Numeric Investors manages equity portfolios with the use of a momentum model and a value model. The momentum model is based on earnings surprise and analysts' revisions of their earnings estimates. The firm offers long-short as well as long-only strategies, and its approach involves high portfolio turnover. Numeric has experienced rapid growth in assets under management, which has resulted in higher transaction costs. The firm has already closed many of its products to further investment, and needs to decide where to go next. The case provides a rich setting within which to discuss value investing, momentum investing, the efficiency of analysts' earnings estimates, stock market efficiency, long-short investing, transaction costs, the relationship between assets under management and performance, performance fees, and the business strategies of investment management firms.
Swot Analysis of "Numeric Investors L.P." written by Andre F. Perold, Brian Tierney includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Numeric Momentum facing as an external strategic factors. Some of the topics covered in Numeric Investors L.P. case study are - Strategic Management Strategies, Financial management, Financial markets, Product development and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Numeric Investors L.P. casestudy better are - – talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, geopolitical disruptions,
supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Numeric Investors L.P.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Numeric Investors L.P. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Numeric Momentum, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Numeric Momentum 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 Numeric Investors L.P. can be done for the following purposes –
1. Strategic planning using facts provided in Numeric Investors L.P. case study
2. Improving business portfolio management of Numeric Momentum
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 Numeric Momentum
Strengths Numeric Investors L.P. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Numeric Momentum in Numeric Investors L.P. Harvard Business Review case study are -
Innovation driven organization
– Numeric Momentum is one of the most innovative firm in sector. Manager in Numeric Investors L.P. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Numeric Momentum 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
– Numeric Momentum has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Numeric Investors L.P. 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)
– Numeric Momentum 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 Numeric Investors L.P. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Numeric Momentum has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Numeric Momentum to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Numeric Momentum digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Numeric Momentum 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.
Superior customer experience
– The customer experience strategy of Numeric Momentum in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Numeric Momentum 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.
Highly skilled collaborators
– Numeric Momentum 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 Numeric Investors L.P. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Numeric Momentum is one of the leading recruiters in the industry. Managers in the Numeric Investors L.P. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Numeric Momentum is present in almost all the verticals within the industry. This has provided firm in Numeric Investors L.P. 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.
Organizational Resilience of Numeric Momentum
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Numeric Momentum does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Numeric Investors L.P. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Numeric Investors L.P. are -
Slow to strategic competitive environment developments
– As Numeric Investors L.P. HBR case study mentions - Numeric Momentum takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High 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 Numeric Momentum supply chain. Even after few cautionary changes mentioned in the HBR case study - Numeric Investors L.P., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Numeric Momentum vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Numeric Momentum 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 - Numeric Investors L.P. should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Numeric Investors L.P., in the dynamic environment Numeric Momentum has struggled to respond to the nimble upstart competition. Numeric Momentum 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, Numeric Momentum 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 Numeric Momentum 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 Numeric Investors L.P., it seems that the employees of Numeric Momentum 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.
Capital Spending Reduction
– Even during the low interest decade, Numeric Momentum 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.
Low market penetration in new markets
– Outside its home market of Numeric Momentum, firm in the HBR case study Numeric Investors L.P. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Numeric Investors L.P., is just above the industry average. Numeric Momentum 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 cash cycle compare to competitors
Numeric Momentum 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.
Opportunities Numeric Investors L.P. | 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 Numeric Investors L.P. are -
Learning at scale
– Online learning technologies has now opened space for Numeric Momentum 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.
Loyalty marketing
– Numeric Momentum 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Numeric Momentum is facing challenges because of the dominance of functional experts in the organization. Numeric Investors L.P. 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Numeric Momentum 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.
Manufacturing automation
– Numeric Momentum 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.
Building a culture of innovation
– managers at Numeric Momentum 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.
Better consumer reach
– The expansion of the 5G network will help Numeric Momentum to increase its market reach. Numeric Momentum 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.
Developing new processes and practices
– Numeric Momentum 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 Numeric Momentum 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.
Buying journey improvements
– Numeric Momentum can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Numeric Investors L.P. suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Numeric Momentum can use these opportunities to build new business models that can help the communities that Numeric Momentum operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Numeric Momentum can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Numeric Momentum 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.
Threats Numeric Investors L.P. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Numeric Investors L.P. are -
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. Numeric Momentum 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.
Environmental challenges
– Numeric Momentum 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. Numeric Momentum can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Consumer confidence and its impact on Numeric Momentum 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.
Shortening product life cycle
– it is one of the major threat that Numeric Momentum 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 Numeric Momentum.
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 Numeric Momentum business can come under increasing regulations regarding data privacy, data security, etc.
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. Numeric Momentum needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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
– Numeric Momentum 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
– Numeric Momentum 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Numeric Momentum with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Numeric Investors L.P., Numeric Momentum may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Numeric Momentum 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.
Weighted SWOT Analysis of Numeric Investors L.P. 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 Numeric Investors L.P. 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 Numeric Investors L.P. 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 Numeric Investors L.P. 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 Numeric Investors L.P. 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 Numeric Momentum needs to make to build a sustainable competitive advantage.
