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 - – technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models,
increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, 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 -
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Ameritrade Managers digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ameritrade Managers has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Low bargaining power of suppliers
– Suppliers of Ameritrade Managers in the sector have low bargaining power. Ameritrade Holding Corp. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ameritrade Managers to manage not only supply disruptions but also source products at highly competitive prices.
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.
Analytics focus
– Ameritrade Managers 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 Lisa Meulbroek 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.
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.
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.
High switching costs
– The high switching costs that Ameritrade Managers has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Learning organization
- Ameritrade Managers 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 Ameritrade Managers is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Ameritrade Holding Corp. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
High brand equity
– Ameritrade Managers has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ameritrade Managers to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Strong track record of project management
– Ameritrade Managers is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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 -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Ameritrade Holding Corp., in the dynamic environment Ameritrade Managers has struggled to respond to the nimble upstart competition. Ameritrade Managers has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, Ameritrade Managers 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Ameritrade Managers 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.
Need for greater diversity
– Ameritrade Managers 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.
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.
Slow decision making process
– As mentioned earlier in the report, Ameritrade Managers has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Ameritrade Managers even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
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.
Lack of clear differentiation of Ameritrade Managers products
– To increase the profitability and margins on the products, Ameritrade Managers needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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 -
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 Ameritrade Managers in the consumer business. Now Ameritrade Managers can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Ameritrade Managers can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Ameritrade Managers can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Ameritrade Managers 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 Finance & Accounting segment.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Ameritrade Managers is facing challenges because of the dominance of functional experts in the organization. Ameritrade Holding Corp. 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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ameritrade Managers in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ameritrade Managers can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
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 -
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.
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.
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.
Consumer confidence and its impact on Ameritrade Managers 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.
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.
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.
Stagnating economy with rate increase
– Ameritrade Managers 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.
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.
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.
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.
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. .
Regulatory challenges
– Ameritrade Managers needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
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. Ameritrade Managers 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.
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.