Case Study Description of Ameritrade Holding Corp.
Some of the senior managers at Ameritrade, an Internet brokerage firm, are selling their holdings in the firm. Why are the managers selling, how will it affect shareholders, and what should the CEO do about it? The CEO is concerned that the market will interpret managerial sales as a signal that the managers believe the firm to be overvalued. He also wonders whether the sales might interfere with the firm's plan to raise funds in the capital markets. Finally, he thinks that, at a minimum, such sales undermine a carefully thought-out compensation plan that pays managers with stock options to align managers' incentive with those of the shareholders.
Swot Analysis of "Ameritrade Holding Corp." written by Lisa Meulbroek includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ameritrade Managers facing as an external strategic factors. Some of the topics covered in Ameritrade Holding Corp. case study are - Strategic Management Strategies, Compensation, Ethics, Financial analysis, Financial management, Internet, Motivating people, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Ameritrade Holding Corp. casestudy better are - – there is increasing trade war between United States & China, supply chains are disrupted by pandemic , increasing transportation and logistics costs, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Ameritrade Holding Corp.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Ameritrade Holding Corp. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ameritrade Managers, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ameritrade Managers 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 Ameritrade Holding Corp. can be done for the following purposes –
1. Strategic planning using facts provided in Ameritrade Holding Corp. case study
2. Improving business portfolio management of Ameritrade Managers
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 Ameritrade Managers
Strengths Ameritrade Holding Corp. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ameritrade Managers in Ameritrade Holding Corp. Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Ameritrade Managers 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.
Effective Research and Development (R&D)
– Ameritrade Managers 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 Ameritrade Holding Corp. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Ameritrade Managers has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ameritrade Managers 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.
Ability to lead change in Finance & Accounting field
– Ameritrade Managers 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 Ameritrade Managers in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the Ameritrade Holding Corp. 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.
Ability to recruit top talent
– Ameritrade Managers is one of the leading recruiters in the industry. Managers in the Ameritrade Holding Corp. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Ameritrade Managers has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Ameritrade Holding Corp. 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.
Innovation driven organization
– Ameritrade Managers is one of the most innovative firm in sector. Manager in Ameritrade Holding Corp. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Ameritrade Managers is present in almost all the verticals within the industry. This has provided firm in Ameritrade Holding Corp. 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.
Superior customer experience
– The customer experience strategy of Ameritrade Managers in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Ameritrade Managers
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ameritrade Managers does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Finance & Accounting industry
– Ameritrade Holding Corp. firm has clearly differentiated products in the market place. This has enabled Ameritrade Managers to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Ameritrade Managers to invest into research and development (R&D) and innovation.
Weaknesses Ameritrade Holding Corp. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Ameritrade Holding Corp. are -
Interest costs
– Compare to the competition, Ameritrade Managers 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Ameritrade Holding Corp. 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 Ameritrade Managers has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Ameritrade Holding Corp., is just above the industry average. Ameritrade Managers 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.
Low market penetration in new markets
– Outside its home market of Ameritrade Managers, firm in the HBR case study Ameritrade Holding Corp. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ameritrade Managers is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Ameritrade Holding Corp. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Ameritrade Managers is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Ameritrade Managers needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ameritrade Managers to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Ameritrade Managers 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 Ameritrade Managers supply chain. Even after few cautionary changes mentioned in the HBR case study - Ameritrade Holding Corp., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ameritrade Managers vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Ameritrade Holding Corp., it seems that the employees of Ameritrade Managers 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Ameritrade Holding Corp. 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 Ameritrade Managers 's lucrative customers.
No frontier risks strategy
– After analyzing the HBR case study Ameritrade Holding Corp., 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.
Opportunities Ameritrade Holding Corp. | 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 Ameritrade Holding Corp. are -
Manufacturing automation
– Ameritrade Managers can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Creating value in data economy
– The success of analytics program of Ameritrade Managers has opened avenues for new revenue streams for the organization in the industry. This can help Ameritrade Managers to build a more holistic ecosystem as suggested in the Ameritrade Holding Corp. case study. Ameritrade Managers can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ameritrade Managers 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, Ameritrade Holding Corp., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Ameritrade Managers to increase its market reach. Ameritrade Managers 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.
Buying journey improvements
– Ameritrade Managers can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Ameritrade Holding Corp. 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ameritrade Managers 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.
Loyalty marketing
– Ameritrade Managers 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.
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 Ameritrade Managers 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.
Using analytics as competitive advantage
– Ameritrade Managers 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 Ameritrade Holding Corp. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ameritrade Managers to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Ameritrade Managers 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.
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. Ameritrade Managers 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. Ameritrade Managers 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ameritrade Managers can use these opportunities to build new business models that can help the communities that Ameritrade Managers operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Developing new processes and practices
– Ameritrade Managers 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.
Threats Ameritrade Holding Corp. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Ameritrade Holding Corp. are -
High dependence on third party suppliers
– Ameritrade Managers 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.
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 Ameritrade Managers in the Finance & Accounting sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Ameritrade Holding Corp., Ameritrade Managers 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 .
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ameritrade Managers 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 Ameritrade Holding Corp. .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ameritrade Managers with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ameritrade Managers in the Finance & Accounting industry. The Finance & Accounting 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.
Increasing wage structure of Ameritrade Managers
– 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 Ameritrade Managers.
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.
Environmental challenges
– Ameritrade Managers 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. Ameritrade Managers can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Technology acceleration in Forth Industrial Revolution
– Ameritrade Managers has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Ameritrade Managers 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.
Shortening product life cycle
– it is one of the major threat that Ameritrade Managers is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Ameritrade Managers needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Ameritrade Holding Corp. 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 Ameritrade Holding Corp. 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 Ameritrade Holding Corp. 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 Ameritrade Holding Corp. 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 Ameritrade Holding Corp. 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 Ameritrade Managers needs to make to build a sustainable competitive advantage.
