Case Study Description of Lucas Wang: Stop-Loss Strategy
On February 29, 2016, an investor, who was a business school graduate, purchased one share of Tesla Motors, Inc. stock for $191.93. In doing so, the investor wondered what trading strategy should be followed over the next six months to maximize returns while minimizing risk. In choosing a strategy, he wanted to make good use of the knowledge gained from his financial analytics classes. To that end, he did not know if he should choose a buy and hold, or a stop-loss strategy with an optimal stop-loss threshold. The investor wondered how he would make this decision. Would a six month comparison of the stop-loss strategy with thresholds from 1 per cent to 99 per cent versus the buy and hold strategy resolve his dilemma?
Swot Analysis of "Lucas Wang: Stop-Loss Strategy" written by Hubert Pun, Hongmei Sun includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Stop Loss facing as an external strategic factors. Some of the topics covered in Lucas Wang: Stop-Loss Strategy case study are - Strategic Management Strategies, and Technology & Operations.
Some of the macro environment factors that can be used to understand the Lucas Wang: Stop-Loss Strategy casestudy better are - – there is backlash against globalization, central banks are concerned over increasing inflation, technology disruption, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, supply chains are disrupted by pandemic ,
increasing commodity prices, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Lucas Wang: Stop-Loss Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lucas Wang: Stop-Loss Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Stop Loss, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Stop Loss 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 Lucas Wang: Stop-Loss Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Lucas Wang: Stop-Loss Strategy case study
2. Improving business portfolio management of Stop Loss
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 Stop Loss
Strengths Lucas Wang: Stop-Loss Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Stop Loss in Lucas Wang: Stop-Loss Strategy Harvard Business Review case study are -
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Stop Loss digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Stop Loss 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.
Ability to lead change in Technology & Operations field
– Stop Loss 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 Stop Loss in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Stop Loss 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 Stop Loss is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lucas Wang: Stop-Loss Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Stop Loss has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Stop Loss 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
– Stop Loss has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Lucas Wang: Stop-Loss Strategy 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.
Sustainable margins compare to other players in Technology & Operations industry
– Lucas Wang: Stop-Loss Strategy firm has clearly differentiated products in the market place. This has enabled Stop Loss to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Stop Loss to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Stop Loss 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.
Strong track record of project management
– Stop Loss is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Lucas Wang: Stop-Loss Strategy 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.
Effective Research and Development (R&D)
– Stop Loss 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 Lucas Wang: Stop-Loss Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Stop Loss in the sector have low bargaining power. Lucas Wang: Stop-Loss Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Stop Loss to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Stop Loss has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Stop Loss to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Lucas Wang: Stop-Loss Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lucas Wang: Stop-Loss Strategy are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Lucas Wang: Stop-Loss Strategy, it seems that the employees of Stop Loss 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, Stop Loss 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.
Interest costs
– Compare to the competition, Stop Loss 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Stop Loss is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Lucas Wang: Stop-Loss Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Stop Loss 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 - Lucas Wang: Stop-Loss Strategy should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Stop Loss 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.
Slow decision making process
– As mentioned earlier in the report, Stop Loss 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. Stop Loss 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Lucas Wang: Stop-Loss Strategy, in the dynamic environment Stop Loss has struggled to respond to the nimble upstart competition. Stop Loss has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– After analyzing the HBR case study Lucas Wang: Stop-Loss Strategy, it seems that company is thinking about the frontier risks that can impact Technology & Operations 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Lucas Wang: Stop-Loss Strategy, is just above the industry average. Stop Loss needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Lucas Wang: Stop-Loss Strategy 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 Stop Loss has relatively successful track record of launching new products.
Opportunities Lucas Wang: Stop-Loss Strategy | 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 Lucas Wang: Stop-Loss Strategy are -
Creating value in data economy
– The success of analytics program of Stop Loss has opened avenues for new revenue streams for the organization in the industry. This can help Stop Loss to build a more holistic ecosystem as suggested in the Lucas Wang: Stop-Loss Strategy case study. Stop Loss can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Stop Loss 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.
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. Stop Loss can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Stop Loss to increase its market reach. Stop Loss 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Stop Loss 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.
Building a culture of innovation
– managers at Stop Loss 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 Technology & Operations segment.
Developing new processes and practices
– Stop Loss 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.
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 Stop Loss 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.
Learning at scale
– Online learning technologies has now opened space for Stop Loss 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Stop Loss is facing challenges because of the dominance of functional experts in the organization. Lucas Wang: Stop-Loss Strategy 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.
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. Stop Loss 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. Stop Loss 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.
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. Stop Loss can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Stop Loss 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 Lucas Wang: Stop-Loss Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Stop Loss to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Lucas Wang: Stop-Loss Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lucas Wang: Stop-Loss Strategy are -
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Stop Loss in the Technology & Operations industry. The Technology & Operations 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.
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 Stop Loss in the Technology & Operations sector and impact the bottomline of the organization.
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. Stop Loss needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Increasing wage structure of Stop Loss
– 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 Stop Loss.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Stop Loss can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Stop Loss.
Consumer confidence and its impact on Stop Loss 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.
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.
High dependence on third party suppliers
– Stop Loss high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Stop Loss 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 Lucas Wang: Stop-Loss Strategy .
Technology acceleration in Forth Industrial Revolution
– Stop Loss has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Stop Loss 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.
Shortening product life cycle
– it is one of the major threat that Stop Loss is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Lucas Wang: Stop-Loss Strategy 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 Lucas Wang: Stop-Loss Strategy 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 Lucas Wang: Stop-Loss Strategy 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 Lucas Wang: Stop-Loss Strategy 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 Lucas Wang: Stop-Loss Strategy 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 Stop Loss needs to make to build a sustainable competitive advantage.
