Case Study Description of Travelers Mortgage Securities CMO
Describes a series of collateralized mortgage obligations offered by Travelers Insurance. Provides a general description of the life insurance business and the role of life insurance in the capital markets. Also describes a variety of mortgage related instruments, including pass-through securities, pay-through bonds, mortgage-backed bonds, and CMOs; and outlines trends in the securitization of mortgage assets. Background on the pricing of mortgage securities and models of prepayment on mortgage instruments is included. The protagonist, an insurance company portfolio manager, wonders why Travelers is issuing this security (and retaining one class of the bonds) and considers purchasing one or more of the bond classes offered. The student should understand the yield curve arbitrage driving the issuance of CMOs, the reason Travelers undertook the transaction, and the interaction of the primary and secondary residential mortgage markets.
Swot Analysis of "Travelers Mortgage Securities CMO" written by Scott P. Mason, Sally E. Durdan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Mortgage Travelers facing as an external strategic factors. Some of the topics covered in Travelers Mortgage Securities CMO case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Travelers Mortgage Securities CMO casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, increasing transportation and logistics costs, talent flight as more people leaving formal jobs,
competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Travelers Mortgage Securities CMO
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Travelers Mortgage Securities CMO case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mortgage Travelers, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mortgage Travelers 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 Travelers Mortgage Securities CMO can be done for the following purposes –
1. Strategic planning using facts provided in Travelers Mortgage Securities CMO case study
2. Improving business portfolio management of Mortgage Travelers
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 Mortgage Travelers
Strengths Travelers Mortgage Securities CMO | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mortgage Travelers in Travelers Mortgage Securities CMO Harvard Business Review case study are -
Training and development
– Mortgage Travelers has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Travelers Mortgage Securities CMO 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.
Cross disciplinary teams
– Horizontal connected teams at the Mortgage Travelers 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.
Innovation driven organization
– Mortgage Travelers is one of the most innovative firm in sector. Manager in Travelers Mortgage Securities CMO Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Analytics focus
– Mortgage Travelers 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 Scott P. Mason, Sally E. Durdan 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.
Highly skilled collaborators
– Mortgage Travelers 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 Travelers Mortgage Securities CMO HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Mortgage Travelers 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)
– Mortgage Travelers 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 Travelers Mortgage Securities CMO - 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
– Travelers Mortgage Securities CMO firm has clearly differentiated products in the market place. This has enabled Mortgage Travelers to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Mortgage Travelers to invest into research and development (R&D) and innovation.
Organizational Resilience of Mortgage Travelers
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Mortgage Travelers does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Mortgage Travelers 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 Mortgage Travelers is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Travelers Mortgage Securities CMO Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Mortgage Travelers has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Mortgage Travelers to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Mortgage Travelers is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Travelers Mortgage Securities CMO | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Travelers Mortgage Securities CMO are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Travelers Mortgage Securities CMO, in the dynamic environment Mortgage Travelers has struggled to respond to the nimble upstart competition. Mortgage Travelers 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, Mortgage Travelers 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.
Slow decision making process
– As mentioned earlier in the report, Mortgage Travelers 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. Mortgage Travelers 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.
Increasing silos among functional specialists
– The organizational structure of Mortgage Travelers is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Mortgage Travelers needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Mortgage Travelers to focus more on services rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Travelers Mortgage Securities CMO, is just above the industry average. Mortgage Travelers needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Travelers Mortgage Securities CMO 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 Mortgage Travelers has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Travelers Mortgage Securities CMO 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 Mortgage Travelers 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Mortgage Travelers 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.
Slow to strategic competitive environment developments
– As Travelers Mortgage Securities CMO HBR case study mentions - Mortgage Travelers takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Mortgage Travelers needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Aligning sales with marketing
– It come across in the case study Travelers Mortgage Securities CMO 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 Travelers Mortgage Securities CMO can leverage the sales team experience to cultivate customer relationships as Mortgage Travelers is planning to shift buying processes online.
Opportunities Travelers Mortgage Securities CMO | 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 Travelers Mortgage Securities CMO are -
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. Mortgage Travelers 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. Mortgage Travelers can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Better consumer reach
– The expansion of the 5G network will help Mortgage Travelers to increase its market reach. Mortgage Travelers 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
– Mortgage Travelers 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.
Loyalty marketing
– Mortgage Travelers 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 Mortgage Travelers 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Mortgage Travelers 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, Travelers Mortgage Securities CMO, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Mortgage Travelers 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.
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. Mortgage Travelers can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Mortgage Travelers can use these opportunities to build new business models that can help the communities that Mortgage Travelers operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Mortgage Travelers can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Mortgage Travelers can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Mortgage Travelers 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, Mortgage Travelers is facing challenges because of the dominance of functional experts in the organization. Travelers Mortgage Securities CMO 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.
Threats Travelers Mortgage Securities CMO External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Travelers Mortgage Securities CMO 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.
Environmental challenges
– Mortgage Travelers 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. Mortgage Travelers can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 Mortgage Travelers.
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 Mortgage Travelers in the Finance & Accounting sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Mortgage Travelers with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Mortgage Travelers business can come under increasing regulations regarding data privacy, data security, etc.
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. Mortgage Travelers can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Mortgage Travelers 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.
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. Mortgage Travelers needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Travelers Mortgage Securities CMO, Mortgage Travelers 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 .
Shortening product life cycle
– it is one of the major threat that Mortgage Travelers 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
– Mortgage Travelers 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.
Increasing wage structure of Mortgage Travelers
– 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 Mortgage Travelers.
Weighted SWOT Analysis of Travelers Mortgage Securities CMO 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 Travelers Mortgage Securities CMO 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 Travelers Mortgage Securities CMO 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 Travelers Mortgage Securities CMO 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 Travelers Mortgage Securities CMO 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 Mortgage Travelers needs to make to build a sustainable competitive advantage.
