Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market
This case examines Dimensional Fund Advisors (DFA)'s decision to enter the retirement market with their new "Dimensional Managed DC" product, a complete retirement solution that aimed to provide investors with what they really wanted: the same standard of living in retirement that they had while working. The case considers the challenges of entering the fiercely competitive retirement market, introduces students to the large literature on the behavioral biases of individual investors, and asks students to evaluate an innovative new financial product designed to automate the process of retirement investing.
Swot Analysis of "Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market" written by Lauren H. Cohen, Christopher Malloy includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Retirement Dimensional facing as an external strategic factors. Some of the topics covered in Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market casestudy better are - – cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , increasing transportation and logistics costs, increasing commodity prices, increasing energy prices, increasing household debt because of falling income levels,
increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Retirement Dimensional, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Retirement Dimensional 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 Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market can be done for the following purposes –
1. Strategic planning using facts provided in Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market case study
2. Improving business portfolio management of Retirement Dimensional
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 Retirement Dimensional
Strengths Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Retirement Dimensional in Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market Harvard Business Review case study are -
High switching costs
– The high switching costs that Retirement Dimensional 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.
Highly skilled collaborators
– Retirement Dimensional 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 Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Retirement Dimensional in the sector have low bargaining power. Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Retirement Dimensional to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Retirement Dimensional 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.
Strong track record of project management
– Retirement Dimensional is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Retirement Dimensional has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Retirement Dimensional to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Retirement Dimensional is one of the most innovative firm in sector. Manager in Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Finance & Accounting industry
– Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market firm has clearly differentiated products in the market place. This has enabled Retirement Dimensional to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Retirement Dimensional to invest into research and development (R&D) and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Retirement Dimensional digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Retirement Dimensional 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.
Successful track record of launching new products
– Retirement Dimensional has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Retirement Dimensional 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.
Effective Research and Development (R&D)
– Retirement Dimensional 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 Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Retirement Dimensional is present in almost all the verticals within the industry. This has provided firm in Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market 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.
Weaknesses Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market are -
Workers concerns about automation
– As automation is fast increasing in the segment, Retirement Dimensional 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Lauren H. Cohen, Christopher Malloy suggests that, Retirement Dimensional 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market, it seems that the employees of Retirement Dimensional 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 cash cycle compare to competitors
Retirement Dimensional 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.
Skills based hiring
– The stress on hiring functional specialists at Retirement Dimensional 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.
Products dominated business model
– Even though Retirement Dimensional 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 - Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Retirement Dimensional products
– To increase the profitability and margins on the products, Retirement Dimensional needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market 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 Retirement Dimensional 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Retirement Dimensional has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
No frontier risks strategy
– After analyzing the HBR case study Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market, 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market 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 Retirement Dimensional has relatively successful track record of launching new products.
Opportunities Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market | 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 Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market are -
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. Retirement Dimensional can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Retirement Dimensional 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.
Creating value in data economy
– The success of analytics program of Retirement Dimensional has opened avenues for new revenue streams for the organization in the industry. This can help Retirement Dimensional to build a more holistic ecosystem as suggested in the Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market case study. Retirement Dimensional can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Retirement Dimensional 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.
Loyalty marketing
– Retirement Dimensional 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.
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 Retirement Dimensional in the consumer business. Now Retirement Dimensional can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Retirement Dimensional 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Retirement Dimensional 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.
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 Retirement Dimensional 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Retirement Dimensional can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Retirement Dimensional 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, Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Retirement Dimensional to increase its market reach. Retirement Dimensional 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Retirement Dimensional is facing challenges because of the dominance of functional experts in the organization. Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market 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 Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market are -
Regulatory challenges
– Retirement Dimensional needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market, Retirement Dimensional may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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 Retirement Dimensional.
Environmental challenges
– Retirement Dimensional 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. Retirement Dimensional can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 Retirement Dimensional business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Retirement Dimensional is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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 Retirement Dimensional in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Retirement Dimensional 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.
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. Retirement Dimensional needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Retirement Dimensional with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Retirement Dimensional 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.
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. Retirement Dimensional 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.
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. Retirement Dimensional can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market 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 Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market 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 Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market 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 Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market 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 Dimensional Fund Advisors (DFA)'s Entry into the Retirement Market 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 Retirement Dimensional needs to make to build a sustainable competitive advantage.
