Arbitrage in the Government Bond Market? SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Arbitrage in the Government Bond Market?
Documents a pricing anomaly in the large and liquid treasury bond market. The prices of callable treasury bonds seem to be inconsistent with the prices of noncallable treasuries and an arbitrage opportunity appears to exist. Permits instructors to introduce the treasury market, the concept of creating synthetic instruments, principles of arbitrage, and institutional frictions in the bond markets.
Swot Analysis of "Arbitrage in the Government Bond Market?" written by Michael E. Edleson, Peter Tufano includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Arbitrage Treasury facing as an external strategic factors. Some of the topics covered in Arbitrage in the Government Bond Market? case study are - Strategic Management Strategies, Financial markets, Pricing and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Arbitrage in the Government Bond Market? casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, geopolitical disruptions, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels,
increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, etc
Introduction to SWOT Analysis of Arbitrage in the Government Bond Market?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Arbitrage in the Government Bond Market? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arbitrage Treasury, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arbitrage Treasury 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 Arbitrage in the Government Bond Market? can be done for the following purposes –
1. Strategic planning using facts provided in Arbitrage in the Government Bond Market? case study
2. Improving business portfolio management of Arbitrage Treasury
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 Arbitrage Treasury
Strengths Arbitrage in the Government Bond Market? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arbitrage Treasury in Arbitrage in the Government Bond Market? Harvard Business Review case study are -
High brand equity
– Arbitrage Treasury has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arbitrage Treasury to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Arbitrage Treasury digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Arbitrage Treasury 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.
High switching costs
– The high switching costs that Arbitrage Treasury 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Arbitrage in the Government Bond Market? firm has clearly differentiated products in the market place. This has enabled Arbitrage Treasury to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Arbitrage Treasury to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Arbitrage Treasury in the sector have low bargaining power. Arbitrage in the Government Bond Market? has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arbitrage Treasury to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Arbitrage Treasury 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 Michael E. Edleson, Peter Tufano 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.
Effective Research and Development (R&D)
– Arbitrage Treasury 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 Arbitrage in the Government Bond Market? - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Arbitrage Treasury is present in almost all the verticals within the industry. This has provided firm in Arbitrage in the Government Bond Market? 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 Arbitrage Treasury in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Arbitrage Treasury has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Arbitrage in the Government Bond Market? 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.
Learning organization
- Arbitrage Treasury 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 Arbitrage Treasury is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Arbitrage in the Government Bond Market? Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Arbitrage Treasury 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 Arbitrage in the Government Bond Market? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arbitrage in the Government Bond Market? are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Arbitrage in the Government Bond Market?, it seems that the employees of Arbitrage Treasury 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Arbitrage in the Government Bond Market?, in the dynamic environment Arbitrage Treasury has struggled to respond to the nimble upstart competition. Arbitrage Treasury has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Arbitrage Treasury 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. Arbitrage Treasury 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, Arbitrage Treasury 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 strategic competitive environment developments
– As Arbitrage in the Government Bond Market? HBR case study mentions - Arbitrage Treasury 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Arbitrage in the Government Bond Market?, is just above the industry average. Arbitrage Treasury 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.
Need for greater diversity
– Arbitrage Treasury has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High bargaining power of channel partners
– Because of the regulatory requirements, Michael E. Edleson, Peter Tufano suggests that, Arbitrage Treasury is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Lack of clear differentiation of Arbitrage Treasury products
– To increase the profitability and margins on the products, Arbitrage Treasury needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Arbitrage Treasury supply chain. Even after few cautionary changes mentioned in the HBR case study - Arbitrage in the Government Bond Market?, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Arbitrage Treasury vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Arbitrage Treasury 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.
Opportunities Arbitrage in the Government Bond Market? | 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 Arbitrage in the Government Bond Market? are -
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. Arbitrage Treasury can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Arbitrage Treasury to increase its market reach. Arbitrage Treasury 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.
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 Arbitrage Treasury 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Arbitrage Treasury 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, Arbitrage in the Government Bond Market?, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Arbitrage Treasury 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Arbitrage Treasury 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 Arbitrage Treasury to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Arbitrage Treasury 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Arbitrage Treasury can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Arbitrage Treasury can use these opportunities to build new business models that can help the communities that Arbitrage Treasury operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Arbitrage Treasury in the consumer business. Now Arbitrage Treasury can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Arbitrage Treasury 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 Arbitrage in the Government Bond Market? - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Arbitrage Treasury to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Arbitrage Treasury has opened avenues for new revenue streams for the organization in the industry. This can help Arbitrage Treasury to build a more holistic ecosystem as suggested in the Arbitrage in the Government Bond Market? case study. Arbitrage Treasury can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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. Arbitrage Treasury 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. Arbitrage Treasury 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.
Threats Arbitrage in the Government Bond Market? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Arbitrage in the Government Bond Market? are -
Increasing wage structure of Arbitrage Treasury
– 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 Arbitrage Treasury.
Technology acceleration in Forth Industrial Revolution
– Arbitrage Treasury has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Arbitrage Treasury 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.
Regulatory challenges
– Arbitrage Treasury 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.
Consumer confidence and its impact on Arbitrage Treasury 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.
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 Arbitrage Treasury.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arbitrage Treasury 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. Arbitrage Treasury needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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. Arbitrage Treasury 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.
Environmental challenges
– Arbitrage Treasury 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. Arbitrage Treasury can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 Arbitrage Treasury in the Finance & Accounting sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Arbitrage Treasury 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.
Weighted SWOT Analysis of Arbitrage in the Government Bond Market? 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 Arbitrage in the Government Bond Market? 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 Arbitrage in the Government Bond Market? 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 Arbitrage in the Government Bond Market? 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 Arbitrage in the Government Bond Market? 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 Arbitrage Treasury needs to make to build a sustainable competitive advantage.
