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 - – increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, wage bills are increasing, there is backlash against globalization, supply chains are disrupted by pandemic , increasing energy prices,
increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, 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 -
Low bargaining power of suppliers
– Suppliers of Aqr's Funds in the sector have low bargaining power. AQR's Momentum Funds (B) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aqr's Funds to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
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.
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.
High switching costs
– The high switching costs that Aqr's Funds 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.
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.
Successful track record of launching new products
– Aqr's Funds has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Aqr's Funds 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.
Cross disciplinary teams
– Horizontal connected teams at the Aqr's Funds are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
Training and development
– Aqr's Funds has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in AQR's Momentum Funds (B) 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.
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 -
Need for greater diversity
– Aqr's Funds 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.
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.
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 operating costs
– Compare to the competitors, firm in the HBR case study AQR's Momentum Funds (B) 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 Aqr's Funds 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Aqr's Funds needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High 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 Aqr's Funds supply chain. Even after few cautionary changes mentioned in the HBR case study - AQR's Momentum Funds (B), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Aqr's Funds vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Aqr's Funds is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Aqr's Funds needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aqr's Funds to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Aqr's Funds 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 - AQR's Momentum Funds (B) 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 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 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.
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.
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 -
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aqr's Funds is facing challenges because of the dominance of functional experts in the organization. AQR's Momentum Funds (B) 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.
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.
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.
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. Aqr's Funds 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, Aqr's Funds 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.
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.
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.
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Aqr's Funds 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.
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 -
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.
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.
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.
High dependence on third party suppliers
– Aqr's Funds 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 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.
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 .
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.
Increasing wage structure of Aqr's Funds
– 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 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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aqr's Funds 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 AQR's Momentum Funds (B) .
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. Aqr's Funds 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.
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.
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.