This note introduces the basic motivation behind Islamic finance and how it is implemented in practice. The note contains background regarding the religious principles underlying the practice of Islamic finance as well as a discussion of several products designed to be Shariah compliant and the means by which these products achieve this compliance.
Swot Analysis of "Note on Islamic Finance" written by Stephen Sapp includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Islamic Finance facing as an external strategic factors. Some of the topics covered in Note on Islamic Finance case study are - Strategic Management Strategies, and Global Business.
Some of the macro environment factors that can be used to understand the Note on Islamic Finance casestudy better are - – technology disruption, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, increasing energy prices, geopolitical disruptions,
cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Note on Islamic Finance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Note on Islamic Finance case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Islamic Finance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Islamic Finance 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 Note on Islamic Finance can be done for the following purposes –
1. Strategic planning using facts provided in Note on Islamic Finance case study
2. Improving business portfolio management of Islamic Finance
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Islamic Finance
Strengths Note on Islamic Finance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Islamic Finance in Note on Islamic Finance Harvard Business Review case study are -
Highly skilled collaborators
– Islamic Finance 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 Note on Islamic Finance HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Islamic Finance 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 Stephen Sapp 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.
Strong track record of project management
– Islamic Finance is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Islamic Finance 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 Note on Islamic Finance - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Islamic Finance 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.
Ability to recruit top talent
– Islamic Finance is one of the leading recruiters in the industry. Managers in the Note on Islamic Finance are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Islamic Finance
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Islamic Finance does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Global Business field
– Islamic Finance 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 Islamic Finance in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the Note on Islamic Finance 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.
Low bargaining power of suppliers
– Suppliers of Islamic Finance in the sector have low bargaining power. Note on Islamic Finance has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Islamic Finance to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Islamic Finance in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Islamic Finance is present in almost all the verticals within the industry. This has provided firm in Note on Islamic Finance 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.
Weaknesses Note on Islamic Finance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Note on Islamic Finance are -
Increasing silos among functional specialists
– The organizational structure of Islamic Finance is dominated by functional specialists. It is not different from other players in the Global Business segment. Islamic Finance needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Islamic Finance to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Note on Islamic Finance, it seems that the employees of Islamic Finance 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Note on Islamic Finance 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 Islamic Finance 's lucrative customers.
High cash cycle compare to competitors
Islamic Finance 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Note on Islamic Finance 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 Islamic Finance has relatively successful track record of launching new products.
Lack of clear differentiation of Islamic Finance products
– To increase the profitability and margins on the products, Islamic Finance needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Islamic Finance, firm in the HBR case study Note on Islamic Finance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– After analyzing the HBR case study Note on Islamic Finance, it seems that company is thinking about the frontier risks that can impact Global Business 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 to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Islamic Finance is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Note on Islamic Finance can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Stephen Sapp suggests that, Islamic Finance 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.
Products dominated business model
– Even though Islamic Finance 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 - Note on Islamic Finance should strive to include more intangible value offerings along with its core products and services.
Opportunities Note on Islamic Finance | 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 Note on Islamic Finance are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Islamic Finance 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.
Building a culture of innovation
– managers at Islamic Finance 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 Global Business segment.
Leveraging digital technologies
– Islamic Finance 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.
Developing new processes and practices
– Islamic Finance can develop new processes and procedures in Global Business 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.
Better consumer reach
– The expansion of the 5G network will help Islamic Finance to increase its market reach. Islamic Finance 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Islamic Finance 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, Note on Islamic Finance, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Islamic Finance has opened avenues for new revenue streams for the organization in the industry. This can help Islamic Finance to build a more holistic ecosystem as suggested in the Note on Islamic Finance case study. Islamic Finance can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Islamic Finance can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Islamic Finance 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.
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. Islamic Finance can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Islamic Finance can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Islamic Finance 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. Islamic Finance 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.
Loyalty marketing
– Islamic Finance 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.
Threats Note on Islamic Finance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Note on Islamic Finance are -
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Islamic Finance 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
– Islamic Finance 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Note on Islamic Finance, Islamic Finance may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Islamic Finance 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 Islamic Finance business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Islamic Finance is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Islamic Finance
– 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 Islamic Finance.
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.
Regulatory challenges
– Islamic Finance 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 Global Business industry regulations.
Consumer confidence and its impact on Islamic Finance 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.
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. Islamic Finance 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.
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 Islamic Finance in the Global Business sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Note on Islamic Finance 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 Note on Islamic Finance 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 Note on Islamic Finance 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 Note on Islamic Finance 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 Note on Islamic Finance 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 Islamic Finance needs to make to build a sustainable competitive advantage.