Case Study Description of Harrington Financial Group
In early 1997, Harrington Bank, a small Indiana savings and loan (thrift) wondered what its next move should be. Harrington was acquired in 1988 by the principals of Smith Breeden Associates, a money-management and consulting firm specializing in the application of modern financial technology to the pricing, hedging, and risk management of mortgage securities. The Smith Breeden principals had established an arms-length contract with Harrington, where Smith Breeden advised Harrington on the pricing, hedging, active management, and risk management of Harrington's assets and liabilities. Since the acquisition, the bank had done very well. Assets had grown from $75 million in 1988 to over $520 million at the end of 1996. Its net interest margin had more than tripled, core operating profits had grown by over 400%, and return on equity had been substantially increased. Still, Harrington in 1996 was not an average thrift. 80% of its assets consisted of mortgage-backed securities (vs. 30% for the median thrift), and most of its liabilities were not deposits but other forms of wholesale funding.
Swot Analysis of "Harrington Financial Group" written by Alberto Moel, Robert C. Merton includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Harrington Thrift facing as an external strategic factors. Some of the topics covered in Harrington Financial Group case study are - Strategic Management Strategies, Mergers & acquisitions, Negotiations, Pricing, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Harrington Financial Group casestudy better are - – cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels,
challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Harrington Financial Group
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Harrington Financial Group case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Harrington Thrift, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Harrington Thrift 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 Harrington Financial Group can be done for the following purposes –
1. Strategic planning using facts provided in Harrington Financial Group case study
2. Improving business portfolio management of Harrington Thrift
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 Harrington Thrift
Strengths Harrington Financial Group | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Harrington Thrift in Harrington Financial Group Harvard Business Review case study are -
Ability to recruit top talent
– Harrington Thrift is one of the leading recruiters in the industry. Managers in the Harrington Financial Group are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Harrington Thrift is present in almost all the verticals within the industry. This has provided firm in Harrington Financial Group 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.
Successful track record of launching new products
– Harrington Thrift has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Harrington Thrift 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
– Harrington Thrift has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Harrington Financial Group 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.
High switching costs
– The high switching costs that Harrington Thrift 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
– Harrington Thrift is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Harrington Thrift
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Harrington Thrift does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Finance & Accounting field
– Harrington Thrift 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 Harrington Thrift in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the Harrington Financial Group 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.
Learning organization
- Harrington Thrift 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 Harrington Thrift is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Harrington Financial Group Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Harrington Thrift are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Superior customer experience
– The customer experience strategy of Harrington Thrift in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Harrington Financial Group | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Harrington Financial Group are -
Workers concerns about automation
– As automation is fast increasing in the segment, Harrington Thrift 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.
Capital Spending Reduction
– Even during the low interest decade, Harrington Thrift 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Alberto Moel, Robert C. Merton suggests that, Harrington Thrift 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Harrington Financial Group, is just above the industry average. Harrington Thrift 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 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 Harrington Thrift supply chain. Even after few cautionary changes mentioned in the HBR case study - Harrington Financial Group, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Harrington Thrift vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Harrington Financial Group, in the dynamic environment Harrington Thrift has struggled to respond to the nimble upstart competition. Harrington Thrift has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Harrington Thrift has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Harrington Financial Group 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 Harrington Thrift has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Harrington Thrift is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Harrington Thrift needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Harrington Thrift to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Harrington Financial Group, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Need for greater diversity
– Harrington Thrift 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.
Opportunities Harrington Financial Group | 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 Harrington Financial Group are -
Better consumer reach
– The expansion of the 5G network will help Harrington Thrift to increase its market reach. Harrington Thrift 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 Harrington Thrift 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.
Leveraging digital technologies
– Harrington Thrift 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Harrington Thrift 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, Harrington Financial Group, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Harrington Thrift can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Harrington Thrift 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. Harrington Thrift 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.
Building a culture of innovation
– managers at Harrington Thrift 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.
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 Harrington Thrift in the consumer business. Now Harrington Thrift can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Harrington Thrift 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 Finance & Accounting industry, but it has also influenced the consumer preferences. Harrington Thrift can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Harrington Thrift can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Manufacturing automation
– Harrington Thrift can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– Harrington Thrift can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Harrington Financial Group 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.
Threats Harrington Financial Group External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Harrington Financial Group are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Harrington Thrift with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Harrington Thrift has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Harrington Thrift 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.
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.
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 Harrington Thrift.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Harrington Thrift 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 Harrington Financial Group .
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 Harrington Thrift in the Finance & Accounting sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Harrington Thrift is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Harrington Thrift
– 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 Harrington Thrift.
High dependence on third party suppliers
– Harrington Thrift 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.
Consumer confidence and its impact on Harrington Thrift 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.
Regulatory challenges
– Harrington Thrift 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Harrington Thrift can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Harrington Thrift 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.
Weighted SWOT Analysis of Harrington Financial Group 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 Harrington Financial Group 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 Harrington Financial Group 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 Harrington Financial Group 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 Harrington Financial Group 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 Harrington Thrift needs to make to build a sustainable competitive advantage.
