Case Study Description of AQR's Momentum Funds (B)
This is a (B) case for AQR's Momentum Funds. It follows the first year of performance of the funds after launching, and gives students a critical inflection point for analyzing the nascent stages of a new product launch and the potential path dependence of the product depending on initial returns. It allows students to wrestle with the way forward given these conditions, and how (if at all) it changes their views, pitch, and perspective on the strategy, and traditional long-short strategies more generally.
Authors :: Daniel B. Bergstresser, Christopher Malloy, Lauren H. Cohen, Randolph B. Cohen
Swot Analysis of "AQR's Momentum Funds (B)" written by Daniel B. Bergstresser, Christopher Malloy, Lauren H. Cohen, Randolph B. Cohen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aqr's Funds facing as an external strategic factors. Some of the topics covered in AQR's Momentum Funds (B) case study are - Strategic Management Strategies, Financial markets, Strategy and Finance & Accounting.
Some of the macro environment factors that can be used to understand the AQR's Momentum Funds (B) casestudy better are - – geopolitical disruptions, wage bills are increasing, increasing energy prices, increasing transportation and logistics costs, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy,
cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of AQR's Momentum Funds (B)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in AQR's Momentum Funds (B) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aqr's Funds, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aqr's Funds 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 AQR's Momentum Funds (B) can be done for the following purposes –
1. Strategic planning using facts provided in AQR's Momentum Funds (B) case study
2. Improving business portfolio management of Aqr's Funds
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 Aqr's Funds
Strengths AQR's Momentum Funds (B) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aqr's Funds in AQR's Momentum Funds (B) Harvard Business Review case study are -
Diverse revenue streams
– Aqr's Funds is present in almost all the verticals within the industry. This has provided firm in AQR's Momentum Funds (B) 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.
Highly skilled collaborators
– Aqr's Funds 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 AQR's Momentum Funds (B) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Aqr's Funds is one of the most innovative firm in sector. Manager in AQR's Momentum Funds (B) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Aqr's Funds
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Aqr's Funds 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 Aqr's Funds digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aqr's Funds 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.
Analytics focus
– Aqr's Funds 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 Daniel B. Bergstresser, Christopher Malloy, Lauren H. Cohen, Randolph B. Cohen 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 AQR's Momentum Funds (B) 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.
Sustainable margins compare to other players in Finance & Accounting industry
– AQR's Momentum Funds (B) firm has clearly differentiated products in the market place. This has enabled Aqr's Funds to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Aqr's Funds to invest into research and development (R&D) and innovation.
Learning organization
- Aqr's Funds 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 Aqr's Funds is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in AQR's Momentum Funds (B) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Aqr's Funds has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aqr's Funds to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Aqr's Funds 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 AQR's Momentum Funds (B) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Finance & Accounting field
– Aqr's Funds 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 Aqr's Funds in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses AQR's Momentum Funds (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AQR's Momentum Funds (B) are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study AQR's Momentum Funds (B), is just above the industry average. Aqr's Funds needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Aligning sales with marketing
– It come across in the case study AQR's Momentum Funds (B) 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 AQR's Momentum Funds (B) can leverage the sales team experience to cultivate customer relationships as Aqr's Funds is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Aqr's Funds 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.
Low market penetration in new markets
– Outside its home market of Aqr's Funds, firm in the HBR case study AQR's Momentum Funds (B) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the AQR's Momentum Funds (B) 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 Aqr's Funds has relatively successful track record of launching new products.
Lack of clear differentiation of Aqr's Funds products
– To increase the profitability and margins on the products, Aqr's Funds needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study AQR's Momentum Funds (B), 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 bargaining power of channel partners
– Because of the regulatory requirements, Daniel B. Bergstresser, Christopher Malloy, Lauren H. Cohen, Randolph B. Cohen suggests that, Aqr's Funds 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, Aqr's Funds 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Aqr's Funds is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study AQR's Momentum Funds (B) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study AQR's Momentum Funds (B), it seems that the employees of Aqr's Funds 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.
Opportunities AQR's Momentum Funds (B) | 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 AQR's Momentum Funds (B) are -
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 Aqr's Funds in the consumer business. Now Aqr's Funds can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Aqr's Funds 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Aqr's Funds can use these opportunities to build new business models that can help the communities that Aqr's Funds operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Aqr's Funds 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aqr's Funds 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, AQR's Momentum Funds (B), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aqr's Funds can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Aqr's Funds to increase its market reach. Aqr's Funds 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.
Using analytics as competitive advantage
– Aqr's Funds 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 AQR's Momentum Funds (B) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Aqr's Funds to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Aqr's Funds can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. AQR's Momentum Funds (B) 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.
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. Aqr's Funds 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. Aqr's Funds 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.
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. Aqr's Funds can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Aqr's Funds 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.
Loyalty marketing
– Aqr's Funds 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.
Threats AQR's Momentum Funds (B) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study AQR's Momentum Funds (B) are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Aqr's Funds with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Aqr's Funds in the Finance & Accounting sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study AQR's Momentum Funds (B), Aqr's Funds 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 .
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.
Environmental challenges
– Aqr's Funds 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. Aqr's Funds can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Aqr's Funds can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Aqr's Funds has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Aqr's Funds 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.
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 Aqr's Funds.
Shortening product life cycle
– it is one of the major threat that Aqr's Funds is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Aqr's Funds 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. Aqr's Funds needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Regulatory challenges
– Aqr's Funds 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aqr's Funds 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.
Weighted SWOT Analysis of AQR's Momentum Funds (B) 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 AQR's Momentum Funds (B) 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 AQR's Momentum Funds (B) 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 AQR's Momentum Funds (B) 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 AQR's Momentum Funds (B) 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 Aqr's Funds needs to make to build a sustainable competitive advantage.
