A Tale of Two Hedge Funds: Magnetar and Peloton SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of A Tale of Two Hedge Funds: Magnetar and Peloton
Hedge fund Magnetar Capital had returned 25 percent in 2007 with a strategy that posed significantly lower risk to investors than the S&P 500. Magnetar had made more than $1 billion in profit by noticing that the equity tranche of CDOs and CDO-derivative instruments were relatively mispriced. It took advantage of this anomaly by purchasing CDO equity and buying credit default swap (CDS) protection on tranches that were considered less risky. Now it was the job of Alec Litowitz, chairman and chief investment officer, to provide guidance to his team as they planned next year's strategy, evaluate and prioritize their ideas, and generate new ideas of his own. An ocean away, Ron Beller was contemplating some very different issues. Beller's firm, Peloton Partners LLP, had been one of the top-performing hedge funds in 2007, returning in excess of 80 percent. In late January 2008 Beller accepted two prestigious awards at a black-tie EuroHedge ceremony. A month later, his firm was bankrupt. Beller shorted the U.S. housing market before the subprime crisis hit, and was paid handsomely for his bet. After the crisis began, however, he believed that prices for highly rated mortgage securities were being unfairly punished, so he decided to go long AAA-rated securities backed by Alt-A mortgage loans (between prime and subprime), levered 9x. The trade moved against Peloton in a big way on February 14, 2008, causing $17 billion in losses and closure of the firm.
Swot Analysis of "A Tale of Two Hedge Funds: Magnetar and Peloton" written by David P. Stowell, Stephen Carlson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Beller Magnetar facing as an external strategic factors. Some of the topics covered in A Tale of Two Hedge Funds: Magnetar and Peloton case study are - Strategic Management Strategies, International business and Finance & Accounting.
Some of the macro environment factors that can be used to understand the A Tale of Two Hedge Funds: Magnetar and Peloton casestudy better are - – increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, geopolitical disruptions,
increasing commodity prices, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of A Tale of Two Hedge Funds: Magnetar and Peloton
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in A Tale of Two Hedge Funds: Magnetar and Peloton case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Beller Magnetar, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Beller Magnetar 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 A Tale of Two Hedge Funds: Magnetar and Peloton can be done for the following purposes –
1. Strategic planning using facts provided in A Tale of Two Hedge Funds: Magnetar and Peloton case study
2. Improving business portfolio management of Beller Magnetar
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 Beller Magnetar
Strengths A Tale of Two Hedge Funds: Magnetar and Peloton | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Beller Magnetar in A Tale of Two Hedge Funds: Magnetar and Peloton Harvard Business Review case study are -
Analytics focus
– Beller Magnetar 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 David P. Stowell, Stephen Carlson 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.
Innovation driven organization
– Beller Magnetar is one of the most innovative firm in sector. Manager in A Tale of Two Hedge Funds: Magnetar and Peloton Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Beller Magnetar has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Beller Magnetar has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Operational resilience
– The operational resilience strategy in the A Tale of Two Hedge Funds: Magnetar and Peloton 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.
High brand equity
– Beller Magnetar has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Beller Magnetar to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Beller Magnetar is one of the leading recruiters in the industry. Managers in the A Tale of Two Hedge Funds: Magnetar and Peloton 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
– Beller Magnetar is present in almost all the verticals within the industry. This has provided firm in A Tale of Two Hedge Funds: Magnetar and Peloton 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.
Low bargaining power of suppliers
– Suppliers of Beller Magnetar in the sector have low bargaining power. A Tale of Two Hedge Funds: Magnetar and Peloton has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Beller Magnetar to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Beller Magnetar 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 A Tale of Two Hedge Funds: Magnetar and Peloton HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Beller Magnetar
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Beller Magnetar does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Finance & Accounting industry
– A Tale of Two Hedge Funds: Magnetar and Peloton firm has clearly differentiated products in the market place. This has enabled Beller Magnetar to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Beller Magnetar to invest into research and development (R&D) and innovation.
Learning organization
- Beller Magnetar 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 Beller Magnetar is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in A Tale of Two Hedge Funds: Magnetar and Peloton Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses A Tale of Two Hedge Funds: Magnetar and Peloton | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of A Tale of Two Hedge Funds: Magnetar and Peloton are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the A Tale of Two Hedge Funds: Magnetar and Peloton 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 Beller Magnetar has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Beller Magnetar is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study A Tale of Two Hedge Funds: Magnetar and Peloton can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study A Tale of Two Hedge Funds: Magnetar and Peloton, 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.
Capital Spending Reduction
– Even during the low interest decade, Beller Magnetar 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.
Increasing silos among functional specialists
– The organizational structure of Beller Magnetar is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Beller Magnetar needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Beller Magnetar to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Beller Magnetar, firm in the HBR case study A Tale of Two Hedge Funds: Magnetar and Peloton needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at Beller Magnetar 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.
Need for greater diversity
– Beller Magnetar 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.
Lack of clear differentiation of Beller Magnetar products
– To increase the profitability and margins on the products, Beller Magnetar needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study A Tale of Two Hedge Funds: Magnetar and Peloton, in the dynamic environment Beller Magnetar has struggled to respond to the nimble upstart competition. Beller Magnetar has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As A Tale of Two Hedge Funds: Magnetar and Peloton HBR case study mentions - Beller Magnetar 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.
Opportunities A Tale of Two Hedge Funds: Magnetar and Peloton | 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 A Tale of Two Hedge Funds: Magnetar and Peloton are -
Building a culture of innovation
– managers at Beller Magnetar 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 Beller Magnetar to increase its market reach. Beller Magnetar 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.
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 Beller Magnetar in the consumer business. Now Beller Magnetar can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Beller Magnetar 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Beller Magnetar 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, A Tale of Two Hedge Funds: Magnetar and Peloton, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Beller Magnetar can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Beller Magnetar 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.
Learning at scale
– Online learning technologies has now opened space for Beller Magnetar 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
– Beller Magnetar 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 A Tale of Two Hedge Funds: Magnetar and Peloton - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Beller Magnetar to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Beller Magnetar can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Beller Magnetar 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.
Leveraging digital technologies
– Beller Magnetar 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Beller Magnetar is facing challenges because of the dominance of functional experts in the organization. A Tale of Two Hedge Funds: Magnetar and Peloton 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.
Threats A Tale of Two Hedge Funds: Magnetar and Peloton External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study A Tale of Two Hedge Funds: Magnetar and Peloton are -
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. Beller Magnetar 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.
Increasing wage structure of Beller Magnetar
– 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 Beller Magnetar.
Environmental challenges
– Beller Magnetar 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. Beller Magnetar can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Technology acceleration in Forth Industrial Revolution
– Beller Magnetar has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Beller Magnetar 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.
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 Beller Magnetar 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.
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 Beller Magnetar business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Beller Magnetar with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Beller Magnetar.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Beller Magnetar 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 A Tale of Two Hedge Funds: Magnetar and Peloton .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Beller Magnetar 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.
Stagnating economy with rate increase
– Beller Magnetar 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.
Weighted SWOT Analysis of A Tale of Two Hedge Funds: Magnetar and Peloton 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 A Tale of Two Hedge Funds: Magnetar and Peloton 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 A Tale of Two Hedge Funds: Magnetar and Peloton 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 A Tale of Two Hedge Funds: Magnetar and Peloton 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 A Tale of Two Hedge Funds: Magnetar and Peloton 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 Beller Magnetar needs to make to build a sustainable competitive advantage.