Case Study Description of Kroll Bond Rating Agency
The established credit raters were criticized for inflating the mortgage credit bubble that imploded in 2008. A new rating agency, KBRA, is considering how to capitalize on the opportunity this presents and how to enter the industry. A small group of managers have to decide on a business model, how to meet hiring and funding needs, and what types of ratings to start with: municipal, corporate, or structured. Where are the needs for new ratings stronger? How can investors be convinced to use the new ratings? How can KBRA compete with Fitch, Moody's, and S&P?
Swot Analysis of "Kroll Bond Rating Agency" written by Bo Becker includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Kbra Ratings facing as an external strategic factors. Some of the topics covered in Kroll Bond Rating Agency case study are - Strategic Management Strategies, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Kroll Bond Rating Agency casestudy better are - – increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, wage bills are increasing, increasing transportation and logistics costs, there is backlash against globalization, technology disruption, competitive advantages are harder to sustain because of technology dispersion,
central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Kroll Bond Rating Agency
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Kroll Bond Rating Agency case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kbra Ratings, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kbra Ratings 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 Kroll Bond Rating Agency can be done for the following purposes –
1. Strategic planning using facts provided in Kroll Bond Rating Agency case study
2. Improving business portfolio management of Kbra Ratings
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 Kbra Ratings
Strengths Kroll Bond Rating Agency | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kbra Ratings in Kroll Bond Rating Agency Harvard Business Review case study are -
Learning organization
- Kbra Ratings 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 Kbra Ratings is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Kroll Bond Rating Agency Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Kbra Ratings
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Kbra Ratings does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Finance & Accounting field
– Kbra Ratings 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 Kbra Ratings 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
– Kbra Ratings is one of the leading recruiters in the industry. Managers in the Kroll Bond Rating Agency are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Kbra Ratings in the sector have low bargaining power. Kroll Bond Rating Agency has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Kbra Ratings to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Kbra Ratings is present in almost all the verticals within the industry. This has provided firm in Kroll Bond Rating Agency 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.
Cross disciplinary teams
– Horizontal connected teams at the Kbra Ratings 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Kroll Bond Rating Agency firm has clearly differentiated products in the market place. This has enabled Kbra Ratings to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Kbra Ratings to invest into research and development (R&D) and innovation.
Innovation driven organization
– Kbra Ratings is one of the most innovative firm in sector. Manager in Kroll Bond Rating Agency Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Kbra Ratings 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.
High brand equity
– Kbra Ratings has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Kbra Ratings to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Kbra Ratings digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kbra Ratings 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.
Weaknesses Kroll Bond Rating Agency | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kroll Bond Rating Agency are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Kroll Bond Rating Agency, it seems that the employees of Kbra Ratings 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 bargaining power of channel partners
– Because of the regulatory requirements, Bo Becker suggests that, Kbra Ratings 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 cash cycle compare to competitors
Kbra Ratings 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.
Slow to strategic competitive environment developments
– As Kroll Bond Rating Agency HBR case study mentions - Kbra Ratings 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Kroll Bond Rating Agency, in the dynamic environment Kbra Ratings has struggled to respond to the nimble upstart competition. Kbra Ratings has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study Kroll Bond Rating Agency 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 Kbra Ratings 's lucrative customers.
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 Kbra Ratings supply chain. Even after few cautionary changes mentioned in the HBR case study - Kroll Bond Rating Agency, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Kbra Ratings vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Kbra Ratings products
– To increase the profitability and margins on the products, Kbra Ratings needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Kbra Ratings 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. Kbra Ratings 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Kroll Bond Rating Agency, is just above the industry average. Kbra Ratings needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Capital Spending Reduction
– Even during the low interest decade, Kbra Ratings 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 Kroll Bond Rating Agency | 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 Kroll Bond Rating Agency are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Kbra Ratings is facing challenges because of the dominance of functional experts in the organization. Kroll Bond Rating Agency 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.
Loyalty marketing
– Kbra Ratings 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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Kbra Ratings to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Manufacturing automation
– Kbra Ratings 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kbra Ratings 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.
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. Kbra Ratings can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Kbra Ratings 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Kbra Ratings can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Kbra Ratings can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Kroll Bond Rating Agency 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.
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 Kbra Ratings in the consumer business. Now Kbra Ratings can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Kbra Ratings 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.
Leveraging digital technologies
– Kbra Ratings 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
– Kbra Ratings 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.
Threats Kroll Bond Rating Agency External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Kroll Bond Rating Agency are -
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 Kbra Ratings.
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. Kbra Ratings 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.
Shortening product life cycle
– it is one of the major threat that Kbra Ratings is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Kbra Ratings 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Kbra Ratings can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Kbra Ratings 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.
Environmental challenges
– Kbra Ratings 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. Kbra Ratings can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Regulatory challenges
– Kbra Ratings 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.
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 Kbra Ratings 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, Kbra Ratings 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 Kroll Bond Rating Agency .
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. Kbra Ratings needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing wage structure of Kbra Ratings
– 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 Kbra Ratings.
High dependence on third party suppliers
– Kbra Ratings 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.
Weighted SWOT Analysis of Kroll Bond Rating Agency 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 Kroll Bond Rating Agency 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 Kroll Bond Rating Agency 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 Kroll Bond Rating Agency 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 Kroll Bond Rating Agency 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 Kbra Ratings needs to make to build a sustainable competitive advantage.
