Case Study Description of Knight Capital Americas LLC
It took 19 years to build Knight Capital Americas LLC into the largest market maker on the New York Stock Exchange, but on August 1, 2012, it took only 45 minutes for the firm to be wiped out by an information technology (IT) problem: a change in the company's software caused it to lose more than $450 million dollars in less than an hour. Although it was ultimately saved from bankruptcy when it was acquired two days later, the terms of acquisition were very unfavourable to the company's shareholders. How did this happen? Could it have been prevented? What should the staff, the chief executive officer, other managers and the board of directors have done differently? What lessons does this story hold for how firms should be managed and governed? And what does it say about our ability to manage risk in large modern corporations operating in increasingly fast-moving and complex global markets?
Swot Analysis of "Knight Capital Americas LLC" written by Robert D. Austin, Darren Meister includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Americas Knight facing as an external strategic factors. Some of the topics covered in Knight Capital Americas LLC case study are - Strategic Management Strategies, IT, Risk management and Technology & Operations.
Some of the macro environment factors that can be used to understand the Knight Capital Americas LLC casestudy better are - – wage bills are increasing, increasing government debt because of Covid-19 spendings, increasing commodity prices, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, talent flight as more people leaving formal jobs,
geopolitical disruptions, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Knight Capital Americas LLC
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Knight Capital Americas LLC case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Americas Knight, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Americas Knight 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 Knight Capital Americas LLC can be done for the following purposes –
1. Strategic planning using facts provided in Knight Capital Americas LLC case study
2. Improving business portfolio management of Americas Knight
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Americas Knight
Strengths Knight Capital Americas LLC | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Americas Knight in Knight Capital Americas LLC Harvard Business Review case study are -
Successful track record of launching new products
– Americas Knight has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Americas Knight 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 Technology & Operations field
– Americas Knight 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 Americas Knight in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Americas Knight is present in almost all the verticals within the industry. This has provided firm in Knight Capital Americas LLC 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.
High brand equity
– Americas Knight has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Americas Knight to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Americas Knight has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Knight Capital Americas LLC 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.
Organizational Resilience of Americas Knight
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Americas Knight 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 Technology & Operations industry
– Knight Capital Americas LLC firm has clearly differentiated products in the market place. This has enabled Americas Knight to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Americas Knight to invest into research and development (R&D) and innovation.
Analytics focus
– Americas Knight 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 Robert D. Austin, Darren Meister 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.
Innovation driven organization
– Americas Knight is one of the most innovative firm in sector. Manager in Knight Capital Americas LLC Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Effective Research and Development (R&D)
– Americas Knight 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 Knight Capital Americas LLC - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Knight Capital Americas LLC 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.
Highly skilled collaborators
– Americas Knight 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 Knight Capital Americas LLC HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Knight Capital Americas LLC | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Knight Capital Americas LLC are -
Products dominated business model
– Even though Americas Knight 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 - Knight Capital Americas LLC should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Americas Knight 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. Americas Knight 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.
Slow to strategic competitive environment developments
– As Knight Capital Americas LLC HBR case study mentions - Americas Knight 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.
Increasing silos among functional specialists
– The organizational structure of Americas Knight is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Americas Knight needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Americas Knight to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Knight Capital Americas LLC, it seems that the employees of Americas Knight 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 Knight Capital Americas LLC 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 Americas Knight 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Americas Knight 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.
High cash cycle compare to competitors
Americas Knight 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.
Need for greater diversity
– Americas Knight 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Americas Knight is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Knight Capital Americas LLC 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 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 Americas Knight supply chain. Even after few cautionary changes mentioned in the HBR case study - Knight Capital Americas LLC, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Americas Knight vulnerable to further global disruptions in South East Asia.
Opportunities Knight Capital Americas LLC | 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 Knight Capital Americas LLC are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Americas Knight can use these opportunities to build new business models that can help the communities that Americas Knight operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Loyalty marketing
– Americas Knight 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Americas Knight can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Americas Knight can develop new processes and procedures in Technology & Operations 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Americas Knight can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Americas Knight to increase its market reach. Americas Knight 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.
Learning at scale
– Online learning technologies has now opened space for Americas Knight to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Americas Knight 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, Knight Capital Americas LLC, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Americas Knight 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 Knight Capital Americas LLC - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Americas Knight to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Americas Knight 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Americas Knight in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Americas Knight 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. Americas Knight 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Americas Knight to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Americas Knight to hire the very best people irrespective of their geographical location.
Threats Knight Capital Americas LLC External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Knight Capital Americas LLC are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology acceleration in Forth Industrial Revolution
– Americas Knight has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Americas Knight needs to keep up with the evolution of technology in the Technology & Operations 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.
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.
Stagnating economy with rate increase
– Americas Knight 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.
Environmental challenges
– Americas Knight 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. Americas Knight can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Americas Knight business can come under increasing regulations regarding data privacy, data security, 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 Americas Knight.
Consumer confidence and its impact on Americas Knight 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.
Shortening product life cycle
– it is one of the major threat that Americas Knight is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Knight Capital Americas LLC, Americas Knight may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
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 Americas Knight in the Technology & Operations sector and impact the bottomline of the organization.
Regulatory challenges
– Americas Knight 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 Technology & Operations industry regulations.
Increasing wage structure of Americas Knight
– 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 Americas Knight.
Weighted SWOT Analysis of Knight Capital Americas LLC 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 Knight Capital Americas LLC 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 Knight Capital Americas LLC 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 Knight Capital Americas LLC 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 Knight Capital Americas LLC 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 Americas Knight needs to make to build a sustainable competitive advantage.
