Exchange-traded funds (ETFs) and HOLDRS (Holding Company Depositary Receipts) represent recent and highly successful capital market innovations. HOLDRS closely approximates a buy-and-hold strategy, and Merrill Lynch believes the product has significantly lower taxes and other costs than ETFs. The firm is considering broadening the market for HOLDRS by introducing a new 50-stock basket, "Market 2000+ HOLDRS," that would hold 50 of the world's top-capitalized stocks.
Swot Analysis of "Merrill Lynch HOLDRS" written by Andre F. Perold, Simon Brown includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Holdrs Etfs facing as an external strategic factors. Some of the topics covered in Merrill Lynch HOLDRS case study are - Strategic Management Strategies, Financial markets, Innovation, Policy and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Merrill Lynch HOLDRS casestudy better are - – increasing commodity prices, there is backlash against globalization, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing,
technology disruption, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Merrill Lynch HOLDRS
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Merrill Lynch HOLDRS case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Holdrs Etfs, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Holdrs Etfs 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 Merrill Lynch HOLDRS can be done for the following purposes –
1. Strategic planning using facts provided in Merrill Lynch HOLDRS case study
2. Improving business portfolio management of Holdrs Etfs
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 Holdrs Etfs
Strengths Merrill Lynch HOLDRS | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Holdrs Etfs in Merrill Lynch HOLDRS Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Merrill Lynch HOLDRS 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.
Ability to lead change in Finance & Accounting field
– Holdrs Etfs 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 Holdrs Etfs in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Holdrs Etfs is present in almost all the verticals within the industry. This has provided firm in Merrill Lynch HOLDRS 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.
Ability to recruit top talent
– Holdrs Etfs is one of the leading recruiters in the industry. Managers in the Merrill Lynch HOLDRS are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Holdrs Etfs 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.
Successful track record of launching new products
– Holdrs Etfs has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Holdrs Etfs 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.
High switching costs
– The high switching costs that Holdrs Etfs 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.
Highly skilled collaborators
– Holdrs Etfs 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 Merrill Lynch HOLDRS HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Holdrs Etfs
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Holdrs Etfs does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Finance & Accounting industry
– Merrill Lynch HOLDRS firm has clearly differentiated products in the market place. This has enabled Holdrs Etfs to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Holdrs Etfs to invest into research and development (R&D) and innovation.
Strong track record of project management
– Holdrs Etfs is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Holdrs Etfs has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Merrill Lynch HOLDRS 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.
Weaknesses Merrill Lynch HOLDRS | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Merrill Lynch HOLDRS are -
High cash cycle compare to competitors
Holdrs Etfs 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.
No frontier risks strategy
– After analyzing the HBR case study Merrill Lynch HOLDRS, 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Merrill Lynch HOLDRS, it seems that the employees of Holdrs Etfs 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.
Low market penetration in new markets
– Outside its home market of Holdrs Etfs, firm in the HBR case study Merrill Lynch HOLDRS needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the segment, Holdrs Etfs 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.
Aligning sales with marketing
– It come across in the case study Merrill Lynch HOLDRS 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 Merrill Lynch HOLDRS can leverage the sales team experience to cultivate customer relationships as Holdrs Etfs is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Holdrs Etfs is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Holdrs Etfs needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Holdrs Etfs to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Holdrs Etfs 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 - Merrill Lynch HOLDRS should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Merrill Lynch HOLDRS HBR case study mentions - Holdrs Etfs 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.
Lack of clear differentiation of Holdrs Etfs products
– To increase the profitability and margins on the products, Holdrs Etfs needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Holdrs Etfs is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Merrill Lynch HOLDRS can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Merrill Lynch HOLDRS | 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 Merrill Lynch HOLDRS 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. Holdrs Etfs 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. Holdrs Etfs 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. Holdrs Etfs can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Holdrs Etfs 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Holdrs Etfs can use these opportunities to build new business models that can help the communities that Holdrs Etfs operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Better consumer reach
– The expansion of the 5G network will help Holdrs Etfs to increase its market reach. Holdrs Etfs 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.
Manufacturing automation
– Holdrs Etfs 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.
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 Holdrs Etfs 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Holdrs Etfs 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 Holdrs Etfs to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Holdrs Etfs 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.
Using analytics as competitive advantage
– Holdrs Etfs 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 Merrill Lynch HOLDRS - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Holdrs Etfs to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Holdrs Etfs can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Holdrs Etfs 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.
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 Holdrs Etfs in the consumer business. Now Holdrs Etfs can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Merrill Lynch HOLDRS External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Merrill Lynch HOLDRS are -
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. Holdrs Etfs needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 Holdrs Etfs in the Finance & Accounting sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Holdrs Etfs with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Holdrs Etfs business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Holdrs Etfs 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 Merrill Lynch HOLDRS .
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. Holdrs Etfs 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.
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.
Regulatory challenges
– Holdrs Etfs 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.
Shortening product life cycle
– it is one of the major threat that Holdrs Etfs is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Holdrs Etfs.
Technology acceleration in Forth Industrial Revolution
– Holdrs Etfs has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Holdrs Etfs 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.
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.
Stagnating economy with rate increase
– Holdrs Etfs 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.
Weighted SWOT Analysis of Merrill Lynch HOLDRS 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 Merrill Lynch HOLDRS 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 Merrill Lynch HOLDRS 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 Merrill Lynch HOLDRS 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 Merrill Lynch HOLDRS 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 Holdrs Etfs needs to make to build a sustainable competitive advantage.