In 2002, Arcapita Bank, B.S.C., then known as First Islamic Investment Bank, or FIIB, faced a liquidity crunch. Aracapita offered Islamic-compliant private equity, real estate, and venture capital products. In the wake of the 9/11 terrorist attack, however, Islamic banking was an endangered species in the U.S. Should Arcapita change its business model, and how should it finance its growing capital needs?
Swot Analysis of "Arcapita - 2002" written by Nabil N. El-Hage, Leslie S. Pierson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Arcapita Islamic facing as an external strategic factors. Some of the topics covered in Arcapita - 2002 case study are - Strategic Management Strategies, Entrepreneurial finance, Financial management, Organizational culture and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Arcapita - 2002 casestudy better are - – increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs,
challanges to central banks by blockchain based private currencies, technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Arcapita - 2002 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arcapita Islamic, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arcapita Islamic 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 Arcapita - 2002 can be done for the following purposes –
1. Strategic planning using facts provided in Arcapita - 2002 case study
2. Improving business portfolio management of Arcapita Islamic
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 Arcapita Islamic
Strengths Arcapita - 2002 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arcapita Islamic in Arcapita - 2002 Harvard Business Review case study are -
Ability to recruit top talent
– Arcapita Islamic is one of the leading recruiters in the industry. Managers in the Arcapita - 2002 are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Arcapita Islamic digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Arcapita Islamic 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.
Effective Research and Development (R&D)
– Arcapita Islamic 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 Arcapita - 2002 - 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
– Arcapita Islamic 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 Arcapita - 2002 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the Arcapita - 2002 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 switching costs
– The high switching costs that Arcapita Islamic 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.
Ability to lead change in Finance & Accounting field
– Arcapita Islamic 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 Arcapita Islamic in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Arcapita Islamic has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Arcapita Islamic 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.
Diverse revenue streams
– Arcapita Islamic is present in almost all the verticals within the industry. This has provided firm in Arcapita - 2002 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Arcapita - 2002 firm has clearly differentiated products in the market place. This has enabled Arcapita Islamic to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Arcapita Islamic to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Arcapita Islamic in the sector have low bargaining power. Arcapita - 2002 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arcapita Islamic to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Arcapita Islamic has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arcapita Islamic to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Arcapita - 2002 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arcapita - 2002 are -
Products dominated business model
– Even though Arcapita Islamic has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Arcapita - 2002 should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Arcapita Islamic 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Arcapita - 2002, it seems that the employees of Arcapita Islamic 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Arcapita - 2002, is just above the industry average. Arcapita Islamic 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Nabil N. El-Hage, Leslie S. Pierson suggests that, Arcapita Islamic 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
Arcapita Islamic has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on 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 Arcapita Islamic supply chain. Even after few cautionary changes mentioned in the HBR case study - Arcapita - 2002, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Arcapita Islamic vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Arcapita Islamic products
– To increase the profitability and margins on the products, Arcapita Islamic needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Arcapita Islamic is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Arcapita - 2002 can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Need for greater diversity
– Arcapita Islamic 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.
Slow decision making process
– As mentioned earlier in the report, Arcapita Islamic 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. Arcapita Islamic 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.
Opportunities Arcapita - 2002 | 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 Arcapita - 2002 are -
Better consumer reach
– The expansion of the 5G network will help Arcapita Islamic to increase its market reach. Arcapita Islamic 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Arcapita Islamic 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 Arcapita Islamic 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 Arcapita Islamic can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Arcapita Islamic 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Arcapita Islamic 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.
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 Arcapita Islamic in the consumer business. Now Arcapita Islamic can target international markets with far fewer capital restrictions requirements than the existing system.
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. Arcapita Islamic can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Arcapita Islamic 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, Arcapita - 2002, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Arcapita Islamic 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 Arcapita - 2002 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Arcapita Islamic to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Arcapita Islamic has opened avenues for new revenue streams for the organization in the industry. This can help Arcapita Islamic to build a more holistic ecosystem as suggested in the Arcapita - 2002 case study. Arcapita Islamic can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Arcapita Islamic 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Arcapita Islamic can use these opportunities to build new business models that can help the communities that Arcapita Islamic operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Leveraging digital technologies
– Arcapita Islamic 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.
Threats Arcapita - 2002 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Arcapita - 2002 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 Arcapita Islamic.
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. Arcapita Islamic 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.
Stagnating economy with rate increase
– Arcapita Islamic 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.
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 Arcapita Islamic in the Finance & Accounting sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Arcapita Islamic with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Arcapita Islamic needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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. Arcapita Islamic can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Arcapita Islamic has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Arcapita Islamic 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.
Regulatory challenges
– Arcapita Islamic 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.
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.
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 Arcapita Islamic business can come under increasing regulations regarding data privacy, data security, etc.
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.
Increasing wage structure of Arcapita Islamic
– 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 Arcapita Islamic.
Weighted SWOT Analysis of Arcapita - 2002 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 Arcapita - 2002 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 Arcapita - 2002 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 Arcapita - 2002 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 Arcapita - 2002 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 Arcapita Islamic needs to make to build a sustainable competitive advantage.