Disrupting Wall Street: High Frequency Trading SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Disrupting Wall Street: High Frequency Trading
Michael Lewis's book Flash Boys, published in 2014, revealed to the public numerous controversial Wall Street trading practices made possible by advances in technology, as well as regulatory changes that were (ironically) intended to improve pricing fairness in the financial markets. Lewis's story focused on the man who blew the whistle: Brad Katsuyama, a Canadian banker who ran the New York trading desk for the Royal Bank of Canada. In 2010, he had noticed some odd system responses to his trading requests and began to ask questions. The answers he discovered, and publicized, about high frequency trading set off a firestorm regarding the moral integrity of the financial markets. Very few people understood what was happening, and fewer still comprehended the central role played by information technology. Questions remain: How does information technology influence our concept of wealth? Why do "flash crashes" occur? Are the markets rigged? Will the next disruption to the financial markets involve technology?
Swot Analysis of "Disrupting Wall Street: High Frequency Trading" written by Derrick Neufeld, Brad Evans includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Trading Lewis's facing as an external strategic factors. Some of the topics covered in Disrupting Wall Street: High Frequency Trading case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Disrupting Wall Street: High Frequency Trading casestudy better are - – technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, talent flight as more people leaving formal jobs,
digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Disrupting Wall Street: High Frequency Trading
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Disrupting Wall Street: High Frequency Trading case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Trading Lewis's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Trading Lewis'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 Disrupting Wall Street: High Frequency Trading can be done for the following purposes –
1. Strategic planning using facts provided in Disrupting Wall Street: High Frequency Trading case study
2. Improving business portfolio management of Trading Lewis'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 Trading Lewis's
Strengths Disrupting Wall Street: High Frequency Trading | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Trading Lewis's in Disrupting Wall Street: High Frequency Trading Harvard Business Review case study are -
Innovation driven organization
– Trading Lewis's is one of the most innovative firm in sector. Manager in Disrupting Wall Street: High Frequency Trading 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
– Trading Lewis'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.
Successful track record of launching new products
– Trading Lewis's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Trading Lewis's 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.
Superior customer experience
– The customer experience strategy of Trading Lewis's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Trading Lewis's is one of the leading recruiters in the industry. Managers in the Disrupting Wall Street: High Frequency Trading 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 Trading Lewis's 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.
Training and development
– Trading Lewis's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Disrupting Wall Street: High Frequency Trading 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Trading Lewis's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Trading Lewis's 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.
Ability to lead change in Finance & Accounting field
– Trading Lewis'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 Trading Lewis's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Trading Lewis'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.
Effective Research and Development (R&D)
– Trading Lewis'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 Disrupting Wall Street: High Frequency Trading - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Trading Lewis's 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 Disrupting Wall Street: High Frequency Trading HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Disrupting Wall Street: High Frequency Trading | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Disrupting Wall Street: High Frequency Trading are -
High operating costs
– Compare to the competitors, firm in the HBR case study Disrupting Wall Street: High Frequency Trading 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 Trading Lewis's 's lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Trading Lewis's is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Trading Lewis's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Trading Lewis's to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Disrupting Wall Street: High Frequency Trading, it seems that the employees of Trading Lewis'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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Disrupting Wall Street: High Frequency Trading, in the dynamic environment Trading Lewis's has struggled to respond to the nimble upstart competition. Trading Lewis's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Disrupting Wall Street: High Frequency Trading 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 Trading Lewis's has relatively successful track record of launching new products.
Products dominated business model
– Even though Trading Lewis's 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 - Disrupting Wall Street: High Frequency Trading should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Trading Lewis's products
– To increase the profitability and margins on the products, Trading Lewis's needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Trading Lewis's 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.
Capital Spending Reduction
– Even during the low interest decade, Trading Lewis'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 bargaining power of channel partners
– Because of the regulatory requirements, Derrick Neufeld, Brad Evans suggests that, Trading Lewis's is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Trading Lewis's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Disrupting Wall Street: High Frequency Trading 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 Disrupting Wall Street: High Frequency Trading | 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 Disrupting Wall Street: High Frequency Trading are -
Leveraging digital technologies
– Trading Lewis's 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Trading Lewis'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.
Building a culture of innovation
– managers at Trading Lewis'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.
Loyalty marketing
– Trading Lewis'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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Trading Lewis's is facing challenges because of the dominance of functional experts in the organization. Disrupting Wall Street: High Frequency Trading 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Trading Lewis's 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 Trading Lewis's to hire the very best people irrespective of their geographical location.
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. Trading Lewis'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. Trading Lewis'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.
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. Trading Lewis's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Trading Lewis's to increase its market reach. Trading Lewis'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
– Trading Lewis'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.
Creating value in data economy
– The success of analytics program of Trading Lewis's has opened avenues for new revenue streams for the organization in the industry. This can help Trading Lewis's to build a more holistic ecosystem as suggested in the Disrupting Wall Street: High Frequency Trading case study. Trading Lewis's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Trading Lewis's 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.
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. Trading Lewis's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Disrupting Wall Street: High Frequency Trading External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Disrupting Wall Street: High Frequency Trading are -
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Disrupting Wall Street: High Frequency Trading, Trading Lewis'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 wage structure of Trading Lewis'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 Trading Lewis's.
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 Trading Lewis's business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Trading Lewis'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.
Regulatory challenges
– Trading Lewis's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
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 Trading Lewis's.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Trading Lewis's 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Trading Lewis'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 Disrupting Wall Street: High Frequency Trading .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Trading Lewis's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Trading Lewis'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.
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. Trading Lewis's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Trading Lewis's 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.
Weighted SWOT Analysis of Disrupting Wall Street: High Frequency Trading 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 Disrupting Wall Street: High Frequency Trading 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 Disrupting Wall Street: High Frequency Trading 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 Disrupting Wall Street: High Frequency Trading 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 Disrupting Wall Street: High Frequency Trading 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 Trading Lewis's needs to make to build a sustainable competitive advantage.
