Swot Analysis of "Sovereign Wealth Funds" written by Sophus A Reinert, Julie Kheyfets includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sovereign Wealth facing as an external strategic factors. Some of the topics covered in Sovereign Wealth Funds case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Sovereign Wealth Funds casestudy better are - – increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, increasing transportation and logistics costs, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, etc
Introduction to SWOT Analysis of Sovereign Wealth Funds
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Sovereign Wealth Funds case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sovereign Wealth, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sovereign Wealth 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 Sovereign Wealth Funds can be done for the following purposes –
1. Strategic planning using facts provided in Sovereign Wealth Funds case study
2. Improving business portfolio management of Sovereign Wealth
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 Sovereign Wealth
Strengths Sovereign Wealth Funds | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sovereign Wealth in Sovereign Wealth Funds Harvard Business Review case study are -
Strong track record of project management
– Sovereign Wealth is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Finance & Accounting industry
– Sovereign Wealth Funds firm has clearly differentiated products in the market place. This has enabled Sovereign Wealth to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Sovereign Wealth to invest into research and development (R&D) and innovation.
High brand equity
– Sovereign Wealth has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sovereign Wealth to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Sovereign Wealth 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 Sovereign Wealth Funds - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Sovereign Wealth 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 Sovereign Wealth Funds HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Sovereign Wealth is one of the leading recruiters in the industry. Managers in the Sovereign Wealth Funds are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Sovereign Wealth 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 Sophus A Reinert, Julie Kheyfets 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.
Training and development
– Sovereign Wealth has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Sovereign Wealth Funds Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Cross disciplinary teams
– Horizontal connected teams at the Sovereign Wealth 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.
Learning organization
- Sovereign Wealth 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 Sovereign Wealth is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Sovereign Wealth Funds Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Sovereign Wealth in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Sovereign Wealth
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sovereign Wealth does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Sovereign Wealth Funds | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sovereign Wealth Funds are -
No frontier risks strategy
– After analyzing the HBR case study Sovereign Wealth Funds, 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.
Slow decision making process
– As mentioned earlier in the report, Sovereign Wealth 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. Sovereign Wealth 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.
Lack of clear differentiation of Sovereign Wealth products
– To increase the profitability and margins on the products, Sovereign Wealth needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Sovereign Wealth Funds, it seems that the employees of Sovereign Wealth 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Sovereign Wealth Funds, is just above the industry average. Sovereign Wealth needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High operating costs
– Compare to the competitors, firm in the HBR case study Sovereign Wealth Funds 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 Sovereign Wealth 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Sovereign Wealth Funds 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 Sovereign Wealth Funds can leverage the sales team experience to cultivate customer relationships as Sovereign Wealth is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Sovereign Wealth is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Sovereign Wealth needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sovereign Wealth to focus more on services rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sovereign Wealth is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Sovereign Wealth Funds can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Need for greater diversity
– Sovereign Wealth 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 Sovereign Wealth Funds, in the dynamic environment Sovereign Wealth has struggled to respond to the nimble upstart competition. Sovereign Wealth has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Sovereign Wealth Funds | 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 Sovereign Wealth Funds are -
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 Sovereign Wealth in the consumer business. Now Sovereign Wealth 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 Sovereign Wealth 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Sovereign Wealth can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Sovereign Wealth can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Sovereign Wealth Funds 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sovereign Wealth 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 Sovereign Wealth to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Sovereign Wealth 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 Sovereign Wealth Funds - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sovereign Wealth 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 Sovereign Wealth 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.
Developing new processes and practices
– Sovereign Wealth 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sovereign Wealth 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.
Building a culture of innovation
– managers at Sovereign Wealth 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sovereign Wealth 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sovereign Wealth can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Sovereign Wealth has opened avenues for new revenue streams for the organization in the industry. This can help Sovereign Wealth to build a more holistic ecosystem as suggested in the Sovereign Wealth Funds case study. Sovereign Wealth can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Sovereign Wealth Funds External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Sovereign Wealth Funds are -
Environmental challenges
– Sovereign Wealth 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. Sovereign Wealth can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
High dependence on third party suppliers
– Sovereign Wealth 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.
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 Sovereign Wealth.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sovereign Wealth 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.
Increasing wage structure of Sovereign Wealth
– 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 Sovereign Wealth.
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. Sovereign Wealth 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sovereign Wealth with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Sovereign Wealth can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Sovereign Wealth business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Sovereign Wealth can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sovereign Wealth 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 Sovereign Wealth Funds .
Shortening product life cycle
– it is one of the major threat that Sovereign Wealth is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Sovereign Wealth Funds 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 Sovereign Wealth Funds 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 Sovereign Wealth Funds 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 Sovereign Wealth Funds 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 Sovereign Wealth Funds 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 Sovereign Wealth needs to make to build a sustainable competitive advantage.