Deutsche Bank: Discussing the Equity Risk Premium SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
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Case Study SWOT Analysis Solution
Case Study Description of Deutsche Bank: Discussing the Equity Risk Premium
Two members of Deutsche Bank's Fixed Income Research Group are discussing how to advise clients on bond vs. equity asset allocation. A critical aspect to this asset allocation decision is the equity risk premium. Discusses a unique way developed by the bank for understanding the implications of the risk premium.
Authors :: George Chacko, Peter Hecht, Vincent Dessain, Anders Sjoman
Swot Analysis of "Deutsche Bank: Discussing the Equity Risk Premium" written by George Chacko, Peter Hecht, Vincent Dessain, Anders Sjoman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Premium Deutsche facing as an external strategic factors. Some of the topics covered in Deutsche Bank: Discussing the Equity Risk Premium case study are - Strategic Management Strategies, Financial management, Financial markets, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Deutsche Bank: Discussing the Equity Risk Premium casestudy better are - – central banks are concerned over increasing inflation, there is increasing trade war between United States & China, wage bills are increasing, challanges to central banks by blockchain based private currencies, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings,
cloud computing is disrupting traditional business models, increasing commodity prices, etc
Introduction to SWOT Analysis of Deutsche Bank: Discussing the Equity Risk Premium
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Deutsche Bank: Discussing the Equity Risk Premium case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Premium Deutsche, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Premium Deutsche 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 Deutsche Bank: Discussing the Equity Risk Premium can be done for the following purposes –
1. Strategic planning using facts provided in Deutsche Bank: Discussing the Equity Risk Premium case study
2. Improving business portfolio management of Premium Deutsche
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 Premium Deutsche
Strengths Deutsche Bank: Discussing the Equity Risk Premium | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Premium Deutsche in Deutsche Bank: Discussing the Equity Risk Premium Harvard Business Review case study are -
Training and development
– Premium Deutsche has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Deutsche Bank: Discussing the Equity Risk Premium 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.
High brand equity
– Premium Deutsche has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Premium Deutsche to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Finance & Accounting field
– Premium Deutsche 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 Premium Deutsche in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Premium Deutsche is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Premium Deutsche is present in almost all the verticals within the industry. This has provided firm in Deutsche Bank: Discussing the Equity Risk Premium case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Innovation driven organization
– Premium Deutsche is one of the most innovative firm in sector. Manager in Deutsche Bank: Discussing the Equity Risk Premium Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Premium Deutsche
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Premium Deutsche does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Premium Deutsche digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Premium Deutsche 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.
Effective Research and Development (R&D)
– Premium Deutsche 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 Deutsche Bank: Discussing the Equity Risk Premium - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Deutsche Bank: Discussing the Equity Risk Premium 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.
Superior customer experience
– The customer experience strategy of Premium Deutsche in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Premium Deutsche has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Premium Deutsche 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.
Weaknesses Deutsche Bank: Discussing the Equity Risk Premium | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Deutsche Bank: Discussing the Equity Risk Premium are -
Increasing silos among functional specialists
– The organizational structure of Premium Deutsche is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Premium Deutsche needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Premium Deutsche to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Premium Deutsche 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.
Capital Spending Reduction
– Even during the low interest decade, Premium Deutsche 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, Premium Deutsche 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.
Aligning sales with marketing
– It come across in the case study Deutsche Bank: Discussing the Equity Risk Premium 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 Deutsche Bank: Discussing the Equity Risk Premium can leverage the sales team experience to cultivate customer relationships as Premium Deutsche is planning to shift buying processes online.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Premium Deutsche supply chain. Even after few cautionary changes mentioned in the HBR case study - Deutsche Bank: Discussing the Equity Risk Premium, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Premium Deutsche vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Deutsche Bank: Discussing the Equity Risk Premium, is just above the industry average. Premium Deutsche 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Premium Deutsche is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Deutsche Bank: Discussing the Equity Risk Premium can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Premium Deutsche products
– To increase the profitability and margins on the products, Premium Deutsche needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the segment, Premium Deutsche 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Deutsche Bank: Discussing the Equity Risk Premium, in the dynamic environment Premium Deutsche has struggled to respond to the nimble upstart competition. Premium Deutsche has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Deutsche Bank: Discussing the Equity Risk Premium | 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 Deutsche Bank: Discussing the Equity Risk Premium are -
Building a culture of innovation
– managers at Premium Deutsche 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 Premium Deutsche 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.
Manufacturing automation
– Premium Deutsche 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
– Premium Deutsche 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 Premium Deutsche 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.
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. Premium Deutsche 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, Premium Deutsche can use these opportunities to build new business models that can help the communities that Premium Deutsche operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Premium Deutsche 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
– Premium Deutsche can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Deutsche Bank: Discussing the Equity Risk Premium 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.
Creating value in data economy
– The success of analytics program of Premium Deutsche has opened avenues for new revenue streams for the organization in the industry. This can help Premium Deutsche to build a more holistic ecosystem as suggested in the Deutsche Bank: Discussing the Equity Risk Premium case study. Premium Deutsche can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Premium Deutsche 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, Deutsche Bank: Discussing the Equity Risk Premium, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Premium Deutsche has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Deutsche Bank: Discussing the Equity Risk Premium - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Premium Deutsche to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Premium Deutsche 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.
Threats Deutsche Bank: Discussing the Equity Risk Premium External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Deutsche Bank: Discussing the Equity Risk Premium 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. Premium Deutsche can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Premium Deutsche 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Premium Deutsche 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 Deutsche Bank: Discussing the Equity Risk Premium .
Shortening product life cycle
– it is one of the major threat that Premium Deutsche is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Premium Deutsche has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Premium Deutsche needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing wage structure of Premium Deutsche
– 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 Premium Deutsche.
Environmental challenges
– Premium Deutsche 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. Premium Deutsche can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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.
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 Premium Deutsche in the Finance & Accounting sector and impact the bottomline of the organization.
Regulatory challenges
– Premium Deutsche 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.
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. Premium Deutsche 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.
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 Premium Deutsche business can come under increasing regulations regarding data privacy, data security, etc.
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.
Weighted SWOT Analysis of Deutsche Bank: Discussing the Equity Risk Premium 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 Deutsche Bank: Discussing the Equity Risk Premium 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 Deutsche Bank: Discussing the Equity Risk Premium 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 Deutsche Bank: Discussing the Equity Risk Premium 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 Deutsche Bank: Discussing the Equity Risk Premium 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 Premium Deutsche needs to make to build a sustainable competitive advantage.
