Case Study Description of Chicago Board Options Exchange (CBOE)
The Chicago Board Options Exchange (CBEO) must decide how to respond to new competition in the market for financial options. Options have typically been a very liquid asset class, despite the fact that many single-name options are listed on the CBOE, the second largest options exchange in the world. In response to this illiquidity, new options exchanges have started offering electronic trading, with the hope of making the markets more liquid and capturing market share and profitability from the CBOE. The CBOE must now decide whether to ignore the competition and continue with its floor-based model of trading or switch to an all-electronic trading model or some type of hybrid model.
Authors :: George Chacko, Anders Sjoman, Daniela Beyersdorfer, George Robert Nelson
Swot Analysis of "Chicago Board Options Exchange (CBOE)" written by George Chacko, Anders Sjoman, Daniela Beyersdorfer, George Robert Nelson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cboe Options facing as an external strategic factors. Some of the topics covered in Chicago Board Options Exchange (CBOE) case study are - Strategic Management Strategies, Competition, Financial markets, Strategic planning and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Chicago Board Options Exchange (CBOE) casestudy better are - – challanges to central banks by blockchain based private currencies, geopolitical disruptions, wage bills are increasing, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing government debt because of Covid-19 spendings, technology disruption, etc
Introduction to SWOT Analysis of Chicago Board Options Exchange (CBOE)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Chicago Board Options Exchange (CBOE) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cboe Options, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cboe Options 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 Chicago Board Options Exchange (CBOE) can be done for the following purposes –
1. Strategic planning using facts provided in Chicago Board Options Exchange (CBOE) case study
2. Improving business portfolio management of Cboe Options
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 Cboe Options
Strengths Chicago Board Options Exchange (CBOE) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cboe Options in Chicago Board Options Exchange (CBOE) Harvard Business Review case study are -
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Cboe Options digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Cboe Options 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.
Training and development
– Cboe Options has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Chicago Board Options Exchange (CBOE) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Effective Research and Development (R&D)
– Cboe Options 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 Chicago Board Options Exchange (CBOE) - 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
– Cboe Options 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 Chicago Board Options Exchange (CBOE) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Cboe Options has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
High brand equity
– Cboe Options has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Cboe Options to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Cboe Options has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cboe Options 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.
Strong track record of project management
– Cboe Options is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Cboe Options in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Finance & Accounting industry
– Chicago Board Options Exchange (CBOE) firm has clearly differentiated products in the market place. This has enabled Cboe Options to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Cboe Options to invest into research and development (R&D) and innovation.
Ability to lead change in Finance & Accounting field
– Cboe Options 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 Cboe Options in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Cboe Options is present in almost all the verticals within the industry. This has provided firm in Chicago Board Options Exchange (CBOE) 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 Chicago Board Options Exchange (CBOE) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Chicago Board Options Exchange (CBOE) are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Cboe Options is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Chicago Board Options Exchange (CBOE) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Chicago Board Options Exchange (CBOE), in the dynamic environment Cboe Options has struggled to respond to the nimble upstart competition. Cboe Options has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study Chicago Board Options Exchange (CBOE) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Chicago Board Options Exchange (CBOE) can leverage the sales team experience to cultivate customer relationships as Cboe Options is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Chicago Board Options Exchange (CBOE), it seems that the employees of Cboe Options 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.
Slow decision making process
– As mentioned earlier in the report, Cboe Options 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. Cboe Options 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.
Increasing silos among functional specialists
– The organizational structure of Cboe Options is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Cboe Options needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Cboe Options to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Cboe Options 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 - Chicago Board Options Exchange (CBOE) should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners
– Because of the regulatory requirements, George Chacko, Anders Sjoman, Daniela Beyersdorfer, George Robert Nelson suggests that, Cboe Options 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.
Interest costs
– Compare to the competition, Cboe Options 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.
Capital Spending Reduction
– Even during the low interest decade, Cboe Options 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.
High cash cycle compare to competitors
Cboe Options 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.
Opportunities Chicago Board Options Exchange (CBOE) | 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 Chicago Board Options Exchange (CBOE) are -
Better consumer reach
– The expansion of the 5G network will help Cboe Options to increase its market reach. Cboe Options 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cboe Options can use these opportunities to build new business models that can help the communities that Cboe Options operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Developing new processes and practices
– Cboe Options 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.
Buying journey improvements
– Cboe Options can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Chicago Board Options Exchange (CBOE) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Using analytics as competitive advantage
– Cboe Options 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 Chicago Board Options Exchange (CBOE) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Cboe Options to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Cboe Options 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 Cboe Options has opened avenues for new revenue streams for the organization in the industry. This can help Cboe Options to build a more holistic ecosystem as suggested in the Chicago Board Options Exchange (CBOE) case study. Cboe Options can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Cboe Options 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Cboe Options 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, Chicago Board Options Exchange (CBOE), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Cboe Options to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Leveraging digital technologies
– Cboe Options 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.
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. Cboe Options can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Cboe Options 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.
Threats Chicago Board Options Exchange (CBOE) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Chicago Board Options Exchange (CBOE) are -
Shortening product life cycle
– it is one of the major threat that Cboe Options is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Cboe Options 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. Cboe Options can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Cboe Options 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.
Regulatory challenges
– Cboe Options 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.
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 Cboe Options business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Cboe Options has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Cboe Options 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.
Stagnating economy with rate increase
– Cboe Options 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Cboe Options 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.
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 Cboe Options.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Chicago Board Options Exchange (CBOE), Cboe Options 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 .
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 Cboe Options in the Finance & Accounting sector and impact the bottomline of the organization.
Environmental challenges
– Cboe Options 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. Cboe Options can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Weighted SWOT Analysis of Chicago Board Options Exchange (CBOE) 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 Chicago Board Options Exchange (CBOE) 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 Chicago Board Options Exchange (CBOE) 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 Chicago Board Options Exchange (CBOE) 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 Chicago Board Options Exchange (CBOE) 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 Cboe Options needs to make to build a sustainable competitive advantage.