Subprime Meltdown: American Housing and Global Financial Turmoil SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
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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 - – supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google,
wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
Highly skilled collaborators
– Mortgages Subprime 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 Subprime Meltdown: American Housing and Global Financial Turmoil HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
High brand equity
– Mortgages Subprime has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Mortgages Subprime to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Diverse revenue streams
– Mortgages Subprime is present in almost all the verticals within the industry. This has provided firm in Subprime Meltdown: American Housing and Global Financial Turmoil 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.
High switching costs
– The high switching costs that Mortgages Subprime 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.
Successful track record of launching new products
– Mortgages Subprime has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Mortgages Subprime 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.
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.
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.
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.
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.
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 -
High operating costs
– Compare to the competitors, firm in the HBR case study Subprime Meltdown: American Housing and Global Financial Turmoil 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 Mortgages Subprime 's lucrative customers.
Need for greater diversity
– Mortgages Subprime 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.
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 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Mortgages Subprime is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Subprime Meltdown: American Housing and Global Financial Turmoil can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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.
Slow decision making process
– As mentioned earlier in the report, Mortgages Subprime 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. Mortgages Subprime 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.
Increasing silos among functional specialists
– The organizational structure of Mortgages Subprime is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Mortgages Subprime needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Mortgages Subprime to focus more on services rather than just following the product oriented approach.
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.
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.
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 -
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. Mortgages Subprime can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
Loyalty marketing
– Mortgages Subprime has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
Manufacturing automation
– Mortgages Subprime 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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Mortgages Subprime 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, Subprime Meltdown: American Housing and Global Financial Turmoil, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Mortgages Subprime to increase its market reach. Mortgages Subprime will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Mortgages Subprime can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Mortgages Subprime 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.
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.
Building a culture of innovation
– managers at Mortgages Subprime 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.
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 -
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.
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Mortgages Subprime 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.
Consumer confidence and its impact on Mortgages Subprime 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, 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.
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 Mortgages Subprime business can come under increasing regulations regarding data privacy, data security, etc.
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.
Regulatory challenges
– Mortgages Subprime 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.
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.
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 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.