Case Study Description of Foreign Exchange Markets and Transactions
Provides information on the foreign exchange market and exchange rate movements. Describes the different types of foreign exchange transactions, including spot transactions, forwards, swaps, futures, and options. Includes worked examples to help students understand the different instruments and an appendix with additional exercises. A rewritten version of an earlier note.
Authors :: Mihir A. Desai, Yanjun Wang, Christina B. Pham, Kathleen Luchs
Swot Analysis of "Foreign Exchange Markets and Transactions" written by Mihir A. Desai, Yanjun Wang, Christina B. Pham, Kathleen Luchs includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Exchange Transactions facing as an external strategic factors. Some of the topics covered in Foreign Exchange Markets and Transactions case study are - Strategic Management Strategies, Financial markets, International business and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Foreign Exchange Markets and Transactions casestudy better are - – supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, increasing transportation and logistics costs, there is increasing trade war between United States & China, there is backlash against globalization, geopolitical disruptions, increasing commodity prices,
competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Foreign Exchange Markets and Transactions
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Foreign Exchange Markets and Transactions case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Exchange Transactions, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Exchange Transactions 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 Foreign Exchange Markets and Transactions can be done for the following purposes –
1. Strategic planning using facts provided in Foreign Exchange Markets and Transactions case study
2. Improving business portfolio management of Exchange Transactions
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 Exchange Transactions
Strengths Foreign Exchange Markets and Transactions | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Exchange Transactions in Foreign Exchange Markets and Transactions Harvard Business Review case study are -
Ability to lead change in Finance & Accounting field
– Exchange Transactions 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 Exchange Transactions in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Exchange Transactions has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Exchange Transactions has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Organizational Resilience of Exchange Transactions
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Exchange Transactions does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Exchange Transactions is present in almost all the verticals within the industry. This has provided firm in Foreign Exchange Markets and Transactions 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.
Innovation driven organization
– Exchange Transactions is one of the most innovative firm in sector. Manager in Foreign Exchange Markets and Transactions Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Exchange Transactions is one of the leading recruiters in the industry. Managers in the Foreign Exchange Markets and Transactions are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Exchange Transactions 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.
Learning organization
- Exchange Transactions 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 Exchange Transactions is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Foreign Exchange Markets and Transactions Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Exchange Transactions 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 Mihir A. Desai, Yanjun Wang, Christina B. Pham, Kathleen Luchs 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.
High brand equity
– Exchange Transactions has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Exchange Transactions to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Foreign Exchange Markets and Transactions 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.
Low bargaining power of suppliers
– Suppliers of Exchange Transactions in the sector have low bargaining power. Foreign Exchange Markets and Transactions has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Exchange Transactions to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Foreign Exchange Markets and Transactions | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Foreign Exchange Markets and Transactions are -
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 Exchange Transactions supply chain. Even after few cautionary changes mentioned in the HBR case study - Foreign Exchange Markets and Transactions, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Exchange Transactions vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Exchange Transactions is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Foreign Exchange Markets and Transactions can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, firm in the HBR case study Foreign Exchange Markets and Transactions 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 Exchange Transactions 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Exchange Transactions 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. Exchange Transactions 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.
Low market penetration in new markets
– Outside its home market of Exchange Transactions, firm in the HBR case study Foreign Exchange Markets and Transactions needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Foreign Exchange Markets and Transactions, it seems that the employees of Exchange Transactions 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.
Slow to strategic competitive environment developments
– As Foreign Exchange Markets and Transactions HBR case study mentions - Exchange Transactions 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.
Capital Spending Reduction
– Even during the low interest decade, Exchange Transactions 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.
No frontier risks strategy
– After analyzing the HBR case study Foreign Exchange Markets and Transactions, 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.
Lack of clear differentiation of Exchange Transactions products
– To increase the profitability and margins on the products, Exchange Transactions needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Exchange Transactions 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 Foreign Exchange Markets and Transactions | 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 Foreign Exchange Markets and Transactions are -
Better consumer reach
– The expansion of the 5G network will help Exchange Transactions to increase its market reach. Exchange Transactions 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.
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. Exchange Transactions 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. Exchange Transactions 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Exchange Transactions can use these opportunities to build new business models that can help the communities that Exchange Transactions operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Exchange Transactions can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Exchange Transactions can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Exchange Transactions 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Exchange Transactions is facing challenges because of the dominance of functional experts in the organization. Foreign Exchange Markets and Transactions 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.
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 Exchange Transactions 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Exchange Transactions can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Foreign Exchange Markets and Transactions, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Exchange Transactions can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Foreign Exchange Markets and Transactions suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Exchange Transactions to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Exchange Transactions to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Exchange Transactions 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Exchange Transactions 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.
Threats Foreign Exchange Markets and Transactions External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Foreign Exchange Markets and Transactions are -
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 Exchange Transactions business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Foreign Exchange Markets and Transactions, Exchange Transactions 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 .
High dependence on third party suppliers
– Exchange Transactions 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Exchange Transactions 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.
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. Exchange Transactions needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.
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. Exchange Transactions 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Exchange Transactions with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Exchange Transactions 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 Foreign Exchange Markets and Transactions .
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Exchange Transactions can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Technology acceleration in Forth Industrial Revolution
– Exchange Transactions has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Exchange Transactions 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.
Increasing wage structure of Exchange Transactions
– 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 Exchange Transactions.
Weighted SWOT Analysis of Foreign Exchange Markets and Transactions 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 Foreign Exchange Markets and Transactions 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 Foreign Exchange Markets and Transactions 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 Foreign Exchange Markets and Transactions 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 Foreign Exchange Markets and Transactions 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 Exchange Transactions needs to make to build a sustainable competitive advantage.