The Arck Systems series of cases describes the dilemmas faced by a senior sales manager in determining a sales compensation plan at an enterprise software company. The existing compensation plan is aggressive and highly rewards "star" performers. The cases track a series of changes the manager makes to the sales compensation plan in response to negative and unintended consequences of the existing system. The cases illustrate the tradeoffs inherent in incentive plans (even outside of sales environments) and presents a framework for the design and management of incentive systems. It also is useful in addressing employee response to incentive system change.
Swot Analysis of "Arck Systems (C)" written by Ian I. Larkin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Arck Incentive facing as an external strategic factors. Some of the topics covered in Arck Systems (C) case study are - Strategic Management Strategies, Employee retention, Human resource management, IT, Motivating people, Sales and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Arck Systems (C) casestudy better are - – increasing commodity prices, challanges to central banks by blockchain based private currencies, increasing energy prices, technology disruption, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google,
increasing government debt because of Covid-19 spendings, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Arck Systems (C) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arck Incentive, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arck Incentive 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 Arck Systems (C) can be done for the following purposes –
1. Strategic planning using facts provided in Arck Systems (C) case study
2. Improving business portfolio management of Arck Incentive
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arck Incentive
Strengths Arck Systems (C) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arck Incentive in Arck Systems (C) Harvard Business Review case study are -
Sustainable margins compare to other players in Leadership & Managing People industry
– Arck Systems (C) firm has clearly differentiated products in the market place. This has enabled Arck Incentive to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Arck Incentive to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Arck Incentive 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 Arck Systems (C) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Arck Incentive has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arck Incentive to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Arck Systems (C) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Strong track record of project management
– Arck Incentive is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Arck Incentive 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.
Learning organization
- Arck Incentive 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 Arck Incentive is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Arck Systems (C) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Arck Incentive
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Arck Incentive does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Arck Incentive in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Arck Incentive 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 Arck Systems (C) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Arck Incentive 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 Ian I. Larkin 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.
Low bargaining power of suppliers
– Suppliers of Arck Incentive in the sector have low bargaining power. Arck Systems (C) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arck Incentive to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Arck Systems (C) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arck Systems (C) are -
Aligning sales with marketing
– It come across in the case study Arck Systems (C) 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 Arck Systems (C) can leverage the sales team experience to cultivate customer relationships as Arck Incentive is planning to shift buying processes online.
Skills based hiring
– The stress on hiring functional specialists at Arck Incentive 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 Arck Systems (C), in the dynamic environment Arck Incentive has struggled to respond to the nimble upstart competition. Arck Incentive has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Arck Incentive 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Arck Incentive is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Arck Systems (C) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Arck Systems (C) 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 Arck Incentive has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Arck Incentive 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Arck Systems (C), is just above the industry average. Arck Incentive 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 operating costs
– Compare to the competitors, firm in the HBR case study Arck Systems (C) 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 Arck Incentive 's lucrative customers.
Lack of clear differentiation of Arck Incentive products
– To increase the profitability and margins on the products, Arck Incentive needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Arck Systems (C), it seems that the employees of Arck Incentive 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.
Opportunities Arck Systems (C) | 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 Arck Systems (C) are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Arck Incentive can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Arck Incentive in the consumer business. Now Arck Incentive can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Arck Incentive can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Arck Systems (C) 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Arck Incentive in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Leveraging digital technologies
– Arck Incentive 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.
Loyalty marketing
– Arck Incentive 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Arck Incentive is facing challenges because of the dominance of functional experts in the organization. Arck Systems (C) 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.
Using analytics as competitive advantage
– Arck Incentive 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 Arck Systems (C) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Arck Incentive to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Arck Incentive can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Arck Incentive 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, Arck Systems (C), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Arck Incentive 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Arck Incentive 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. Arck Incentive 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.
Manufacturing automation
– Arck Incentive can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats Arck Systems (C) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Arck Systems (C) are -
Increasing wage structure of Arck Incentive
– 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 Arck Incentive.
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. Arck Incentive needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Arck Incentive 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Arck Incentive 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 Arck Systems (C) .
Shortening product life cycle
– it is one of the major threat that Arck Incentive is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Arck Incentive.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Arck Incentive with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Arck Incentive 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. Arck Incentive can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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. Arck Incentive 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.
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 Arck Incentive in the Leadership & Managing People sector and impact the bottomline of the organization.
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.
Technology acceleration in Forth Industrial Revolution
– Arck Incentive has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Arck Incentive needs to keep up with the evolution of technology in the Leadership & Managing People 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arck Incentive in the Leadership & Managing People industry. The Leadership & Managing People 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.
Weighted SWOT Analysis of Arck Systems (C) 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 Arck Systems (C) 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 Arck Systems (C) 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 Arck Systems (C) 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 Arck Systems (C) 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 Arck Incentive needs to make to build a sustainable competitive advantage.
