Betting on Failure: Profiting from Defaults on Subprime Mortgages SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Betting on Failure: Profiting from Defaults on Subprime Mortgages
In October 2008, in the midst of a financial crisis, Anthony Keating, investment manager at the Boston private bank Billingsley, Blaylock, and Montgomery, was searching for an investment strategy to recommend to his high-net-worth clients. Traditional investments in the equity markets were being decimated, and Keating's clients would be looking to him for ideas. Inspired by the success of Paulson and Co., Keating began to explore the possibility of entering a trade that would profit as homeowners defaulted on their mortgages. The more Keating learned about the trade, the more he realized that he needed to know about mortgage-backed securities and credit default swaps. The case provides instructors with a chance to introduce these financial instruments while providing lessons applicable to students interested in value investing or real estate finance.
Swot Analysis of "Betting on Failure: Profiting from Defaults on Subprime Mortgages" written by Craig Furfine includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Keating Mortgages facing as an external strategic factors. Some of the topics covered in Betting on Failure: Profiting from Defaults on Subprime Mortgages case study are - Strategic Management Strategies, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Betting on Failure: Profiting from Defaults on Subprime Mortgages casestudy better are - – supply chains are disrupted by pandemic , increasing commodity prices, technology disruption, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%,
cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Betting on Failure: Profiting from Defaults on Subprime Mortgages
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Betting on Failure: Profiting from Defaults on Subprime Mortgages case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Keating Mortgages, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Keating Mortgages 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 Betting on Failure: Profiting from Defaults on Subprime Mortgages can be done for the following purposes –
1. Strategic planning using facts provided in Betting on Failure: Profiting from Defaults on Subprime Mortgages case study
2. Improving business portfolio management of Keating Mortgages
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 Keating Mortgages
Strengths Betting on Failure: Profiting from Defaults on Subprime Mortgages | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Keating Mortgages in Betting on Failure: Profiting from Defaults on Subprime Mortgages Harvard Business Review case study are -
Highly skilled collaborators
– Keating Mortgages 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 Betting on Failure: Profiting from Defaults on Subprime Mortgages HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Finance & Accounting industry
– Betting on Failure: Profiting from Defaults on Subprime Mortgages firm has clearly differentiated products in the market place. This has enabled Keating Mortgages to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Keating Mortgages to invest into research and development (R&D) and innovation.
Organizational Resilience of Keating Mortgages
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Keating Mortgages does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Keating Mortgages 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 Betting on Failure: Profiting from Defaults on Subprime Mortgages - 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 Keating Mortgages 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Keating Mortgages digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Keating Mortgages 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.
Ability to lead change in Finance & Accounting field
– Keating Mortgages 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 Keating Mortgages in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Keating Mortgages is one of the leading recruiters in the industry. Managers in the Betting on Failure: Profiting from Defaults on Subprime Mortgages are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Keating Mortgages is present in almost all the verticals within the industry. This has provided firm in Betting on Failure: Profiting from Defaults on Subprime Mortgages 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.
High brand equity
– Keating Mortgages has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Keating Mortgages to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Keating Mortgages 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 Craig Furfine 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.
Operational resilience
– The operational resilience strategy in the Betting on Failure: Profiting from Defaults on Subprime Mortgages 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.
Weaknesses Betting on Failure: Profiting from Defaults on Subprime Mortgages | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Betting on Failure: Profiting from Defaults on Subprime Mortgages are -
Slow to strategic competitive environment developments
– As Betting on Failure: Profiting from Defaults on Subprime Mortgages HBR case study mentions - Keating Mortgages 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.
Increasing silos among functional specialists
– The organizational structure of Keating Mortgages is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Keating Mortgages needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Keating Mortgages 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 Betting on Failure: Profiting from Defaults on Subprime Mortgages, it seems that the employees of Keating Mortgages 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 Betting on Failure: Profiting from Defaults on Subprime Mortgages 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 Keating Mortgages 's lucrative customers.
Lack of clear differentiation of Keating Mortgages products
– To increase the profitability and margins on the products, Keating Mortgages needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Keating Mortgages supply chain. Even after few cautionary changes mentioned in the HBR case study - Betting on Failure: Profiting from Defaults on Subprime Mortgages, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Keating Mortgages vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the segment, Keating Mortgages needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Interest costs
– Compare to the competition, Keating Mortgages 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 harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Keating Mortgages is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Betting on Failure: Profiting from Defaults on Subprime Mortgages can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Keating Mortgages 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.
No frontier risks strategy
– After analyzing the HBR case study Betting on Failure: Profiting from Defaults on Subprime Mortgages, 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.
Opportunities Betting on Failure: Profiting from Defaults on Subprime Mortgages | 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 Betting on Failure: Profiting from Defaults on Subprime Mortgages are -
Using analytics as competitive advantage
– Keating Mortgages 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 Betting on Failure: Profiting from Defaults on Subprime Mortgages - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Keating Mortgages to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Keating Mortgages is facing challenges because of the dominance of functional experts in the organization. Betting on Failure: Profiting from Defaults on Subprime Mortgages 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Keating Mortgages 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, Betting on Failure: Profiting from Defaults on Subprime Mortgages, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Keating Mortgages 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.
Manufacturing automation
– Keating Mortgages can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Creating value in data economy
– The success of analytics program of Keating Mortgages has opened avenues for new revenue streams for the organization in the industry. This can help Keating Mortgages to build a more holistic ecosystem as suggested in the Betting on Failure: Profiting from Defaults on Subprime Mortgages case study. Keating Mortgages can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Keating Mortgages 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.
Leveraging digital technologies
– Keating Mortgages 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.
Loyalty marketing
– Keating Mortgages 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.
Better consumer reach
– The expansion of the 5G network will help Keating Mortgages to increase its market reach. Keating Mortgages 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.
Buying journey improvements
– Keating Mortgages can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Betting on Failure: Profiting from Defaults on Subprime Mortgages 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Keating Mortgages 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, Keating Mortgages can use these opportunities to build new business models that can help the communities that Keating Mortgages operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Threats Betting on Failure: Profiting from Defaults on Subprime Mortgages External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Betting on Failure: Profiting from Defaults on Subprime Mortgages are -
Regulatory challenges
– Keating Mortgages 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Betting on Failure: Profiting from Defaults on Subprime Mortgages, Keating Mortgages 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 Keating Mortgages 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.
Increasing wage structure of Keating Mortgages
– 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 Keating Mortgages.
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. Keating Mortgages 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
– Keating Mortgages has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Keating Mortgages 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.
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 Keating Mortgages business can come under increasing regulations regarding data privacy, data security, etc.
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. Keating Mortgages 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 Keating Mortgages in the Finance & Accounting sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Keating Mortgages 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 Betting on Failure: Profiting from Defaults on Subprime Mortgages .
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.
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.
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 Keating Mortgages.
Weighted SWOT Analysis of Betting on Failure: Profiting from Defaults on Subprime Mortgages 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 Betting on Failure: Profiting from Defaults on Subprime Mortgages 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 Betting on Failure: Profiting from Defaults on Subprime Mortgages 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 Betting on Failure: Profiting from Defaults on Subprime Mortgages 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 Betting on Failure: Profiting from Defaults on Subprime Mortgages 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 Keating Mortgages needs to make to build a sustainable competitive advantage.
