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Moody’s Corporation Strategic Plan
Introduction
Moody’s Corporation Strategic Plan. It is essential for companies to develop and manage strategies that will establish and safeguard as well as sustain their positions in competitive markets. A corporate strategic plan is a roadmap on how a corporation plans to achieve its targeted goals. A corporate strategic plan is an important document which describes the steps and approaches an organization will use to grow, become and sustain competitive advantage and more profits. Strategic planning is essential for companies because it ensures the inclusive cooperation of all units and workforce to achieve common objectives as well as allocating the corporation’s resources, human and financial resources efficiently (Wang, 2018). This paper provides a strategic plan for Moody’s Corporation by determining industry analysis, competitive analysis, financial analysis, and technical analysis in order to establish a strategic plan and generate an alternative strategy for the corporation.
MOODY’S CORPORATION STRATEGIC PLAN. Vision and mission
Moody’s Corporation is an essential constituent of the international capital markets and provides research, rating for credits, tools, and analysis that contribute to an integrated and transparent financial market. The vision of the company is, therefore, to provide an integrated and transparent financial market in the global capital markets. The corporation background is the parent corporation of Moody’s Investor Service, which provides ratings for credit and research covering securities and debt instruments, Moody’s Analytics, which offer financial advisory services, leading-edge software, and credit research as well as financial risk management and economic analysis. The corporation reported income of 4.2 billion in 2017 and the corporation hires approximately 12,300 people globally as well as maintains a presence in 42 nations (Wang, 2018).
MOODY’S CORPORATION STRATEGIC PLAN. Industry analysis
The corporation is an essential constituent of the international markets and gives credit ratings, research, techniques, and analysis contributing to an integrated and transparent financial market. Industry analysis is an essential aspect in deciding the strategic plan that an organization should adopt in global capital markets. Industry analysis evaluates the five competitive forces that reveal the competition extend beyond the present rivals as well as evaluates suppliers, customers, substitutes and potential entrants. Global capital markets continue to recover from the 2008 financial crisis and improving investors’ confidence (Cawley, 2016). The emerging markets in global capital markets are one of the main drivers for growth in the industry as firms continue to expand to emerging markets. Besides, financial companies in the global capital are upgrading their information technology systems and communication technologies. IT is driving regulatory pressures, improving risk management, gaining a competitive edge and increased integration activities due to increasing merging and acquisitions in the industry (Markusen, 2017).
MOODY’S CORPORATION STRATEGIC PLAN. Globally, investors in capital markets continue to diversify their portfolios geographically as well as global foreign investments showing a notable increase. Besides, investors’ focus and investment firms are shifting to high growth emerging markets, which has increased global capital market imbalances. According to Markusen (2017), research shows that most developed economies have achieved net debtors, with their debt being funded by emerging markets. Thus, emerging markets have a high growth potential and have increased levels of incomes making them the center for raising capital. The global capital markets main players are buy-side firms which include hedge funds, mutual funds, unit trusts, pension funds private equity and proprietary trading firms; sell-side firms which include investment banks, brokerage houses, and investment analysts and financial intermediaries who include clearinghouses, stock exchanges, and custodian banks. However, the industry shows that the increased regulatory reforms are impacting financial intermediary firms and technology infrastructure upgrades have become a focus of intermediary financial firms. The regulatory environment is predicted to tighten further in the future with global nations’ policies impacting trade volumes on the capital markets (Cawley, 2016).
The key drivers for the increasing regulatory legislation which impact the corporations’ activities are the regulators who are focused on enhancing the transparency in the financial markets, particularly over the counter derivates and markets. Besides, regulators are focusing on decreasing risk as well as removing failure concerns and streamlining the clearing process by the introduction of regulations that will enhance interoperability between central counterparty clearing houses. Besides, industry analysis shows that high frequency and dart pool trading will probably drive future trading volumes for financial corporations in global markets (Cawley, 2016). Moreover, the consolidation of stock exchanges in the global capital markets has created few large players who will be controlling the significant share of trading activities with the global capital market industry (Cash, 2018).
Corporations in the industry manage, compile and report credit information on consumers and business. Major companies in the industry include Equifax, S&P Global, Moody’s, Dun & Bradstreet and TransUnion as well as Experian from Ireland and Creditreform from Germany. Demand in this sector is by the volume of financial transactions and by economic health. Therefore, the individual companies’ profitability depends on operation efficiency and large credit reporting corporations have substantial economies of scale in operations. Besides, small companies in the industry can compete effectively by operating in the niche markets such as tenant screening, business credit or employment screening. However, the US industry is highly concentrated, with the largest companies accounting for more than 95% of the revenue and the four largest corporations account for over 60% of revenue (Cash, 2018).
MOODY’S CORPORATION STRATEGIC PLAN. Competitive analysis
Competition in global capital markets is intense. The best way to evaluate completion is through industry analysis (Cash, 2018). This is because competition drives down the invested capital’s rates of return. If the rate of return is competitive, it encourages investment in global capital markets. The forces influencing competition in global capital markets and industry structure are threats of new entrants, macro factors such as technology and social factors, the threat of substitute products and micro factors, such customers or buyers changing needs. The stable credit profile for the US is showing signs of downward pressure in long-term due to significant fiscal deterioration amid increasing national debt levels as well as widening the federal budget deficit. The competitive climate of global capital markets shows the US economy is very wealthy, robust, dynamic and well-diversified, making its role in the global financial system unmatched. These factors help Moody’s Corporation to compensate for the impending fiscal weakness. According to Cash (2018), corporations in the global capital market are facing rising costs and interest rates that will cause erosion of fiscal position, especially in the United States, and lack of absent measures to decrease the costs and raise additional revenues. The US economy’s competitiveness and dynamism, high levels of income and relatively supportive demographic trends underpin its economic strength. There is rising global competition, and Moody’s Corporation faces the emergence of aversion to open a trade and foreign labor which may erode the financial strength of the corporation. Moody’s Corporation faces competition from various companies such as Goldman Sachs Group Inc, Morgan Stanley, S&P Global Inc, Thomson Reuters Corp, TD Ameritrade Holding Corp, and Charles Schwab Corp. Besides, Moody’s Corporation also faces competition from emerging markets, especially from developing economies and companies incorporating technology into their operations and systems. Moody’s Corporation also faces increasing competition in the industry from corporations providing customer services such s American First Multifamily Investors, American Express Company, and Altanticus Holdings Corporation (Markusen, 2017).
MOODY’S CORPORATION STRATEGIC PLAN. Financial analysis
Financial analysis is an opportunity to evaluate companies’ financial performance, suitability, and sustainability in order to make adjustment and strategies to remain competitive. The company has been experiencing increasing income, and its financial performance recorded revenue of 4.2 billion in 2017. The following table provides the financial performance of Moody’s Corporation since 2014.
| No | Financial Ratio | 2014 | 2015 | 2016 |
| 1 | Earnings Per Share | 4.61 | 4.63 | 5.46 |
| 2 | Net Profit Margin | 29.65% | 27.01% | 25.16% |
| 3 | Return on Capital Employed | 44.44% | 37.93% | 36.14% |
| 4 | Return on Working Capital | 72.77% | 103.71% | 105.22% |
| 5 | Sales Growth | 12.17 | 4.50 | 3.99 |
| 6 | Current Ratio | 2.24 | 2.66 | 2.68 |
| 7 | Quick Ratio | 2.44 | 2.66 | 2.68 |
| 8 | Cash Ratio | 1.40 | 1.83 | |
| 9 | Debt to Equity Ratio | -13.58 | -5.98 | -5.90 |
| 10 | Debt to Capital Ratio | 0.73 | 0.87 | 0.87 |
| 11 | Working Capital Turnover | 2.24 | 1.72 | 2.68 |
MOODY’S CORPORATION STRATEGIC PLAN. Technique analysis – SWOT
Moody’s Corporation is a credit rating provider, analytic tools, research, risk analysis, and related services. The strong financial performance, leading position and broad portfolio offers are the major strengths. However, its significant debts and lawsuits against the corporation remain significant weaknesses. Besides, the foreign exchange risk, going forward, drastic technological changes and intense competition may affect the profitability and business. Despite the worrying negative environment, positive outlook for rating services, strategic acquisitions and increasing demand for management of risk analytics services made by Moody’s Corporation offer new growth opportunities. The strong financial performance by the company enhance investors’ confidence, and strong top and bottom-line performance help the company to pursue its expansion and growth plans (Cash, 2018). The company’s broad service and product portfolio is a major strength which enables the company to cater to a larger customer base besides sustaining its competitive position. Besides, the leading market position and brand name drive the growth of the company. The company faces increasing weaknesses of legal actions and substantial debts which may impact on the company’s bottom-line and its brand image. The company’s opportunities are the strategic acquisitions, positive outlook for rating services and increasing demand for risk management analytics services. The major threats for Moody’s Corporation are intense competition, fluctuating and increasing foreign exchange risks as well as rapid technologic changes.
| Strengths
· The company offers the broad portfolio · The corporation has a leading market position · The company has strong financial performance |
Weaknesses
· Legal actions · Increasing global regulations · Increasing substantial debts · |
| Opportunities
· Increasing demand for risk management analytic services · A positive outlook for rating services globally · Strategic merging and acquisitions · Advancing Information technology opportunities · Partnership strategies |
Threats
· Increasing foreign exchange risks · Increasing and intense competition · Rapid technological changes · |
MOODY’S CORPORATION STRATEGIC PLAN. Alternative strategy generation
The company can use different strategies in order to compete in the emerging markets and attain competitive advantage considering its broad portfolio. Moody’s Corporation uses strategies such as credit ratings and publication strategies for the retail investors. It is reckless and unsuitable for retail investors. The increasing disarray in the retail investor has substantially increased resort to capital market hostilities. Structural changes, shifts, and technological changes have changed operations, and drivers are altering positions and inducing an urge for restructuring. Corporations do not need to be large but can be small businesses that operate in various nations at the same. This is because of the different industry, size, and other components. Companies should adopt outsourcing as well as adopting insourcing and purchasing foreign competitors (Lasserre, 2017).
Strategy and prioritization selection
According to Scarborough (2016), there are various strategies that companies should use in establishing and maintaining a competitive advantage. The company can use strategies such as broad portfolio, credit ratings, publications, a competitive currency devaluation, credit rating’s downgrading, capital controls and making environmental, social and governance information necessary. The company should rank strategies according to their profitability, stability and creating of competitive advantage. Moody’s Corporation should use to integrate IT with its broad portfolio and credit ratings. The second option is to use credit rating downgrading, (3) a competitive currency devaluation and (4) capital controls.
Action plan for implementation
Moody’s Corporation should use its broad portfolio and credit ratings strategically in different locations by incorporating environmental, social and governance information in its operations systems. The companies should generate publications to be used by various players in the capital market information ecosystem to add value to it. This will create a competitive advantage for the company and ensure that the corporation enhances its services in the long-run.
The action plan will be derived from the company mission statement and long-term goals. The company plans to be the leading crediting rating corporation with a strong portfolio in long-run. The company will, therefore, incorporate IT systems into its operations to cater for rapid technological changes. The increasing demand for credit rating globally will be a strategic move for the company to do small business in various locations to invest in market niches and diversify its business services (Lasserre, 2017). This will create a competitive advantage for the company as well as improve its brand image through customer recognition. The company will also place several businesses in an emerging market in the developing economies in order to capture the market niches.
Conclusions
Investing in capital markets is not an easy task. A multinational company should strategically evaluate industry information in order to establish and sustain a competitive advantage. Moody’s Corporation should adopt a strategic plan through a broad and diverse portfolio as well as credit ratings that will strategically position the company as the leading corporation in the global capital markets. It is also important to incorporate information technology in order to capture the emerging markets in the global capital markets.
References
Cash, D. (2018). Sustainable finance ratings as the latest symptom of ‘rating addiction.’ Journal of Sustainable Finance & Investment, 8(3), 242-258.
Cawley, A. (2016). From AAA to Junk: Credit rating agencies as news sources in the Irish print-media during the economic crisis, 2008–2013. Journalism Studies, 17(5), 647-666.
Lasserre, P. (2017). Global strategic management. Macmillan International Higher Education.
Markusen, A. (2017). Sticky places in slippery space: a typology of industrial districts. In Economy (pp. 177-197). Routledge.
Scarborough, N. M. (2016). Essentials of entrepreneurship and small business management. Pearson.
Wang, Y. (2018). Investment analysis project for Petrofac Ltd(Doctoral dissertation).
