Case Study Description of Introduction to Islamic Finance
Provides a basic introduction to the principles of Islamic finance. Examines the religious background and legal foundations of Islamic finance. Also discusses the development of Islamic financial institutions and the financial instruments they use. Concludes with a discussion of recent developments and future challenges for this growing segment of the global financial system.
Authors :: Benjamin C. Esty, Fuaad A. Qureshi, Mathew Mateo Millett
Swot Analysis of "Introduction to Islamic Finance" written by Benjamin C. Esty, Fuaad A. Qureshi, Mathew Mateo Millett includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Islamic Finance facing as an external strategic factors. Some of the topics covered in Introduction to Islamic Finance case study are - Strategic Management Strategies, Organizational culture, Regulation and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Introduction to Islamic Finance casestudy better are - – geopolitical disruptions, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs,
banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, etc
Introduction to SWOT Analysis of Introduction to Islamic Finance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Introduction to Islamic Finance case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Islamic Finance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Islamic Finance 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 Introduction to Islamic Finance can be done for the following purposes –
1. Strategic planning using facts provided in Introduction to Islamic Finance case study
2. Improving business portfolio management of Islamic Finance
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 Islamic Finance
Strengths Introduction to Islamic Finance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Islamic Finance in Introduction to Islamic Finance Harvard Business Review case study are -
Effective Research and Development (R&D)
– Islamic Finance 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 Introduction to Islamic Finance - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Islamic Finance 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 Islamic Finance is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Introduction to Islamic Finance Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Islamic Finance in the sector have low bargaining power. Introduction to Islamic Finance has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Islamic Finance to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Islamic Finance 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 Introduction to Islamic Finance HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Islamic Finance
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Islamic Finance does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Islamic Finance 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 Benjamin C. Esty, Fuaad A. Qureshi, Mathew Mateo Millett 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.
Operational resilience
– The operational resilience strategy in the Introduction to Islamic Finance 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.
Strong track record of project management
– Islamic Finance is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Islamic Finance is present in almost all the verticals within the industry. This has provided firm in Introduction to Islamic Finance 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.
Successful track record of launching new products
– Islamic Finance has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Islamic Finance 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.
Superior customer experience
– The customer experience strategy of Islamic Finance in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Islamic Finance is one of the leading recruiters in the industry. Managers in the Introduction to Islamic Finance are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Introduction to Islamic Finance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Introduction to Islamic Finance are -
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Islamic Finance supply chain. Even after few cautionary changes mentioned in the HBR case study - Introduction to Islamic Finance, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Islamic Finance vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Islamic Finance 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 - Introduction to Islamic Finance should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Islamic Finance, firm in the HBR case study Introduction to Islamic Finance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Introduction to Islamic Finance HBR case study mentions - Islamic Finance 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Introduction to Islamic Finance 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 Islamic Finance 's lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Introduction to Islamic Finance, in the dynamic environment Islamic Finance has struggled to respond to the nimble upstart competition. Islamic Finance has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Introduction to Islamic Finance, it seems that the employees of Islamic Finance 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.
Need for greater diversity
– Islamic Finance 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.
Increasing silos among functional specialists
– The organizational structure of Islamic Finance is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Islamic Finance needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Islamic Finance to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Introduction to Islamic Finance, 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.
Interest costs
– Compare to the competition, Islamic Finance has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities Introduction to Islamic Finance | 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 Introduction to Islamic Finance are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Islamic Finance can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Islamic Finance can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Learning at scale
– Online learning technologies has now opened space for Islamic Finance 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Islamic Finance in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Manufacturing automation
– Islamic Finance 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.
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. Islamic Finance can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Islamic Finance 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.
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 Islamic Finance in the consumer business. Now Islamic Finance can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Islamic Finance 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, Introduction to Islamic Finance, 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. Islamic Finance can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Islamic Finance can use these opportunities to build new business models that can help the communities that Islamic Finance operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Leveraging digital technologies
– Islamic Finance 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.
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 Islamic Finance 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.
Creating value in data economy
– The success of analytics program of Islamic Finance has opened avenues for new revenue streams for the organization in the industry. This can help Islamic Finance to build a more holistic ecosystem as suggested in the Introduction to Islamic Finance case study. Islamic Finance can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Introduction to Islamic Finance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Introduction to Islamic Finance are -
High dependence on third party suppliers
– Islamic Finance 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.
Environmental challenges
– Islamic Finance 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. Islamic Finance can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 Islamic Finance 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, Islamic Finance 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 Introduction to Islamic Finance .
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 Islamic Finance business can come under increasing regulations regarding data privacy, data security, etc.
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. Islamic Finance needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Regulatory challenges
– Islamic Finance 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.
Consumer confidence and its impact on Islamic Finance 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.
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. Islamic Finance can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Islamic Finance
– 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 Islamic Finance.
Technology acceleration in Forth Industrial Revolution
– Islamic Finance has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Islamic Finance 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Introduction to Islamic Finance, Islamic Finance 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 .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Islamic Finance with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Introduction to Islamic Finance 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 Introduction to Islamic Finance 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 Introduction to Islamic Finance 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 Introduction to Islamic Finance 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 Introduction to Islamic Finance 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 Islamic Finance needs to make to build a sustainable competitive advantage.
