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 - – supply chains are disrupted by pandemic , increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs,
increasing energy prices, there is increasing trade war between United States & China, 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 -
Highly skilled collaborators
– Leveraged Goodman 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 Blackstone and the Sale of Citigroup's Loan Portfolio HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Leveraged Goodman is one of the leading recruiters in the industry. Managers in the Blackstone and the Sale of Citigroup's Loan Portfolio are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Leveraged Goodman in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Leveraged Goodman digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Leveraged Goodman 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.
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.
Sustainable margins compare to other players in Finance & Accounting industry
– Blackstone and the Sale of Citigroup's Loan Portfolio firm has clearly differentiated products in the market place. This has enabled Leveraged Goodman to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Leveraged Goodman to invest into research and development (R&D) and innovation.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, Leveraged Goodman 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.
Need for greater diversity
– Leveraged Goodman 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.
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 Leveraged Goodman supply chain. Even after few cautionary changes mentioned in the HBR case study - Blackstone and the Sale of Citigroup's Loan Portfolio, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Leveraged Goodman vulnerable to further global disruptions in South East Asia.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Blackstone and the Sale of Citigroup's Loan Portfolio, in the dynamic environment Leveraged Goodman has struggled to respond to the nimble upstart competition. Leveraged Goodman has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Leveraged Goodman 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 decision making process
– As mentioned earlier in the report, Leveraged Goodman 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. Leveraged Goodman 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 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.
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 -
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.
Developing new processes and practices
– Leveraged Goodman 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.
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.
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.
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. Leveraged Goodman can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Leveraged Goodman 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 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.
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.
Using analytics as competitive advantage
– Leveraged Goodman 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 Blackstone and the Sale of Citigroup's Loan Portfolio - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Leveraged Goodman to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Leveraged Goodman 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 Leveraged Goodman to hire the very best people irrespective of their geographical location.
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.
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.
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.
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.
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.
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.
Regulatory challenges
– Leveraged Goodman 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.
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.
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.
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.
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 .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Leveraged Goodman 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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Leveraged Goodman business can come under increasing regulations regarding data privacy, data security, etc.
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.