Managing a 401(k) Fund SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Managing a 401(k) Fund
Focuses on an individual's decision to participate in his firm's 401(k) plan and how to invest his contributions. Plan participants have a choice of 10 mutual funds with different investment strategies. Includes data from Morningstar on the composition and performance of the different funds and information on different asset allocation strategies provided by the fund administrator, T. Rowe Price.
Swot Analysis of "Managing a 401(k) Fund" written by Richard S. Ruback, Kathleen S. Luchs includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that 401 Morningstar facing as an external strategic factors. Some of the topics covered in Managing a 401(k) Fund case study are - Strategic Management Strategies, Financial markets and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Managing a 401(k) Fund casestudy better are - – increasing transportation and logistics costs, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, there is backlash against globalization,
digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Managing a 401(k) Fund
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Managing a 401(k) Fund case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the 401 Morningstar, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which 401 Morningstar 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 Managing a 401(k) Fund can be done for the following purposes –
1. Strategic planning using facts provided in Managing a 401(k) Fund case study
2. Improving business portfolio management of 401 Morningstar
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 401 Morningstar
Strengths Managing a 401(k) Fund | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of 401 Morningstar in Managing a 401(k) Fund Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of 401 Morningstar in the sector have low bargaining power. Managing a 401(k) Fund has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps 401 Morningstar to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– 401 Morningstar 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 Managing a 401(k) Fund 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
– 401 Morningstar 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 401 Morningstar 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
– 401 Morningstar is one of the leading recruiters in the industry. Managers in the Managing a 401(k) Fund 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)
– 401 Morningstar 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 Managing a 401(k) Fund - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Finance & Accounting industry
– Managing a 401(k) Fund firm has clearly differentiated products in the market place. This has enabled 401 Morningstar to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped 401 Morningstar to invest into research and development (R&D) and innovation.
Diverse revenue streams
– 401 Morningstar is present in almost all the verticals within the industry. This has provided firm in Managing a 401(k) Fund 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.
Superior customer experience
– The customer experience strategy of 401 Morningstar in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– 401 Morningstar has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled 401 Morningstar to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that 401 Morningstar 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For 401 Morningstar digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. 401 Morningstar 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.
Cross disciplinary teams
– Horizontal connected teams at the 401 Morningstar 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.
Weaknesses Managing a 401(k) Fund | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Managing a 401(k) Fund are -
Low market penetration in new markets
– Outside its home market of 401 Morningstar, firm in the HBR case study Managing a 401(k) Fund 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 Managing a 401(k) Fund, is just above the industry average. 401 Morningstar 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.
Slow decision making process
– As mentioned earlier in the report, 401 Morningstar 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. 401 Morningstar 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Managing a 401(k) Fund 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 401 Morningstar 's lucrative customers.
Interest costs
– Compare to the competition, 401 Morningstar 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.
Increasing silos among functional specialists
– The organizational structure of 401 Morningstar is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. 401 Morningstar needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help 401 Morningstar to focus more on services rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, 401 Morningstar 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 401 Morningstar supply chain. Even after few cautionary changes mentioned in the HBR case study - Managing a 401(k) Fund, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left 401 Morningstar vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study Managing a 401(k) Fund, 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.
Aligning sales with marketing
– It come across in the case study Managing a 401(k) Fund that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Managing a 401(k) Fund can leverage the sales team experience to cultivate customer relationships as 401 Morningstar is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, 401 Morningstar is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Managing a 401(k) Fund can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Managing a 401(k) Fund | 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 Managing a 401(k) Fund are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects 401 Morningstar can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, 401 Morningstar 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.
Better consumer reach
– The expansion of the 5G network will help 401 Morningstar to increase its market reach. 401 Morningstar 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.
Building a culture of innovation
– managers at 401 Morningstar 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.
Buying journey improvements
– 401 Morningstar can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Managing a 401(k) Fund 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.
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 401 Morningstar in the consumer business. Now 401 Morningstar can target international markets with far fewer capital restrictions requirements than the existing system.
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. 401 Morningstar 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. 401 Morningstar 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.
Developing new processes and practices
– 401 Morningstar 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.
Leveraging digital technologies
– 401 Morningstar 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, 401 Morningstar is facing challenges because of the dominance of functional experts in the organization. Managing a 401(k) Fund 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.
Loyalty marketing
– 401 Morningstar 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.
Manufacturing automation
– 401 Morningstar 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.
Using analytics as competitive advantage
– 401 Morningstar 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 Managing a 401(k) Fund - to build a competitive advantage using analytics. The analytics driven competitive advantage can help 401 Morningstar to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Managing a 401(k) Fund External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Managing a 401(k) Fund are -
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. 401 Morningstar needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Environmental challenges
– 401 Morningstar 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. 401 Morningstar can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for 401 Morningstar 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.
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.
Shortening product life cycle
– it is one of the major threat that 401 Morningstar is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– 401 Morningstar 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.
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 401 Morningstar.
Technology acceleration in Forth Industrial Revolution
– 401 Morningstar has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, 401 Morningstar 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Managing a 401(k) Fund, 401 Morningstar 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 .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for 401 Morningstar in the Finance & Accounting sector and impact the bottomline of the organization.
Consumer confidence and its impact on 401 Morningstar 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, 401 Morningstar 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 Managing a 401(k) Fund .
Weighted SWOT Analysis of Managing a 401(k) Fund 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 Managing a 401(k) Fund 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 Managing a 401(k) Fund 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 Managing a 401(k) Fund 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 Managing a 401(k) Fund 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 401 Morningstar needs to make to build a sustainable competitive advantage.
