Portfolio Selection and the Capital Asset Pricing Model SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Portfolio Selection and the Capital Asset Pricing Model
In the context of determining an optimal portfolio to recommend to two hypothetical investors, this strucutuerd analysis leads students through a series of steps examining return data for three stocks. The analysis first explores the effects of portfolio formation on returns and volatility. With the addition of a market index and a bond portfolio, students easily recognize how portfolios from from these to investment vehicles may be optimal. The analysis then explores stock betas as a measure of risk and the statistical properties of those betas. At the conclusion, students will have a practical understanding of the capital asset pricing model.
Swot Analysis of "Portfolio Selection and the Capital Asset Pricing Model" written by Marc Lipson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Betas Portfolio facing as an external strategic factors. Some of the topics covered in Portfolio Selection and the Capital Asset Pricing Model case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Portfolio Selection and the Capital Asset Pricing Model casestudy better are - – talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, increasing energy prices, challanges to central banks by blockchain based private currencies, increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies,
supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Portfolio Selection and the Capital Asset Pricing Model
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Portfolio Selection and the Capital Asset Pricing Model case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Betas Portfolio, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Betas Portfolio 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 Portfolio Selection and the Capital Asset Pricing Model can be done for the following purposes –
1. Strategic planning using facts provided in Portfolio Selection and the Capital Asset Pricing Model case study
2. Improving business portfolio management of Betas Portfolio
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 Betas Portfolio
Strengths Portfolio Selection and the Capital Asset Pricing Model | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Betas Portfolio in Portfolio Selection and the Capital Asset Pricing Model Harvard Business Review case study are -
Ability to recruit top talent
– Betas Portfolio is one of the leading recruiters in the industry. Managers in the Portfolio Selection and the Capital Asset Pricing Model are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management
– Betas Portfolio 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 Betas Portfolio
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Betas Portfolio does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Betas Portfolio 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.
Training and development
– Betas Portfolio has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Portfolio Selection and the Capital Asset Pricing Model 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.
Effective Research and Development (R&D)
– Betas Portfolio 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 Portfolio Selection and the Capital Asset Pricing Model - 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
– Betas Portfolio is one of the most innovative firm in sector. Manager in Portfolio Selection and the Capital Asset Pricing Model Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Analytics focus
– Betas Portfolio 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 Marc Lipson 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.
Highly skilled collaborators
– Betas Portfolio 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 Portfolio Selection and the Capital Asset Pricing Model HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Finance & Accounting field
– Betas Portfolio 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 Betas Portfolio in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Betas Portfolio in the sector have low bargaining power. Portfolio Selection and the Capital Asset Pricing Model has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Betas Portfolio to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Betas Portfolio digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Betas Portfolio 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.
Weaknesses Portfolio Selection and the Capital Asset Pricing Model | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Portfolio Selection and the Capital Asset Pricing Model are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Portfolio Selection and the Capital Asset Pricing Model 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 Betas Portfolio has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Betas Portfolio 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 operating costs
– Compare to the competitors, firm in the HBR case study Portfolio Selection and the Capital Asset Pricing Model has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Betas Portfolio 's lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Portfolio Selection and the Capital Asset Pricing Model, in the dynamic environment Betas Portfolio has struggled to respond to the nimble upstart competition. Betas Portfolio has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Betas Portfolio, firm in the HBR case study Portfolio Selection and the Capital Asset Pricing Model needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Portfolio Selection and the Capital Asset Pricing Model, it seems that the employees of Betas Portfolio 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 Betas Portfolio 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.
Slow decision making process
– As mentioned earlier in the report, Betas Portfolio 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. Betas Portfolio 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.
Lack of clear differentiation of Betas Portfolio products
– To increase the profitability and margins on the products, Betas Portfolio 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 Betas Portfolio supply chain. Even after few cautionary changes mentioned in the HBR case study - Portfolio Selection and the Capital Asset Pricing Model, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Betas Portfolio vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Betas Portfolio 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 - Portfolio Selection and the Capital Asset Pricing Model should strive to include more intangible value offerings along with its core products and services.
Opportunities Portfolio Selection and the Capital Asset Pricing Model | 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 Portfolio Selection and the Capital Asset Pricing Model are -
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 Betas Portfolio 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.
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. Betas Portfolio can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Betas Portfolio can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Betas Portfolio can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Betas Portfolio 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Betas Portfolio can use these opportunities to build new business models that can help the communities that Betas Portfolio operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Buying journey improvements
– Betas Portfolio can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Portfolio Selection and the Capital Asset Pricing Model 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Betas Portfolio 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 Betas Portfolio to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Betas Portfolio 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.
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. Betas Portfolio 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. Betas Portfolio 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Betas Portfolio is facing challenges because of the dominance of functional experts in the organization. Portfolio Selection and the Capital Asset Pricing Model case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Betas Portfolio has opened avenues for new revenue streams for the organization in the industry. This can help Betas Portfolio to build a more holistic ecosystem as suggested in the Portfolio Selection and the Capital Asset Pricing Model case study. Betas Portfolio can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Betas Portfolio 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.
Threats Portfolio Selection and the Capital Asset Pricing Model External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Portfolio Selection and the Capital Asset Pricing Model are -
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Betas Portfolio 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 Portfolio Selection and the Capital Asset Pricing Model .
Stagnating economy with rate increase
– Betas Portfolio 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.
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.
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. Betas Portfolio can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Betas Portfolio with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Betas Portfolio 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.
Environmental challenges
– Betas Portfolio 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. Betas Portfolio can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Shortening product life cycle
– it is one of the major threat that Betas Portfolio is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Betas Portfolio 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.
Increasing wage structure of Betas Portfolio
– 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 Betas Portfolio.
High dependence on third party suppliers
– Betas Portfolio 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.
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. Betas Portfolio 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.
Weighted SWOT Analysis of Portfolio Selection and the Capital Asset Pricing Model 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 Portfolio Selection and the Capital Asset Pricing Model 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 Portfolio Selection and the Capital Asset Pricing Model 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 Portfolio Selection and the Capital Asset Pricing Model 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 Portfolio Selection and the Capital Asset Pricing Model 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 Betas Portfolio needs to make to build a sustainable competitive advantage.