger HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Aol Warner
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Aol Warner does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Aol Warner 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 Aol Warner is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Valuing the AOL Time Warner Merger Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Aol Warner in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Valuing the AOL Time Warner Merger 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.
Weaknesses Valuing the AOL Time Warner Merger | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Valuing the AOL Time Warner Merger are -
Workers concerns about automation
– As automation is fast increasing in the segment, Aol Warner 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Valuing the AOL Time Warner Merger, it seems that the employees of Aol Warner 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.
Low market penetration in new markets
– Outside its home market of Aol Warner, firm in the HBR case study Valuing the AOL Time Warner Merger needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Valuing the AOL Time Warner Merger HBR case study mentions - Aol Warner 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, Aol Warner 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.
Skills based hiring
– The stress on hiring functional specialists at Aol Warner 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Valuing the AOL Time Warner Merger, in the dynamic environment Aol Warner has struggled to respond to the nimble upstart competition. Aol Warner has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Aol Warner 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.
Increasing silos among functional specialists
– The organizational structure of Aol Warner is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Aol Warner needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aol Warner to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Valuing the AOL Time Warner Merger, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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.
Need for greater diversity
– Aol Warner 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.
Opportunities Valuing the AOL Time Warner Merger | 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 Valuing the AOL Time Warner Merger are -
Using analytics as competitive advantage
– Aol Warner 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 Valuing the AOL Time Warner Merger - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Aol Warner to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aol Warner is facing challenges because of the dominance of functional experts in the organization. Valuing the AOL Time Warner Merger 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.
Developing new processes and practices
– Aol Warner can develop new processes and procedures in Innovation & Entrepreneurship 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.
Leveraging digital technologies
– Aol Warner can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aol Warner 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Aol Warner 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 Aol Warner to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aol Warner 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, Valuing the AOL Time Warner Merger, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aol Warner can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Aol Warner in the consumer business. Now Aol Warner can target international markets with far fewer capital restrictions requirements than the existing system.
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. Aol Warner can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Aol Warner 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.
Creating value in data economy
– The success of analytics program of Aol Warner has opened avenues for new revenue streams for the organization in the industry. This can help Aol Warner to build a more holistic ecosystem as suggested in the Valuing the AOL Time Warner Merger case study. Aol Warner can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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, Aol Warner can use these opportunities to build new business models that can help the communities that Aol Warner operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Threats Valuing the AOL Time Warner Merger External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Valuing the AOL Time Warner Merger are -
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.
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 Aol Warner.
Shortening product life cycle
– it is one of the major threat that Aol Warner is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aol Warner 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 Valuing the AOL Time Warner Merger .
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. Aol Warner 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.
Consumer confidence and its impact on Aol Warner 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.
Stagnating economy with rate increase
– Aol Warner 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.
High dependence on third party suppliers
– Aol Warner high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Aol Warner can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Aol Warner with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Aol Warner needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
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 Aol Warner in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Aol Warner has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Aol Warner needs to keep up with the evolution of technology in the Innovation & Entrepreneurship sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Weighted SWOT Analysis of Valuing the AOL Time Warner Merger 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 Valuing the AOL Time Warner Merger 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 Valuing the AOL Time Warner Merger 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 Valuing the AOL Time Warner Merger 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 Valuing the AOL Time Warner Merger 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 Aol Warner needs to make to build a sustainable competitive advantage.