Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

Case Study SWOT Analysis Solution

Case Study Description of Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board

As Canada Pension Plan Investment Board (CPPIB) CEO David Denison and SVP and Chief Investment Strategist Don Raymond embarked upon a review of CPPIB's investment strategy, they reflected on the changes that had been made in recent years. The Reference Portfolio played an integral role in allowing CPPIB to look through the labels of asset classes and to holistically consider each asset in terms of its underlying factors. In this case, which draws upon interviews with both Denison and Raymond, students will learn about the history of CPPIB, the genesis of the Reference Portfolio, and how the Reference Portfolio operates to guide CPPIB's high performing investment strategy.

Authors :: Andrew Ang

Topics :: Finance & Accounting

Tags :: Financial markets, Risk management, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis

Swot Analysis of "Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board" written by Andrew Ang includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cppib Reference facing as an external strategic factors. Some of the topics covered in Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board case study are - Strategic Management Strategies, Financial markets, Risk management and Finance & Accounting.

Some of the macro environment factors that can be used to understand the Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board casestudy better are - – there is backlash against globalization, increasing commodity prices, increasing energy prices, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, etc

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Introduction to SWOT Analysis of Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cppib Reference, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cppib Reference 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board can be done for the following purposes –
1. Strategic planning using facts provided in Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board case study
2. Improving business portfolio management of Cppib Reference
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 Cppib Reference

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Strengths Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Cppib Reference in Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board Harvard Business Review case study are -

High switching costs

– The high switching costs that Cppib Reference 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.

Analytics focus

– Cppib Reference 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 Andrew Ang 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)

– Cppib Reference 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 Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Innovation driven organization

– Cppib Reference is one of the most innovative firm in sector. Manager in Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.

Ability to lead change in Finance & Accounting field

– Cppib Reference 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 Cppib Reference in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Diverse revenue streams

– Cppib Reference is present in almost all the verticals within the industry. This has provided firm in Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board 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.

Strong track record of project management

– Cppib Reference is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Successful track record of launching new products

– Cppib Reference has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cppib Reference 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.

Superior customer experience

– The customer experience strategy of Cppib Reference in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Learning organization

- Cppib Reference 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 Cppib Reference is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board Harvard Business Review case study emphasize – knowledge, initiative, and innovation.

Highly skilled collaborators

– Cppib Reference 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 Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.

Cross disciplinary teams

– Horizontal connected teams at the Cppib Reference 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.

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Weaknesses Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board are -

Products dominated business model

– Even though Cppib Reference 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 - Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board should strive to include more intangible value offerings along with its core products and services.

Slow to strategic competitive environment developments

– As Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board HBR case study mentions - Cppib Reference 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.

High cash cycle compare to competitors

Cppib Reference 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

– Cppib Reference 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.

Employees’ incomplete understanding of strategy

– From the instances in the HBR case study Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board, it seems that the employees of Cppib Reference 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.

Skills based hiring

– The stress on hiring functional specialists at Cppib Reference has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

Low market penetration in new markets

– Outside its home market of Cppib Reference, firm in the HBR case study Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Aligning sales with marketing

– It come across in the case study Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board can leverage the sales team experience to cultivate customer relationships as Cppib Reference is planning to shift buying processes online.

High dependence on star products

– The top 2 products and services of the firm as mentioned in the Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board 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 Cppib Reference has relatively successful track record of launching new products.

Lack of clear differentiation of Cppib Reference products

– To increase the profitability and margins on the products, Cppib Reference needs to provide more differentiated products than what it is currently offering in the marketplace.

Workers concerns about automation

– As automation is fast increasing in the segment, Cppib Reference 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.

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Opportunities Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board | 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 Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board are -

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. Cppib Reference 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. Cppib Reference 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.

Buying journey improvements

– Cppib Reference can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cppib Reference can use these opportunities to build new business models that can help the communities that Cppib Reference operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Cppib Reference can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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 Cppib Reference in the consumer business. Now Cppib Reference can target international markets with far fewer capital restrictions requirements than the existing system.

Manufacturing automation

– Cppib Reference 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.

Learning at scale

– Online learning technologies has now opened space for Cppib Reference 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.

Building a culture of innovation

– managers at Cppib Reference 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Cppib Reference 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.

Better consumer reach

– The expansion of the 5G network will help Cppib Reference to increase its market reach. Cppib Reference 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 Cppib Reference 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.

Loyalty marketing

– Cppib Reference 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.

Developing new processes and practices

– Cppib Reference 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.

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Threats Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats mentioned in the HBR case study Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board are -

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Cppib Reference 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 Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board .

Stagnating economy with rate increase

– Cppib Reference 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.

Consumer confidence and its impact on Cppib Reference 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.

Technology acceleration in Forth Industrial Revolution

– Cppib Reference has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Cppib Reference 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 Cppib Reference.

High dependence on third party suppliers

– Cppib Reference 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.

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. Cppib Reference needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board, Cppib Reference may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Cppib Reference 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.

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. Cppib Reference 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.

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.

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. Cppib Reference can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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Weighted SWOT Analysis of Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board 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 Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board 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 Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board 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 Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board 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 Factor Investing: The Reference Portfolio and Canada Pension Plan Investment Board 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 Cppib Reference needs to make to build a sustainable competitive advantage.

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