Subprime Meltdown: American Housing and Global Financial Turmoil SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study SWOT Analysis Solution
Case Study Description of Subprime Meltdown: American Housing and Global Financial Turmoil
This case focuses on the financial difficulties faced in the US from August to December 2006 as well as their roots in subprime lending. After briefly discussing how mortgages were structured and traded in the pre-1990 period, it describes subprime mortgage lending, as well as other innovative mortgages issued in the 1990s. It also discusses how these mortgages were packaged into securities, and who ultimately came to own these claims and their attendant risk. The case then describes the pain inflicted by raising foreclosures, as well as the financial market ramifications of the rise in mortgage delinquencies. It also chronicles the response of the US and European central banks to the unfolding financial difficulties. Lastly, the case lays policies that have been proposed to deal with either the consequences or the causes of the crisis. These include policies for reforming the supervision of the financial system, changing bankruptcy rules and regulating mortgage finance. Some attention is paid to the role of credit rating agencies in the crisis, and in the financial system as a whole.
Swot Analysis of "Subprime Meltdown: American Housing and Global Financial Turmoil" written by Julio J. Rotemberg includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Mortgages Subprime facing as an external strategic factors. Some of the topics covered in Subprime Meltdown: American Housing and Global Financial Turmoil case study are - Strategic Management Strategies, Policy and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Subprime Meltdown: American Housing and Global Financial Turmoil casestudy better are - – challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, wage bills are increasing,
increasing commodity prices, geopolitical disruptions, etc
Introduction to SWOT Analysis of Subprime Meltdown: American Housing and Global Financial Turmoil
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Subprime Meltdown: American Housing and Global Financial Turmoil case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mortgages Subprime, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mortgages Subprime 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 Subprime Meltdown: American Housing and Global Financial Turmoil can be done for the following purposes –
1. Strategic planning using facts provided in Subprime Meltdown: American Housing and Global Financial Turmoil case study
2. Improving business portfolio management of Mortgages Subprime
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 Mortgages Subprime
Strengths Subprime Meltdown: American Housing and Global Financial Turmoil | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mortgages Subprime in Subprime Meltdown: American Housing and Global Financial Turmoil Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Mortgages Subprime 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.
Ability to lead change in Finance & Accounting field
– Mortgages Subprime 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 Mortgages Subprime in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Mortgages Subprime has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Subprime Meltdown: American Housing and Global Financial Turmoil 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.
Analytics focus
– Mortgages Subprime 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 Julio J. Rotemberg 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.
Effective Research and Development (R&D)
– Mortgages Subprime 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 Subprime Meltdown: American Housing and Global Financial Turmoil - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Mortgages Subprime in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Mortgages Subprime is one of the leading recruiters in the industry. Managers in the Subprime Meltdown: American Housing and Global Financial Turmoil are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management
– Mortgages Subprime is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Subprime Meltdown: American Housing and Global Financial Turmoil 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.
Innovation driven organization
– Mortgages Subprime is one of the most innovative firm in sector. Manager in Subprime Meltdown: American Housing and Global Financial Turmoil 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
– Subprime Meltdown: American Housing and Global Financial Turmoil firm has clearly differentiated products in the market place. This has enabled Mortgages Subprime to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Mortgages Subprime to invest into research and development (R&D) and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Mortgages Subprime digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Mortgages Subprime 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.
Weaknesses Subprime Meltdown: American Housing and Global Financial Turmoil | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Subprime Meltdown: American Housing and Global Financial Turmoil are -
Products dominated business model
– Even though Mortgages Subprime 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 - Subprime Meltdown: American Housing and Global Financial Turmoil should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Mortgages Subprime 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Subprime Meltdown: American Housing and Global Financial Turmoil 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 Mortgages Subprime has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Subprime Meltdown: American Housing and Global Financial Turmoil HBR case study mentions - Mortgages Subprime 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.
Capital Spending Reduction
– Even during the low interest decade, Mortgages Subprime 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Julio J. Rotemberg suggests that, Mortgages Subprime 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Subprime Meltdown: American Housing and Global Financial Turmoil, is just above the industry average. Mortgages Subprime 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.
High cash cycle compare to competitors
Mortgages Subprime 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Subprime Meltdown: American Housing and Global Financial Turmoil, it seems that the employees of Mortgages Subprime 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.
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 Mortgages Subprime supply chain. Even after few cautionary changes mentioned in the HBR case study - Subprime Meltdown: American Housing and Global Financial Turmoil, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Mortgages Subprime vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study Subprime Meltdown: American Housing and Global Financial Turmoil, 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.
Opportunities Subprime Meltdown: American Housing and Global Financial Turmoil | 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 Subprime Meltdown: American Housing and Global Financial Turmoil are -
Developing new processes and practices
– Mortgages Subprime 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.
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. Mortgages Subprime can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Mortgages Subprime in the consumer business. Now Mortgages Subprime can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Mortgages Subprime 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Mortgages Subprime can use these opportunities to build new business models that can help the communities that Mortgages Subprime operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Leveraging digital technologies
– Mortgages Subprime 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.
Learning at scale
– Online learning technologies has now opened space for Mortgages Subprime 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Mortgages Subprime 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 Mortgages Subprime to hire the very best people irrespective of their geographical location.
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. Mortgages Subprime 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. Mortgages Subprime 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.
Using analytics as competitive advantage
– Mortgages Subprime 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 Subprime Meltdown: American Housing and Global Financial Turmoil - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Mortgages Subprime to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Mortgages Subprime can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Subprime Meltdown: American Housing and Global Financial Turmoil 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.
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 Mortgages Subprime 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Mortgages Subprime is facing challenges because of the dominance of functional experts in the organization. Subprime Meltdown: American Housing and Global Financial Turmoil 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.
Threats Subprime Meltdown: American Housing and Global Financial Turmoil External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Subprime Meltdown: American Housing and Global Financial Turmoil 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. Mortgages Subprime needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Mortgages Subprime with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Subprime Meltdown: American Housing and Global Financial Turmoil, Mortgages Subprime 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 .
Stagnating economy with rate increase
– Mortgages Subprime 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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Shortening product life cycle
– it is one of the major threat that Mortgages Subprime is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Mortgages Subprime can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Mortgages Subprime 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. Mortgages Subprime can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 Mortgages Subprime.
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. Mortgages Subprime 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 Mortgages Subprime in the Finance & Accounting sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Mortgages Subprime 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 Subprime Meltdown: American Housing and Global Financial Turmoil .
High dependence on third party suppliers
– Mortgages Subprime 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.
Weighted SWOT Analysis of Subprime Meltdown: American Housing and Global Financial Turmoil 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 Subprime Meltdown: American Housing and Global Financial Turmoil 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 Subprime Meltdown: American Housing and Global Financial Turmoil 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 Subprime Meltdown: American Housing and Global Financial Turmoil 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 Subprime Meltdown: American Housing and Global Financial Turmoil 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 Mortgages Subprime needs to make to build a sustainable competitive advantage.