Case Study Description of The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes
In 2013, the chief business officer at the Bombay Stock Exchange needed to prepare a recommendation on whether to pursue liquidity enhancement schemes in the equity cash market. The Bombay Stock Exchange, the oldest stock exchange in Asia, had held a monopoly in India until 1994, when the National Stock Exchange was launched. When derivatives were introduced to the Indian stock exchanges in 2000, the Bombay Stock Exchange had been unprepared, and the National Stock Exchange soon captured the entire derivatives market. In 2011, the Securities and Exchange Board of India approved the introduction of the Liquidity Enhancement Incentive Programmes on illiquid securities in the derivatives segment. The Bombay Stock Exchange then introduced the incentives for various illiquid products in the derivatives segment, but lost profit as a result of the incentives it paid out. Had the Liquidity Enhancement Incentive Programmes improved liquidity in the derivatives segment? Was it worth sacrificing profit to gain liquidity and market share? The chief business officer needed to address the long-term benefits of liquidity enhancement schemes and the merits of introducing such schemes to the Bombay Stock Exchange's equity cash market. Nupur Pavan Bang, Khemchand H. Sakaldeepi and Ramabhadran S. Thirumalai are affiliated with Indian School of Business.
Authors :: Nupur Pavan Bang, Khemchand H. Sakaldeepi, Ramabhadran S. Thirumalai
Swot Analysis of "The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes" written by Nupur Pavan Bang, Khemchand H. Sakaldeepi, Ramabhadran S. Thirumalai includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Bombay Liquidity facing as an external strategic factors. Some of the topics covered in The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes 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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes casestudy better are - – challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, there is backlash against globalization,
increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Bombay Liquidity, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Bombay Liquidity 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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes can be done for the following purposes –
1. Strategic planning using facts provided in The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes case study
2. Improving business portfolio management of Bombay Liquidity
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 Bombay Liquidity
Strengths The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Bombay Liquidity in The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes Harvard Business Review case study are -
High switching costs
– The high switching costs that Bombay Liquidity 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.
Diverse revenue streams
– Bombay Liquidity is present in almost all the verticals within the industry. This has provided firm in The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Bombay Liquidity digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Bombay Liquidity 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.
Highly skilled collaborators
– Bombay Liquidity 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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Finance & Accounting field
– Bombay Liquidity 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 Bombay Liquidity in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Bombay Liquidity is one of the most innovative firm in sector. Manager in The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Finance & Accounting industry
– The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes firm has clearly differentiated products in the market place. This has enabled Bombay Liquidity to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Bombay Liquidity to invest into research and development (R&D) and innovation.
Learning organization
- Bombay Liquidity 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 Bombay Liquidity is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes 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.
Strong track record of project management
– Bombay Liquidity is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Bombay Liquidity has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Bombay Liquidity 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.
Analytics focus
– Bombay Liquidity 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 Nupur Pavan Bang, Khemchand H. Sakaldeepi, Ramabhadran S. Thirumalai 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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Bombay Liquidity is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes, it seems that the employees of Bombay Liquidity don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow decision making process
– As mentioned earlier in the report, Bombay Liquidity 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. Bombay Liquidity 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 cash cycle compare to competitors
Bombay Liquidity 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.
Skills based hiring
– The stress on hiring functional specialists at Bombay Liquidity 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.
Slow to strategic competitive environment developments
– As The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes HBR case study mentions - Bombay Liquidity 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.
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 Bombay Liquidity supply chain. Even after few cautionary changes mentioned in the HBR case study - The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Bombay Liquidity vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes, in the dynamic environment Bombay Liquidity has struggled to respond to the nimble upstart competition. Bombay Liquidity has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners
– Because of the regulatory requirements, Nupur Pavan Bang, Khemchand H. Sakaldeepi, Ramabhadran S. Thirumalai suggests that, Bombay Liquidity 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.
No frontier risks strategy
– After analyzing the HBR case study The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Products dominated business model
– Even though Bombay Liquidity has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes should strive to include more intangible value offerings along with its core products and services.
Opportunities The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes | 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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Bombay Liquidity 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.
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. Bombay Liquidity 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. Bombay Liquidity 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Bombay Liquidity 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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes, 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 Bombay Liquidity 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.
Loyalty marketing
– Bombay Liquidity 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
– Bombay Liquidity 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, Bombay Liquidity is facing challenges because of the dominance of functional experts in the organization. The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Bombay Liquidity can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Bombay Liquidity can use these opportunities to build new business models that can help the communities that Bombay Liquidity operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Buying journey improvements
– Bombay Liquidity can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes 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.
Developing new processes and practices
– Bombay Liquidity 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.
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 Bombay Liquidity 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.
Building a culture of innovation
– managers at Bombay Liquidity 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.
Threats The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes are -
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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes, Bombay Liquidity 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 Bombay Liquidity 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.
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.
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. Bombay Liquidity can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Bombay Liquidity 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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes .
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 Bombay Liquidity.
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 Bombay Liquidity in the Finance & Accounting sector and impact the bottomline of the organization.
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.
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. Bombay Liquidity 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.
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. Bombay Liquidity needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Bombay Liquidity 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.
Stagnating economy with rate increase
– Bombay Liquidity 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Bombay Liquidity 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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes 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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes 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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes 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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes 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 Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes 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 Bombay Liquidity needs to make to build a sustainable competitive advantage.