Bear Stearns and the Seeds of Its Demise SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Bear Stearns and the Seeds of Its Demise
This case is suitable for courses on corporate finance at the graduate or advanced undergraduate level that cover banking, financing, security design, capital structure, or capital markets. The case covers the events that led to the collapse of Bear Stearns's (Bear's) hedge funds in July 2007 and traces management's response to the situation through January 2008. These events include macroeconomic factors that fueled the housing boom, the growth of securitization, structured products, and credit default swaps, and the maturity mismatch of financial institutions' funding strategies. The case provides a rich setting for students to understand the increasingly interrelated nature of banking activities, which poses large systemic risk to the financial sector. Two key questions are posed: "What factors were responsible for the collapse of Bear's hedge funds?" and "Was the response by Bear's management adequate in light of the collapse and the credit problems that ensued?" John Corso is a hedge fund manager with large cash balances in a prime brokerage account at Bear. In January 2008, he receives a call from a senior Bear executive reassuring him that the firm is in good hands following a shakeup of top management. The previous summer, two Bear hedge funds collapsed as a result of their investments in collateralized debt obligations (CDOs) that were backed by subprime mortgages. As a longtime client of Bear, Corso must evaluate whether the steps taken by management have been sufficient to resolve its credit problems or whether now is the time to remove his funds from the firm.
Swot Analysis of "Bear Stearns and the Seeds of Its Demise" written by Susan Chaplinsky includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Bear Bear's facing as an external strategic factors. Some of the topics covered in Bear Stearns and the Seeds of Its Demise case study are - Strategic Management Strategies, Recession and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Bear Stearns and the Seeds of Its Demise casestudy better are - – geopolitical disruptions, there is backlash against globalization, technology disruption, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation,
increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Bear Stearns and the Seeds of Its Demise
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Bear Stearns and the Seeds of Its Demise case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Bear Bear's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Bear Bear's 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 Bear Stearns and the Seeds of Its Demise can be done for the following purposes –
1. Strategic planning using facts provided in Bear Stearns and the Seeds of Its Demise case study
2. Improving business portfolio management of Bear Bear's
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 Bear Bear's
Strengths Bear Stearns and the Seeds of Its Demise | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Bear Bear's in Bear Stearns and the Seeds of Its Demise Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Bear Bear's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Bear Bear's 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.
Organizational Resilience of Bear Bear's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Bear Bear's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Bear Stearns and the Seeds of Its Demise 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.
Training and development
– Bear Bear's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Bear Stearns and the Seeds of Its Demise 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.
Innovation driven organization
– Bear Bear's is one of the most innovative firm in sector. Manager in Bear Stearns and the Seeds of Its Demise 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
– Bear Bear's 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 Bear Bear's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Bear Bear's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Bear Bear's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Bear Bear's is present in almost all the verticals within the industry. This has provided firm in Bear Stearns and the Seeds of Its Demise 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
– Bear Bear's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Bear Bear's is one of the leading recruiters in the industry. Managers in the Bear Stearns and the Seeds of Its Demise are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Bear Bear's 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 Bear Stearns and the Seeds of Its Demise - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Bear Stearns and the Seeds of Its Demise | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Bear Stearns and the Seeds of Its Demise are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Bear Stearns and the Seeds of Its Demise, in the dynamic environment Bear Bear's has struggled to respond to the nimble upstart competition. Bear Bear's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Bear Bear's products
– To increase the profitability and margins on the products, Bear Bear's needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Bear Bear's, firm in the HBR case study Bear Stearns and the Seeds of Its Demise needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Bear Stearns and the Seeds of Its Demise HBR case study mentions - Bear Bear's 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Bear Bear's needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Capital Spending Reduction
– Even during the low interest decade, Bear Bear's has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High 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 Bear Bear's supply chain. Even after few cautionary changes mentioned in the HBR case study - Bear Stearns and the Seeds of Its Demise, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Bear Bear's vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Bear Stearns and the Seeds of Its Demise, it seems that the employees of Bear Bear's 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.
Interest costs
– Compare to the competition, Bear Bear's 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Bear Stearns and the Seeds of Its Demise, is just above the industry average. Bear Bear's needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Bear Stearns and the Seeds of Its Demise 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 Bear Bear's has relatively successful track record of launching new products.
Opportunities Bear Stearns and the Seeds of Its Demise | 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 Bear Stearns and the Seeds of Its Demise are -
Creating value in data economy
– The success of analytics program of Bear Bear's has opened avenues for new revenue streams for the organization in the industry. This can help Bear Bear's to build a more holistic ecosystem as suggested in the Bear Stearns and the Seeds of Its Demise case study. Bear Bear's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Bear Bear's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Bear Bear's 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 Bear Bear's 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.
Using analytics as competitive advantage
– Bear Bear's 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 Bear Stearns and the Seeds of Its Demise - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Bear Bear's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Bear Bear's 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.
Developing new processes and practices
– Bear Bear's 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 Bear Bear's 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.
Loyalty marketing
– Bear Bear's 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.
Buying journey improvements
– Bear Bear's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Bear Stearns and the Seeds of Its Demise 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.
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. Bear Bear's 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. Bear Bear's 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.
Better consumer reach
– The expansion of the 5G network will help Bear Bear's to increase its market reach. Bear Bear's 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
– Bear Bear's 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.
Threats Bear Stearns and the Seeds of Its Demise External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Bear Stearns and the Seeds of Its Demise are -
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 Bear Bear's.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Bear Stearns and the Seeds of Its Demise, Bear Bear's 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 .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Bear Bear's 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 Bear Stearns and the Seeds of Its Demise .
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 Bear Bear's business can come under increasing regulations regarding data privacy, data security, etc.
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.
Increasing wage structure of Bear Bear's
– 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 Bear Bear's.
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. Bear Bear's needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Consumer confidence and its impact on Bear Bear's 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 Bear Bear's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Bear Bear's 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. Bear Bear's can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
High dependence on third party suppliers
– Bear Bear's 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.
Stagnating economy with rate increase
– Bear Bear's 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.
Shortening product life cycle
– it is one of the major threat that Bear Bear's is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Bear Stearns and the Seeds of Its Demise 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 Bear Stearns and the Seeds of Its Demise 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 Bear Stearns and the Seeds of Its Demise 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 Bear Stearns and the Seeds of Its Demise 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 Bear Stearns and the Seeds of Its Demise 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 Bear Bear's needs to make to build a sustainable competitive advantage.
