Blackstone and the Sale of Citigroup's Loan Portfolio SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Blackstone and the Sale of Citigroup's Loan Portfolio
The credit boom that preceded the 2007-2009 financial crisis led to several lending practices that exposed banks to large risks. In particular, when the financial crisis unraveled, there were several billion dollars' worth of leveraged buyout (LBO) loans that were meant to be syndicated but-due to full underwriting-had to be funded by the originating banks. The case protagonist is Bennett J. Goodman, a Senior Managing Director at Blackstone. Goodman evaluates the opportunity to buy a fraction of the leveraged loan portfolio being offered for sale by Citigroup. This case can be used as a vehicle for discussing details of leveraged financing. In particular, it illustrates the close connection between syndicated-lending-backed leveraged transactions and loan securitization, and provides a context for discussion of factors that led to the leveraged credit boom that ended in 2007. The case also provides in-depth details of the structure of the transaction and its underlying assets, and serves as a means for understanding and valuing alternative investment strategies pursued by private equity firms during the credit-market crisis. As a byproduct, students learn how to use credit default swaps (CDS), a market-based indicator, for valuation.
Authors :: Victoria Ivashina, David S. Scharfstein
Swot Analysis of "Blackstone and the Sale of Citigroup's Loan Portfolio" written by Victoria Ivashina, David S. Scharfstein includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Leveraged Goodman facing as an external strategic factors. Some of the topics covered in Blackstone and the Sale of Citigroup's Loan Portfolio case study are - Strategic Management Strategies, Financial management, Financial markets, Marketing, Reorganization and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Blackstone and the Sale of Citigroup's Loan Portfolio casestudy better are - – increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google,
wage bills are increasing, there is backlash against globalization, etc
Introduction to SWOT Analysis of Blackstone and the Sale of Citigroup's Loan Portfolio
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Blackstone and the Sale of Citigroup's Loan Portfolio case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Leveraged Goodman, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Leveraged Goodman 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 Blackstone and the Sale of Citigroup's Loan Portfolio can be done for the following purposes –
1. Strategic planning using facts provided in Blackstone and the Sale of Citigroup's Loan Portfolio case study
2. Improving business portfolio management of Leveraged Goodman
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 Leveraged Goodman
Strengths Blackstone and the Sale of Citigroup's Loan Portfolio | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Leveraged Goodman in Blackstone and the Sale of Citigroup's Loan Portfolio Harvard Business Review case study are -
Diverse revenue streams
– Leveraged Goodman is present in almost all the verticals within the industry. This has provided firm in Blackstone and the Sale of Citigroup's Loan Portfolio 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.
Effective Research and Development (R&D)
– Leveraged Goodman 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 Blackstone and the Sale of Citigroup's Loan Portfolio - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Leveraged Goodman 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 Leveraged Goodman is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Blackstone and the Sale of Citigroup's Loan Portfolio Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Leveraged Goodman has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Leveraged Goodman 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.
High brand equity
– Leveraged Goodman has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Leveraged Goodman to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Leveraged Goodman is one of the most innovative firm in sector. Manager in Blackstone and the Sale of Citigroup's Loan Portfolio Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Finance & Accounting field
– Leveraged Goodman 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 Leveraged Goodman in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Leveraged Goodman 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.
Cross disciplinary teams
– Horizontal connected teams at the Leveraged Goodman 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.
Operational resilience
– The operational resilience strategy in the Blackstone and the Sale of Citigroup's Loan Portfolio 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.
Low bargaining power of suppliers
– Suppliers of Leveraged Goodman in the sector have low bargaining power. Blackstone and the Sale of Citigroup's Loan Portfolio has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Leveraged Goodman to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Leveraged Goodman
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Leveraged Goodman does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Blackstone and the Sale of Citigroup's Loan Portfolio | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Blackstone and the Sale of Citigroup's Loan Portfolio are -
Products dominated business model
– Even though Leveraged Goodman 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 - Blackstone and the Sale of Citigroup's Loan Portfolio should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Leveraged Goodman products
– To increase the profitability and margins on the products, Leveraged Goodman needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Blackstone and the Sale of Citigroup's Loan Portfolio HBR case study mentions - Leveraged Goodman 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 cash cycle compare to competitors
Leveraged Goodman 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 star products
– The top 2 products and services of the firm as mentioned in the Blackstone and the Sale of Citigroup's Loan Portfolio 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 Leveraged Goodman has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Victoria Ivashina, David S. Scharfstein suggests that, Leveraged Goodman 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.
Increasing silos among functional specialists
– The organizational structure of Leveraged Goodman is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Leveraged Goodman needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Leveraged Goodman to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Blackstone and the Sale of Citigroup's Loan Portfolio 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 Leveraged Goodman 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Blackstone and the Sale of Citigroup's Loan Portfolio 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 Blackstone and the Sale of Citigroup's Loan Portfolio can leverage the sales team experience to cultivate customer relationships as Leveraged Goodman is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Leveraged Goodman, firm in the HBR case study Blackstone and the Sale of Citigroup's Loan Portfolio needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at Leveraged Goodman 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.
Opportunities Blackstone and the Sale of Citigroup's Loan Portfolio | 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 Blackstone and the Sale of Citigroup's Loan Portfolio are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Leveraged Goodman 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.
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 Leveraged Goodman in the consumer business. Now Leveraged Goodman can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Leveraged Goodman 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Leveraged Goodman 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.
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. Leveraged Goodman can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Leveraged Goodman 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.
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. Leveraged Goodman 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. Leveraged Goodman 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.
Leveraging digital technologies
– Leveraged Goodman 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.
Creating value in data economy
– The success of analytics program of Leveraged Goodman has opened avenues for new revenue streams for the organization in the industry. This can help Leveraged Goodman to build a more holistic ecosystem as suggested in the Blackstone and the Sale of Citigroup's Loan Portfolio case study. Leveraged Goodman can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Leveraged Goodman is facing challenges because of the dominance of functional experts in the organization. Blackstone and the Sale of Citigroup's Loan Portfolio 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 Leveraged Goodman 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Leveraged Goodman can use these opportunities to build new business models that can help the communities that Leveraged Goodman 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 Leveraged Goodman 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.
Threats Blackstone and the Sale of Citigroup's Loan Portfolio External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Blackstone and the Sale of Citigroup's Loan Portfolio are -
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. Leveraged Goodman needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 Leveraged Goodman.
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. Leveraged Goodman 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.
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 Leveraged Goodman in the Finance & Accounting sector and impact the bottomline of the organization.
Environmental challenges
– Leveraged Goodman 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. Leveraged Goodman can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Stagnating economy with rate increase
– Leveraged Goodman 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.
Increasing wage structure of Leveraged Goodman
– 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 Leveraged Goodman.
High dependence on third party suppliers
– Leveraged Goodman 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.
Consumer confidence and its impact on Leveraged Goodman 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Leveraged Goodman 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 Blackstone and the Sale of Citigroup's Loan Portfolio .
Technology acceleration in Forth Industrial Revolution
– Leveraged Goodman has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Leveraged Goodman 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.
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. Leveraged Goodman 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 Blackstone and the Sale of Citigroup's Loan Portfolio 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 Blackstone and the Sale of Citigroup's Loan Portfolio 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 Blackstone and the Sale of Citigroup's Loan Portfolio 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 Blackstone and the Sale of Citigroup's Loan Portfolio 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 Blackstone and the Sale of Citigroup's Loan Portfolio 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 Leveraged Goodman needs to make to build a sustainable competitive advantage.