Emergence of Default Swap Index Products SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Emergence of Default Swap Index Products
With the increased liquidity in markets for credit derivatives around the turn of the century, coupled with dramatically increased corporate default rates, fixed-income investors and buyers of credit protection were receptive to a new generation of structured credit products that would further enhance their abilities to transfer credit risk efficiently, especially products offering improved liquidity and diversification. In April 2003, Morgan Stanley partnered with JPMorgan to co-market and co-design a suite of credit indices. Their first product, named TRAC-X, was a portfolio of underlying, single-name, credit default swaps. To enhance liquidity and make TRAC-X the new benchmark for credit trading, Morgan Stanley and JPMorgan offered to make two-sided markets (subject to market conditions) at bounded bid-offer spreads and licensed TRAC-X to other dealers. In early 2004, Lisa Watkinson was the executive director and global product manager for credit default swap and credit indexation products at Morgan Stanley in New York, responsible for the development and marketing of all credit derivatives and credit indexation products globally. Recently, the TRAC-X products had faced criticism in the market and, opportunistically, competing basket credit products had been launched. Although Morgan Stanley was still at the leading edge of an explosive and profitable line of structured credit products, Watkinson faced significant business development risk, trying to maintain the liquidity associated with her first-mover advantage.
Swot Analysis of "Emergence of Default Swap Index Products" written by Darrell Duffie includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Credit Trac facing as an external strategic factors. Some of the topics covered in Emergence of Default Swap Index Products case study are - Strategic Management Strategies, Financial markets, Product development, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Emergence of Default Swap Index Products casestudy better are - – increasing household debt because of falling income levels, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, increasing energy prices, there is backlash against globalization,
wage bills are increasing, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Emergence of Default Swap Index Products
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Emergence of Default Swap Index Products case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Credit Trac, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Credit Trac 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 Emergence of Default Swap Index Products can be done for the following purposes –
1. Strategic planning using facts provided in Emergence of Default Swap Index Products case study
2. Improving business portfolio management of Credit Trac
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Credit Trac
Strengths Emergence of Default Swap Index Products | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Credit Trac in Emergence of Default Swap Index Products Harvard Business Review case study are -
Successful track record of launching new products
– Credit Trac has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Credit Trac 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.
Training and development
– Credit Trac has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Emergence of Default Swap Index Products 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.
Ability to recruit top talent
– Credit Trac is one of the leading recruiters in the industry. Managers in the Emergence of Default Swap Index Products are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Credit Trac 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 Emergence of Default Swap Index Products HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Credit Trac has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Credit Trac to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Strategy & Execution industry
– Emergence of Default Swap Index Products firm has clearly differentiated products in the market place. This has enabled Credit Trac to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Credit Trac to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Credit Trac is present in almost all the verticals within the industry. This has provided firm in Emergence of Default Swap Index Products 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.
Innovation driven organization
– Credit Trac is one of the most innovative firm in sector. Manager in Emergence of Default Swap Index Products Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Credit Trac 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.
Analytics focus
– Credit Trac 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 Darrell Duffie 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.
Operational resilience
– The operational resilience strategy in the Emergence of Default Swap Index Products 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.
Organizational Resilience of Credit Trac
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Credit Trac does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Emergence of Default Swap Index Products | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Emergence of Default Swap Index Products are -
Lack of clear differentiation of Credit Trac products
– To increase the profitability and margins on the products, Credit Trac needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Emergence of Default Swap Index Products HBR case study mentions - Credit Trac 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.
Aligning sales with marketing
– It come across in the case study Emergence of Default Swap Index Products 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 Emergence of Default Swap Index Products can leverage the sales team experience to cultivate customer relationships as Credit Trac is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study Emergence of Default Swap Index Products, it seems that company is thinking about the frontier risks that can impact Strategy & Execution 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
– Credit Trac 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Emergence of Default Swap Index Products 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 Credit Trac 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Emergence of Default Swap Index Products, is just above the industry average. Credit Trac 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.
Products dominated business model
– Even though Credit Trac 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 - Emergence of Default Swap Index Products should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Credit Trac has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Emergence of Default Swap Index Products 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 Credit Trac has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Credit Trac 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.
Opportunities Emergence of Default Swap Index Products | 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 Emergence of Default Swap Index Products are -
Developing new processes and practices
– Credit Trac can develop new processes and procedures in Strategy & Execution 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.
Building a culture of innovation
– managers at Credit Trac 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 Strategy & Execution segment.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Credit Trac 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. Credit Trac 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.
Using analytics as competitive advantage
– Credit Trac 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 Emergence of Default Swap Index Products - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Credit Trac 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 Credit Trac can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Credit Trac can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Credit Trac can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Credit Trac is facing challenges because of the dominance of functional experts in the organization. Emergence of Default Swap Index Products 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.
Manufacturing automation
– Credit Trac can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Credit Trac can use these opportunities to build new business models that can help the communities that Credit Trac operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Better consumer reach
– The expansion of the 5G network will help Credit Trac to increase its market reach. Credit Trac 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.
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 Credit Trac in the consumer business. Now Credit Trac can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Credit Trac has opened avenues for new revenue streams for the organization in the industry. This can help Credit Trac to build a more holistic ecosystem as suggested in the Emergence of Default Swap Index Products case study. Credit Trac can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Emergence of Default Swap Index Products External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Emergence of Default Swap Index Products are -
Environmental challenges
– Credit Trac 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. Credit Trac can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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 Credit Trac.
Increasing wage structure of Credit Trac
– 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 Credit Trac.
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. Credit Trac needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Credit Trac in the Strategy & Execution industry. The Strategy & Execution 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.
Shortening product life cycle
– it is one of the major threat that Credit Trac is facing in Strategy & Execution 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, Credit Trac 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 Emergence of Default Swap Index Products .
Consumer confidence and its impact on Credit Trac 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.
Technology acceleration in Forth Industrial Revolution
– Credit Trac has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Credit Trac needs to keep up with the evolution of technology in the Strategy & Execution 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.
Stagnating economy with rate increase
– Credit Trac 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Emergence of Default Swap Index Products, Credit Trac may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Regulatory challenges
– Credit Trac 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 Strategy & Execution industry regulations.
Weighted SWOT Analysis of Emergence of Default Swap Index Products 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 Emergence of Default Swap Index Products 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 Emergence of Default Swap Index Products 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 Emergence of Default Swap Index Products 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 Emergence of Default Swap Index Products 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 Credit Trac needs to make to build a sustainable competitive advantage.
