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 - – increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models,
competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
Operational resilience
– The operational resilience strategy in the Chicago Board Options Exchange (CBOE) 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.
Analytics focus
– Cboe Options 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 George Chacko, Anders Sjoman, Daniela Beyersdorfer, George Robert Nelson 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.
Organizational Resilience of Cboe Options
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Cboe Options does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
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.
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.
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 recruit top talent
– Cboe Options is one of the leading recruiters in the industry. Managers in the Chicago Board Options Exchange (CBOE) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
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 -
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Chicago Board Options Exchange (CBOE) 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 Cboe Options has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Chicago Board Options Exchange (CBOE) 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 Cboe Options 's lucrative customers.
Slow to strategic competitive environment developments
– As Chicago Board Options Exchange (CBOE) HBR case study mentions - Cboe Options 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 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.
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.
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.
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 Cboe Options supply chain. Even after few cautionary changes mentioned in the HBR case study - Chicago Board Options Exchange (CBOE), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Cboe Options vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the segment, Cboe Options 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.
Skills based hiring
– The stress on hiring functional specialists at Cboe Options 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.
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.
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 -
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Cboe Options 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Cboe Options can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Cboe Options 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 Cboe Options to hire the very best people irrespective of their geographical location.
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.
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 Cboe Options in the consumer business. Now Cboe Options can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Cboe Options is facing challenges because of the dominance of functional experts in the organization. Chicago Board Options Exchange (CBOE) 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.
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.
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. Cboe Options can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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 -
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.
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. Cboe Options needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.
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.
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 .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Cboe Options 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 Chicago Board Options Exchange (CBOE) .
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.
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.
Consumer confidence and its impact on Cboe Options 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Cboe Options with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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.
