Case Study Description of Schumpeter Finanzberatung GmbH: Evaluating Investment Risk
It is April 2014, and the small investment management firm Elke Schumpeter founded twelve years earlier in Frankfurt, Germany, is performing well. The fund, Schumpeter Finanzberatung GmbH (SF), has pursued a low-cost market timing (tactical asset allocation) strategy that targets a mix of 60% in the equity market index and 40% in German treasury bills (T-bills) but that also strategically changes the mix in an attempt to beat the passive benchmark. The fund has grown to just over a‚¬400 million and since 2006 has outperformed the passive benchmark by 98 basis points. At the suggestion of some investors, Schumpeter is now considering expanding her firm's investment thesis to include investments in individual stocks. She has investigated two firms: ThyssenKrupp AG and Deoleo SA. Before making the decision to invest in individual stocks, Schumpeter needs to decide how to measure the risk of those investments. Students are asked to measure the risk of both individual investments (stocks) as well as the risk of SF's overall portfolio. The case provides a way to explain the intuition behind the capital asset pricing model and to describe the distinction between idiosyncratic (diversifiable) risk and systematic (non-diversifiable) risk.
Swot Analysis of "Schumpeter Finanzberatung GmbH: Evaluating Investment Risk" written by Mitchell A. Petersen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Schumpeter Finanzberatung facing as an external strategic factors. Some of the topics covered in Schumpeter Finanzberatung GmbH: Evaluating Investment Risk case study are - Strategic Management Strategies, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Schumpeter Finanzberatung GmbH: Evaluating Investment Risk casestudy better are - – there is backlash against globalization, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, increasing commodity prices,
challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Schumpeter Finanzberatung GmbH: Evaluating Investment Risk
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Schumpeter Finanzberatung GmbH: Evaluating Investment Risk case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Schumpeter Finanzberatung, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Schumpeter Finanzberatung 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 Schumpeter Finanzberatung GmbH: Evaluating Investment Risk can be done for the following purposes –
1. Strategic planning using facts provided in Schumpeter Finanzberatung GmbH: Evaluating Investment Risk case study
2. Improving business portfolio management of Schumpeter Finanzberatung
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 Schumpeter Finanzberatung
Strengths Schumpeter Finanzberatung GmbH: Evaluating Investment Risk | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Schumpeter Finanzberatung in Schumpeter Finanzberatung GmbH: Evaluating Investment Risk Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Schumpeter Finanzberatung GmbH: Evaluating Investment Risk 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.
Effective Research and Development (R&D)
– Schumpeter Finanzberatung 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 Schumpeter Finanzberatung GmbH: Evaluating Investment Risk - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Schumpeter Finanzberatung 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 Mitchell A. Petersen 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.
Learning organization
- Schumpeter Finanzberatung 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 Schumpeter Finanzberatung is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Schumpeter Finanzberatung GmbH: Evaluating Investment Risk Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Schumpeter Finanzberatung has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Schumpeter Finanzberatung GmbH: Evaluating Investment Risk 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.
Successful track record of launching new products
– Schumpeter Finanzberatung has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Schumpeter Finanzberatung 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.
High switching costs
– The high switching costs that Schumpeter Finanzberatung 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.
Ability to lead change in Finance & Accounting field
– Schumpeter Finanzberatung 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 Schumpeter Finanzberatung in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Finance & Accounting industry
– Schumpeter Finanzberatung GmbH: Evaluating Investment Risk firm has clearly differentiated products in the market place. This has enabled Schumpeter Finanzberatung to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Schumpeter Finanzberatung to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Schumpeter Finanzberatung 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 Schumpeter Finanzberatung GmbH: Evaluating Investment Risk HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Schumpeter Finanzberatung
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Schumpeter Finanzberatung does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Schumpeter Finanzberatung in the sector have low bargaining power. Schumpeter Finanzberatung GmbH: Evaluating Investment Risk has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Schumpeter Finanzberatung to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Schumpeter Finanzberatung GmbH: Evaluating Investment Risk | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Schumpeter Finanzberatung GmbH: Evaluating Investment Risk are -
High cash cycle compare to competitors
Schumpeter Finanzberatung 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.
Aligning sales with marketing
– It come across in the case study Schumpeter Finanzberatung GmbH: Evaluating Investment Risk 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 Schumpeter Finanzberatung GmbH: Evaluating Investment Risk can leverage the sales team experience to cultivate customer relationships as Schumpeter Finanzberatung is planning to shift buying processes online.
Interest costs
– Compare to the competition, Schumpeter Finanzberatung 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.
Need for greater diversity
– Schumpeter Finanzberatung has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Schumpeter Finanzberatung GmbH: Evaluating Investment Risk, in the dynamic environment Schumpeter Finanzberatung has struggled to respond to the nimble upstart competition. Schumpeter Finanzberatung has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Schumpeter Finanzberatung 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. Schumpeter Finanzberatung even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High bargaining power of channel partners
– Because of the regulatory requirements, Mitchell A. Petersen suggests that, Schumpeter Finanzberatung 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Schumpeter Finanzberatung 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.
Increasing silos among functional specialists
– The organizational structure of Schumpeter Finanzberatung is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Schumpeter Finanzberatung needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Schumpeter Finanzberatung to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Schumpeter Finanzberatung products
– To increase the profitability and margins on the products, Schumpeter Finanzberatung needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Schumpeter Finanzberatung 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.
Opportunities Schumpeter Finanzberatung GmbH: Evaluating Investment Risk | 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 Schumpeter Finanzberatung GmbH: Evaluating Investment Risk are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Schumpeter Finanzberatung can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Schumpeter Finanzberatung 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Schumpeter Finanzberatung can use these opportunities to build new business models that can help the communities that Schumpeter Finanzberatung operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Buying journey improvements
– Schumpeter Finanzberatung can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Schumpeter Finanzberatung GmbH: Evaluating Investment Risk 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Schumpeter Finanzberatung 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, Schumpeter Finanzberatung GmbH: Evaluating Investment Risk, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Schumpeter Finanzberatung to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Schumpeter Finanzberatung 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.
Creating value in data economy
– The success of analytics program of Schumpeter Finanzberatung has opened avenues for new revenue streams for the organization in the industry. This can help Schumpeter Finanzberatung to build a more holistic ecosystem as suggested in the Schumpeter Finanzberatung GmbH: Evaluating Investment Risk case study. Schumpeter Finanzberatung can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Schumpeter Finanzberatung in the consumer business. Now Schumpeter Finanzberatung can target international markets with far fewer capital restrictions requirements than the existing system.
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 Schumpeter Finanzberatung 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Schumpeter Finanzberatung 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 Schumpeter Finanzberatung to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Schumpeter Finanzberatung 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.
Leveraging digital technologies
– Schumpeter Finanzberatung 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.
Threats Schumpeter Finanzberatung GmbH: Evaluating Investment Risk External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Schumpeter Finanzberatung GmbH: Evaluating Investment Risk are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Schumpeter Finanzberatung 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 Schumpeter Finanzberatung GmbH: Evaluating Investment Risk .
High dependence on third party suppliers
– Schumpeter Finanzberatung 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.
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. Schumpeter Finanzberatung needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Regulatory challenges
– Schumpeter Finanzberatung 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.
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. Schumpeter Finanzberatung can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Schumpeter Finanzberatung 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.
Technology acceleration in Forth Industrial Revolution
– Schumpeter Finanzberatung has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Schumpeter Finanzberatung 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.
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 Schumpeter Finanzberatung in the Finance & Accounting sector and impact the bottomline of the organization.
Environmental challenges
– Schumpeter Finanzberatung 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. Schumpeter Finanzberatung can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Schumpeter Finanzberatung 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.
Shortening product life cycle
– it is one of the major threat that Schumpeter Finanzberatung is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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 Schumpeter Finanzberatung GmbH: Evaluating Investment Risk, Schumpeter Finanzberatung 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 .
Consumer confidence and its impact on Schumpeter Finanzberatung 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.
Weighted SWOT Analysis of Schumpeter Finanzberatung GmbH: Evaluating Investment Risk 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 Schumpeter Finanzberatung GmbH: Evaluating Investment Risk 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 Schumpeter Finanzberatung GmbH: Evaluating Investment Risk 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 Schumpeter Finanzberatung GmbH: Evaluating Investment Risk 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 Schumpeter Finanzberatung GmbH: Evaluating Investment Risk 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 Schumpeter Finanzberatung needs to make to build a sustainable competitive advantage.