Leading index company Dow Jones recently signed a license and joint marketing agreement with Transparent Value LLC, the creator of a new fundamentals-based valuation methodology. The agreement allowed Dow Jones to offer a family of indexes based on the Transparent Value methodology. The methodology viewed stock prices as the clearest and most reliable signals of the market's expectations about a company's future performance, and employed a Reverse Discounted Cash Flow (RDCF) valuation model to calculate the revenue required to support a given stock price for a given company. Then, the methodology applied a probability that the company would achieve the needed revenues in the next 12 months, based on its recent track record. Moreover, the methodology endeavored for specificity. For example, when possible, Transparent Value strove to determine what the company needed to do in its business activities to achieve the required revenues. Called "business performance requirements," these could include the number of new store openings, or the number of product unit sales needed, as two examples. The fictitious case protagonist, a business development manager at a leading money management firm, is looking to launch an exchange-traded fund (ETF) using a fundamentals-based index as the underlying index. She needs to decide whether to base her ETF products on the Dow Jones - Transparent Value indexes. The case study provides an overview of equity indexes and ETF's and a step-by-step description of Transparent Value's methodology.
Authors :: Sharon Katz, Krishna G. Palepu, Aldo Sesia
Swot Analysis of "Transparent Value LLC" written by Sharon Katz, Krishna G. Palepu, Aldo Sesia includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Transparent Methodology facing as an external strategic factors. Some of the topics covered in Transparent Value LLC case study are - Strategic Management Strategies, Financial analysis, Financial management, Financial markets and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Transparent Value LLC casestudy better are - – talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, there is backlash against globalization, wage bills are increasing, increasing transportation and logistics costs,
cloud computing is disrupting traditional business models, technology disruption, etc
Introduction to SWOT Analysis of Transparent Value LLC
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Transparent Value LLC case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Transparent Methodology, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Transparent Methodology 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 Transparent Value LLC can be done for the following purposes –
1. Strategic planning using facts provided in Transparent Value LLC case study
2. Improving business portfolio management of Transparent Methodology
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 Transparent Methodology
Strengths Transparent Value LLC | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Transparent Methodology in Transparent Value LLC Harvard Business Review case study are -
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Transparent Methodology digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Transparent Methodology 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.
Strong track record of project management
– Transparent Methodology is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Transparent Methodology
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Transparent Methodology does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Transparent Methodology 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.
Cross disciplinary teams
– Horizontal connected teams at the Transparent Methodology 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.
Superior customer experience
– The customer experience strategy of Transparent Methodology in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Transparent Methodology 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 Transparent Methodology is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Transparent Value LLC Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Transparent Methodology is present in almost all the verticals within the industry. This has provided firm in Transparent Value LLC 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
– Transparent Methodology has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Transparent Methodology to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Transparent Methodology has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Transparent Value LLC 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.
Effective Research and Development (R&D)
– Transparent Methodology 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 Transparent Value LLC - 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
– Transparent Methodology 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 Transparent Value LLC HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Transparent Value LLC | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Transparent Value LLC are -
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 Transparent Methodology supply chain. Even after few cautionary changes mentioned in the HBR case study - Transparent Value LLC, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Transparent Methodology vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Transparent Methodology 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.
Need for greater diversity
– Transparent Methodology 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.
Aligning sales with marketing
– It come across in the case study Transparent Value LLC 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 Transparent Value LLC can leverage the sales team experience to cultivate customer relationships as Transparent Methodology is planning to shift buying processes online.
Lack of clear differentiation of Transparent Methodology products
– To increase the profitability and margins on the products, Transparent Methodology needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Transparent Value LLC HBR case study mentions - Transparent Methodology 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.
Skills based hiring
– The stress on hiring functional specialists at Transparent Methodology has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Transparent Value LLC 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 Transparent Methodology 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Transparent Methodology 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.
Capital Spending Reduction
– Even during the low interest decade, Transparent Methodology 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Sharon Katz, Krishna G. Palepu, Aldo Sesia suggests that, Transparent Methodology 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.
Opportunities Transparent Value LLC | 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 Transparent Value LLC are -
Buying journey improvements
– Transparent Methodology can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Transparent Value LLC 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Transparent Methodology 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.
Manufacturing automation
– Transparent Methodology 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Transparent Methodology 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, Transparent Value LLC, 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 Transparent Methodology 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.
Better consumer reach
– The expansion of the 5G network will help Transparent Methodology to increase its market reach. Transparent Methodology 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 Transparent Methodology 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.
Using analytics as competitive advantage
– Transparent Methodology 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 Transparent Value LLC - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Transparent Methodology to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Transparent Methodology 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.
Loyalty marketing
– Transparent Methodology 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Transparent Methodology 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 Transparent Methodology to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Transparent Methodology can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Transparent Methodology in the consumer business. Now Transparent Methodology can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Transparent Value LLC External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Transparent Value LLC are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Transparent Methodology 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.
Regulatory challenges
– Transparent Methodology 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.
Stagnating economy with rate increase
– Transparent Methodology 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.
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 Transparent Methodology business can come under increasing regulations regarding data privacy, data security, etc.
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 Transparent Methodology in the Finance & Accounting sector and impact the bottomline of the organization.
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 acceleration in Forth Industrial Revolution
– Transparent Methodology has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Transparent Methodology 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.
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. Transparent Methodology needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing wage structure of Transparent Methodology
– 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 Transparent Methodology.
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. Transparent Methodology 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.
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.
Shortening product life cycle
– it is one of the major threat that Transparent Methodology is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Transparent Methodology with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Transparent Value LLC 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 Transparent Value LLC 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 Transparent Value LLC 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 Transparent Value LLC 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 Transparent Value LLC 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 Transparent Methodology needs to make to build a sustainable competitive advantage.