Case Study Description of Trading Strategies with Options
This is a Darden case study.This technical note provides a brief introduction to option trading strategies. It covers pay-off diagrams and specifically introduces bull spreads, butterfly spreads and calendar spreads. It also introduces straddles, strips, and strangles.
Swot Analysis of "Trading Strategies with Options" written by Robert M. Conroy includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Spreads Strangles facing as an external strategic factors. Some of the topics covered in Trading Strategies with Options case study are - Strategic Management Strategies, Financial management, Financial markets and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Trading Strategies with Options casestudy better are - – increasing energy prices, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%,
increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Trading Strategies with Options
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Trading Strategies with Options case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Spreads Strangles, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Spreads Strangles 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 Trading Strategies with Options can be done for the following purposes –
1. Strategic planning using facts provided in Trading Strategies with Options case study
2. Improving business portfolio management of Spreads Strangles
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 Spreads Strangles
Strengths Trading Strategies with Options | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Spreads Strangles in Trading Strategies with Options Harvard Business Review case study are -
Effective Research and Development (R&D)
– Spreads Strangles 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 Trading Strategies with Options - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Spreads Strangles 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 Spreads Strangles is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Trading Strategies with Options Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Spreads Strangles is present in almost all the verticals within the industry. This has provided firm in Trading Strategies with Options 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.
Training and development
– Spreads Strangles has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Trading Strategies with Options 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.
Highly skilled collaborators
– Spreads Strangles 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 Trading Strategies with Options 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
– Spreads Strangles 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 Spreads Strangles in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Spreads Strangles 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 Robert M. Conroy 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Spreads Strangles digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Spreads Strangles 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.
High switching costs
– The high switching costs that Spreads Strangles 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.
Successful track record of launching new products
– Spreads Strangles has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Spreads Strangles 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.
Innovation driven organization
– Spreads Strangles is one of the most innovative firm in sector. Manager in Trading Strategies with Options Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Spreads Strangles is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Trading Strategies with Options | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Trading Strategies with Options are -
No frontier risks strategy
– After analyzing the HBR case study Trading Strategies with Options, 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.
Interest costs
– Compare to the competition, Spreads Strangles 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.
Slow to strategic competitive environment developments
– As Trading Strategies with Options HBR case study mentions - Spreads Strangles 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 star products
– The top 2 products and services of the firm as mentioned in the Trading Strategies with Options HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Spreads Strangles has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Robert M. Conroy suggests that, Spreads Strangles 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.
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 Spreads Strangles supply chain. Even after few cautionary changes mentioned in the HBR case study - Trading Strategies with Options, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Spreads Strangles vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Spreads Strangles is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Spreads Strangles needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Spreads Strangles to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Spreads Strangles 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 - Trading Strategies with Options should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Spreads Strangles 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. Spreads Strangles 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 operating costs
– Compare to the competitors, firm in the HBR case study Trading Strategies with Options 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 Spreads Strangles 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Spreads Strangles 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.
Opportunities Trading Strategies with Options | 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 Trading Strategies with Options are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Spreads Strangles can use these opportunities to build new business models that can help the communities that Spreads Strangles operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Spreads Strangles can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Spreads Strangles 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Spreads Strangles 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 Spreads Strangles to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Spreads Strangles 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, Trading Strategies with Options, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Spreads Strangles can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Spreads Strangles to increase its market reach. Spreads Strangles will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Learning at scale
– Online learning technologies has now opened space for Spreads Strangles 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Spreads Strangles can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Spreads Strangles 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.
Using analytics as competitive advantage
– Spreads Strangles 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 Trading Strategies with Options - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Spreads Strangles to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Spreads Strangles 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. Spreads Strangles can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Creating value in data economy
– The success of analytics program of Spreads Strangles has opened avenues for new revenue streams for the organization in the industry. This can help Spreads Strangles to build a more holistic ecosystem as suggested in the Trading Strategies with Options case study. Spreads Strangles can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Trading Strategies with Options External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Trading Strategies with Options are -
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. Spreads Strangles needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Spreads Strangles has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Spreads Strangles 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Spreads Strangles 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 Trading Strategies with Options .
Increasing wage structure of Spreads Strangles
– 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 Spreads Strangles.
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 Spreads Strangles in the Finance & Accounting sector and impact the bottomline of the organization.
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 Spreads Strangles business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Spreads Strangles with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Spreads Strangles 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.
High dependence on third party suppliers
– Spreads Strangles 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.
Environmental challenges
– Spreads Strangles 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. Spreads Strangles can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Regulatory challenges
– Spreads Strangles 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Spreads Strangles 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.
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. Spreads Strangles 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.
Weighted SWOT Analysis of Trading Strategies with Options 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 Trading Strategies with Options 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 Trading Strategies with Options 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 Trading Strategies with Options 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 Trading Strategies with Options 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 Spreads Strangles needs to make to build a sustainable competitive advantage.
