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 - – increasing energy prices, there is increasing trade war between United States & China, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices,
technology disruption, wage bills are increasing, 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 -
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.
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.
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.
Learning organization
- Betas Portfolio 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 Betas Portfolio is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Portfolio Selection and the Capital Asset Pricing Model Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Finance & Accounting industry
– Portfolio Selection and the Capital Asset Pricing Model firm has clearly differentiated products in the market place. This has enabled Betas Portfolio to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Betas Portfolio to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Betas Portfolio in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Diverse revenue streams
– Betas Portfolio is present in almost all the verticals within the industry. This has provided firm in Portfolio Selection and the Capital Asset Pricing Model 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 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.
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.
Operational resilience
– The operational resilience strategy in the Portfolio Selection and the Capital Asset Pricing Model 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.
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 -
Need for greater diversity
– Betas Portfolio has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High cash cycle compare to competitors
Betas Portfolio 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.
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.
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.
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.
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.
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.
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.
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.
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.
No frontier risks strategy
– After analyzing the HBR case study Portfolio Selection and the Capital Asset Pricing Model, 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.
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 -
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 Betas Portfolio in the consumer business. Now Betas Portfolio can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Betas Portfolio 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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Betas Portfolio in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help Betas Portfolio to increase its market reach. Betas Portfolio 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.
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.
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.
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.
Loyalty marketing
– Betas Portfolio 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Betas Portfolio 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.
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.
Using analytics as competitive advantage
– Betas Portfolio 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 Portfolio Selection and the Capital Asset Pricing Model - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Betas Portfolio to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Betas Portfolio 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.
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 -
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.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Betas Portfolio has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Betas Portfolio 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.
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.
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 Betas Portfolio business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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 .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Portfolio Selection and the Capital Asset Pricing Model, Betas Portfolio 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 .
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.