The Determinants of Interest Rates SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of The Determinants of Interest Rates
Technically, the Three-Paned Model helps us understand the determinants of interest rates in general but tells us nothing about any particular interest rate. The vagueness of the Three-Paned Model is useful when first learning international macroeconomics, but is untenable as we move toward a more complete understanding of interest rates. This technical note is much more precise about real and nominal interest rates, providing a more complete IS/LM model as a driver of general movements in interest rates, presenting a supply and demand model for bonds that further enhances our understanding of interest rate movements, and discussing the yield curve, which informs us about the relationship between similar bonds of different maturities.
Swot Analysis of "The Determinants of Interest Rates" written by Francis Warnock includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Rates Paned facing as an external strategic factors. Some of the topics covered in The Determinants of Interest Rates case study are - Strategic Management Strategies, Financial markets and Finance & Accounting.
Some of the macro environment factors that can be used to understand the The Determinants of Interest Rates casestudy better are - – increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, geopolitical disruptions, supply chains are disrupted by pandemic , there is backlash against globalization, wage bills are increasing,
increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, etc
Introduction to SWOT Analysis of The Determinants of Interest Rates
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The Determinants of Interest Rates case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rates Paned, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rates Paned 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 The Determinants of Interest Rates can be done for the following purposes –
1. Strategic planning using facts provided in The Determinants of Interest Rates case study
2. Improving business portfolio management of Rates Paned
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 Rates Paned
Strengths The Determinants of Interest Rates | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rates Paned in The Determinants of Interest Rates Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Rates Paned are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Highly skilled collaborators
– Rates Paned 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 The Determinants of Interest Rates HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Rates Paned digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rates Paned 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.
Learning organization
- Rates Paned 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 Rates Paned is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The Determinants of Interest Rates Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Rates Paned
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Rates Paned does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Rates Paned 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.
Low bargaining power of suppliers
– Suppliers of Rates Paned in the sector have low bargaining power. The Determinants of Interest Rates has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Rates Paned to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Finance & Accounting industry
– The Determinants of Interest Rates firm has clearly differentiated products in the market place. This has enabled Rates Paned to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Rates Paned to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Rates Paned is present in almost all the verticals within the industry. This has provided firm in The Determinants of Interest Rates 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.
Successful track record of launching new products
– Rates Paned has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Rates Paned 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.
Ability to lead change in Finance & Accounting field
– Rates Paned 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 Rates Paned in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Rates Paned 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 Francis Warnock 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.
Weaknesses The Determinants of Interest Rates | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Determinants of Interest Rates are -
High operating costs
– Compare to the competitors, firm in the HBR case study The Determinants of Interest Rates 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 Rates Paned 's lucrative customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Francis Warnock suggests that, Rates Paned 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 decision making process
– As mentioned earlier in the report, Rates Paned 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. Rates Paned 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.
Slow to strategic competitive environment developments
– As The Determinants of Interest Rates HBR case study mentions - Rates Paned 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, Rates Paned 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.
Interest costs
– Compare to the competition, Rates Paned 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.
Low market penetration in new markets
– Outside its home market of Rates Paned, firm in the HBR case study The Determinants of Interest Rates needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Rates Paned is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Rates Paned needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Rates Paned to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Rates Paned has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The Determinants of Interest Rates, is just above the industry average. Rates Paned 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Rates Paned 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.
Opportunities The Determinants of Interest Rates | 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 The Determinants of Interest Rates are -
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. Rates Paned 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, Rates Paned can use these opportunities to build new business models that can help the communities that Rates Paned operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Rates Paned 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. Rates Paned 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.
Creating value in data economy
– The success of analytics program of Rates Paned has opened avenues for new revenue streams for the organization in the industry. This can help Rates Paned to build a more holistic ecosystem as suggested in the The Determinants of Interest Rates case study. Rates Paned can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Rates Paned 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.
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 Rates Paned 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.
Developing new processes and practices
– Rates Paned 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Rates Paned can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Rates Paned can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The Determinants of Interest Rates 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.
Leveraging digital technologies
– Rates Paned 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Rates Paned 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Rates Paned 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 Rates Paned to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Rates Paned 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, The Determinants of Interest Rates, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats The Determinants of Interest Rates External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The Determinants of Interest Rates are -
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. Rates Paned can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Rates Paned 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.
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 Rates Paned in the Finance & Accounting sector and impact the bottomline of the organization.
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 Rates Paned.
Consumer confidence and its impact on Rates Paned 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.
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 Rates Paned 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 The Determinants of Interest Rates, Rates Paned 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 .
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.
Environmental challenges
– Rates Paned 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. Rates Paned can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Rates Paned 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 The Determinants of Interest Rates .
High dependence on third party suppliers
– Rates Paned 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.
Technology acceleration in Forth Industrial Revolution
– Rates Paned has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Rates Paned 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Rates Paned with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of The Determinants of Interest Rates 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 The Determinants of Interest Rates 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 The Determinants of Interest Rates 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 The Determinants of Interest Rates 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 The Determinants of Interest Rates 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 Rates Paned needs to make to build a sustainable competitive advantage.
