Running head: MOODY’S CORPORATION STRATEGIC ANALYSIS 1

Moody’s Corporation Strategic Analysis

William Alberts, Sara Faircloth, Matthew Hunter, Cassandra Phillips, & Sarah Waterman

University of Maryland University College

Strategic Management 495

Sanh Tran
MOODY’S CORPORATION STRATEGIC ANALYSIS 2

Abstract

Strategic management is an ongoing process that ensures an organization is meeting their present

and future goals as well as staying abreast of competitors’ actions. A proactive strategy can help

an organization obtain and maintain a competitive advantage. To determine the best strategy to

implement moving forward, an organization must first use their vision, mission, and background

to identify the specific goals of the organization. Once the organization has identified their goals,

various analyses can be conducted to give the organization a comprehensive understanding of

their position among their competitors and in the business environment. An organization can take

this information to improve or modify their existing strategy or to formulate an entirely new

strategy that can be implemented to help the organization meet its short and long-term goals. To

remain a key leader in the credit report/financial services, Moody’s Corporation must undergo

the strategic management process through the examination of the current and future business

environment to identify potential strategic avenues (Management Study Guide, 2018, para. 2).
MOODY’S CORPORATION STRATEGIC ANALYSIS 3

Moody’s Corporation Strategic Analysis

A proactive strategy is important to any business that wishes to gain an edge in the market.

Remaining stagnant within an environment that is constantly evolving will ultimately lead to

failure (Sull, 1999, para. 19). Moody’s Corporation (Moody’s) is seeking to construct a strategic

management plan in order to establish a competitive advantage, remain a key leader in the

industry, and be prepared to adapt to the ever-shifting market demands. Industry, competitive,

financial, and technique analyses must be conducted since a strategic plan is uniquely tailored to

each individual business and their short and long-term goals. Once various analyses have been

completed and weighed, a variety of strategies will be generated and assessed to determine

which strategy would be most effective in meeting the goals of the organization. A prioritization

and selection process to calculate the most ideal and effective strategy will follow. The strategy

should be continually assessed and adapted to ensure they take advantage of opportunities and

minimize as many threats as possible. By doing so, the organization will ensure its continued

success.

Mission, Vision, and Background

For over a century, Moody’s Corporation has been a key leader in the credit

report/financial services industry. Over the years, they have provided credit, capital markets and

economic research, credit ratings, and software solutions to support financial risk management,

financial services training and certification as well as offshore financial research and analytical

services (Moody's Corporation, 2017, p. 11). The organization is split into two segments:

Moody’s Investors Service (MIS) and Moody’s Analytics (MA). MIS focuses on risk analysis,

research and credit ratings while MA focuses on analytical and financial tools to support risk

management objectives (Moody’s Investors Service, Inc., 2018a, para. 1). Moody’s operates in
MOODY’S CORPORATION STRATEGIC ANALYSIS 4

42 countries and employs over 12,000 individuals worldwide (Moody's Corporation, 2018a,

para. 1).

Mission

An organization’s mission statement captures the reason for their existence and the role

they play in society as well as relaying to shareholders why they should support the organization

(Strategic Management, 2014a, Leading Strategically, p. 41). Although the organization does not

have a clear mission statement, Moody’s makes it clear that they are an “…essential component

of the global capital markets, providing credit ratings, research, tools and analysis that contribute

to transparent and integrated financial markets” (Moody's Corporation, 2018a, para. 1). They

achieve this by valuing people, advancing diversity, developing the global community,

contributions to economic development, managing the business, care of the environment, and

showing respect for human rights (Moody's Corporation, 2018b, CSR Statement). Moody’s has

an extensive corporate social responsibility (CSR) program which shows the organization’s

dedication to their operating environment. The main areas of focus for the CSR program are:

empowerment through financial knowledge, leading the way in creating an environmentally

sustainable future, and mentoring the youth (Moody's Corporation, 2018b, Our Focus Areas).

The organization makes it their mission to educate their customers so that they can operate

within financial markets with confidence (Moody's Corporation, 2018b, Our Focus Areas).

Moody’s believes that the knowledge they provide to their customers will provide them with the

ability to make a positive impact in their own lives and their environment (Moody's Corporation,

2018b, Our Focus Areas).

Vision
Moody’s vision statement is geared to be forward thinking and inspires those within the

organization (Strategic Management, 2014a, Leading Strategically, p. 40). Their vision statement
MOODY’S CORPORATION STRATEGIC ANALYSIS 5

provides purpose and motivation to all employees by providing a common vision that they can

work together to achieve. An organization’s vision statement is designed to answer the question:

“Who are we?” (Strategic Management, 2014a, Leading Strategically, p. 41). Each segment of

Moody’s Corporation has their own vision statement specific to their role within the credit

report/financial services industry. Moody’s Investors Service’s vision statement is:

With over one hundred years of experience in evaluating creditworthiness, an award-

winning portfolio of credit risk management software and services, and a global

workforce, Moody's is uniquely prepared to serve credit-sensitive markets in a period of

renewed capital formation and emphasis on risk management. (Moody’s Investor Service,

Inc., 2018b, Who We Are)

Moody’s Analytics (MA) has the following vision:

Moody’s Analytics helps risk practitioners across industries and regions respond to an

evolving marketplace with confidence. Our award-winning data, models, analytical

software, and expertise empower capital markets and risk professionals to better measure,

monitor, and manage risk. (Moody’s Analytics, Inc., 2018, History)

The organization’s vision has helped to guide the growth of MA and has resulted in MA’s

presence in 42 countries in 2017 (Moody's Corporation, 2018a, para. 1).

Background

Moody's Corporation was built from the ground up and cultivated in the investment

environment of New York by a single man, John Moody. In the early 1900's, Moody created

Moody's Manual of Industrial and Miscellaneous Securities, Moody's Manual, and established

the business: John Moody & Company (Moody's Corporation, 2012, para. 9). After John

Moody's death in 1958, Moody's was bought by Dun & Bradstreet Corporation (Moody's
MOODY’S CORPORATION STRATEGIC ANALYSIS 6

Corporation, 2012, para. 9). In 2000, Moody's Corporation regained its status as its own

company and experienced great success over the next ten years (Moody's Corporation, 2012,

para. 9).

Moody’s made historic, ground-breaking moves in the credit rating/financial services

industry between 2000 and 2010 (Moody's Corporation, 2012, para. 15). In 2003, Warren

Buffett's Berkshire Hathaway gained a 15 percent stake in Moody's following its investment

(Moody's Corporation, 2012, para. 15). By the end of the year, Moody's Corporation had

operations in 18 countries and a net income of $364 million USD (Moody's Corporation, 2012,

para. 17). In 2006, Moody's claimed a stake in China's Chengxin International Credit Rating

Company; Moody’s controlled 49 percent of the agency (Moody's Corporation, 2012, para. 20).

This historic move made them the first international rating company to rate Chinese companies

registered by the government (Moody's Corporation, 2012, para. 22).

Since their creation, Moody’s has acquired many companies which have either been

dissolved, become wholly owned subsidiaries, or have been sold. Moody’s Corporation has also

been into the acquisition of software and business & information services which continues to

lead them to their present state (Mergent Online, 2018b, History, para. 1). Most recently,

Moody’s acquired a business intelligence and information product provider, Yellow Maple, in all

its forms for approximately $3,530,000,000 USD (Mergent Online, 2018b, History, para. 1).

Analysis

Approximately 60% of the firm’s earnings are generated by MIS while the other 40% is

generated by MA (Lim, 2017, para. 23). MA has grown into a $1 billion revenue business and

MIS remains the leading credit rating firm globally (Lim, 2017, para. 23).

Moody’s main competitors include Standard & Poor, DBRS Limited, and Fitch (Lim,
MOODY’S CORPORATION STRATEGIC ANALYSIS 7

2017, para. 3). As the leading rating firms, they account for nearly 100% of the revenue accrued

from ratings (Lim, 2017, para. 7). Since these four credit firms have national recognition, outside

competition is put at bay. These firms have consistent revenue channels and significant pricing

power because anyone intending to tap into the credit rating market has to use either of these

companies.

Apart from stringent regulations and standards that often impede undue competition, their

pricing power and market share are congruent factors that enable them to edge their competitors

out of the market. Essentially, Moody operates in an oligopolistic market, where more than 50%

of the total revenue has been generated by the four leading credit firms for the last 15 years (Lim,

2017, para. 7). While the housing crisis dealt a serious blow on the revenue margins to a certain

extent, the durable competitive edge for Moody and its closest rivals has not changed. Moody

accrues colossal returns on investment; this is a clear indication of a lucrative business approach

employed by the firm (Lim, 2017, para. 18).

Industry Analysis

Moody’s Corporation operates in a highly concentrated credit rating sector, where the

Moody’s Investor Service and Standard & Poor’s (S&P) control 95% of the business (Agarwal,

Chen, & Zhang, 2016, p. 2219). The third leading player in the credit rating business, Fitch

Ratings, controls 15% of the market share (Agarwal et al., 2016, p. 2219). From 2012 on, S&P

became a leading player in the sector, with 1.2 million outstanding ratings and 1,416 forecasters

(Agarwal et al., 2016, p. 2220). Moody’s has about 1 million exceptional ratings with 1,252

analysts and administrators (Agarwal et al., 2220). Fitch is the smallest with roughly 350,000

exceptional ratings, and it is often subcontracted by S&P and Moody’s Corporations (Agarwal et

al., 2016, p. 2220). Since the establishment of the first rating firm in 1909, about four companies
MOODY’S CORPORATION STRATEGIC ANALYSIS 8

have controlled the market share (White, 2010, p. 211). The reputation of the top three rating

firms is a competitive edge that erects a high barrier against new entrants in the market. A

majority of the rating agencies are simply niche players (O’Reilly, 2003, para 2). However, some

have gained more of the market share following the economic crunch of 2007 and 2008

(Agarwal et al., 2016, p. 2231).

Financial Analysis

Moody’s financial statements demonstrate an increasing trend in revenue, net profit

margin, and total assets over the last five years: 2013 -2017. The operating margin has increased

annually: 41.5%, 43.2%, 42.3%, 17.7%, and 43.0% respectively from 2013 to 2017 (Lim, 2017,

para. 17). In fiscal year 2017: Moody’s Corporation experienced a net income of $1,000.6 (in

millions) and total net sales of $4,204.1 (in millions) making the company’s net profit margin

23.8% (Moody’s Corporation, 2017, pg. 29). This is above the industry average of 18.06%

(calculated using twelve companies) (Mergent Online, 2018a, Comparison Report). With a net

income of $1,000.6 (in millions) and an averaged total of $7,140.75 (in millions) in assets,

Moody’s Corporation has a Return on Assets of 14.01% (Moody’s Corporation, 2017, pg. 29).

This is also above the industry average of 7.77% (calculated using twelve companies) (Mergent

Online, 2018a, Comparison Report). This shows that Moody’s Corporation is relatively

successful at effectively utilizing their assets to generate profit, especially in comparison to the

other companies in the industry. Each of the ratios above measure the overall profitability of

Moody’s Corporation. The ratios illustrate that Moody’s Corporation is a profitable business as

they are performing above the industry average.

The net working capital to total assets ratio measures a company’s ability to cover its

short term financial obligations by taking the total current assets and subtracting the current
MOODY’S CORPORATION STRATEGIC ANALYSIS 9

liabilities and dividing that by the total assets (Collins, 2017, para. 5). For Moody’s Corporation

this would be $8,594.2 (in millions) minus $5,111.1 (in millions) divided by $8,594.2 (in

millions) (Moody’s Corporation, 2017, pg. 29). The net working capital to total assets ratio for

Moody’s Corporation is 40.5% meaning that the organization is capable of paying off all of their

current liabilities. The current ratio for Moody’s Corporation is 1.25, which is below the industry

average (Mergent Online, 2018b, Moody’s Corp.). The industry average was generated using

eleven companies and is 1.57 (Mergent Online, 2018a, Comparison Report). Moody’s Net

Current Assets to Total Assets ratio is also below the industry average at 6.02 (Mergent Online,

2018b, Moody’s Corp.). The industry average Net Current Assets to Total Assets generated using

eleven companies is 9.23 (Mergent Online, 2018a, Comparison Report). This shows that while

Moody’s remains more profitable than its competitors in the industry the organization is not as

capable of meeting its financial obligations. This decrease in liquidity could be a result of the

settlement charge of $863.8 million in 2016 that led to a drop in their profit margin and reduced

earnings per share (Moody’s Corporation, 2018c, para. 8).

Most of the financial ratios liquidity leverage and profitability ratios show that the

company is within, and to some extent, is above average in comparison to the industry averages.

This is a good indicator of future financial stability and growth within the industry. Based on the

above ratios, Moody’s performs above average in the industry and can be considered a good

investment for potential investors.

SWOT Analysis

Moody’s Corporation has a free cash flow that provides the necessary resources to

venture into new projects. In addition, the company has a good return on expenditures. This

implies that they can implement new projects and generate high returns on capital expenditure by
MOODY’S CORPORATION STRATEGIC ANALYSIS 10

creating new revenue streams. The company has good performance in new markets because of

their expertise and prior experience in successfully expanding into new markets.

Moody’s has failed to resolve challenges posed by some new entrants and as a result has

lost a portion of its market share in the niche segments. They face higher attrition rates of the

labor force than their rivals which means the organization is forced to spend more on the training

and development of its workers (Partnoy, 1999, p. 653). Its investment in research and

development (R&D) is below average compared to some of the fastest growing firms in the

sector. They have also been susceptible to lawsuits which damaged their profit margin (Moody’s

Corporation, 2018c, para. 8).

The implementation of new technological standards and free trade agreements presented

Moody’s an opportunity to expand into emerging markets (Moody’s Corporation, 2016, p. 5).

Technological developments allowed the company to review pricing strategies in new markets

which enabled Moody’s to retain its loyal clients by providing good service and attract new ones

via value-based propositions. The government’s green initiative presented Moody’s new

procurement opportunities for its products by federal and state government contractors (Moody’s

Investors Service, 2016, p. 7). Market development is likely to result in dilution of rivals’

advantage while allowing Moody’s to increase their competitive edge. Economic stability after

recession increased consumers’ spending enabling Moody’s to attract more clients and increase

its market share.

For several years, Moody’s has created many products. However, this has been a

response to its rivals instead of customer demands. Its supply of new products is irregular

contributing to high and lows in sales over time. One threat is the new regulations, such as the

Paris Agreement, that pose a challenge to the organization’s product categories (Moody’s
MOODY’S CORPORATION STRATEGIC ANALYSIS 11

Investors Service, 2017, para. 4). A stable profit margin has attracted new entrants in the sector

that put additional pressure on Moody’s profits and sales volume, despite the barriers to entry.

Consumer purchasing behavior through online channels is also a challenge to Moody’s use of a

physical infrastructure supply chain.

External Factors Evaluation Matrix

The External Factors Evaluation (EFE) Matrix is important when it comes to recognizing

the usefulness of every factor (Zulkarnain, Wahyuningtias, & Putranto, 2018, p. 2). Opportunities

and threats are used in understanding the firm’s macro environment. The EFE would first

identify the critical success external factors then give each a weight to reach a total of 1 (Maxi-

pedia, 2017, para. 6). A rating of 1 to 4 is assigned to each factor to demonstrate how effective

Moody’s is in terms of current strategies (Maxi-pedia, 2017, para. 1). 1 represents poor response

while 4 indicates very good response (Maxi-pedia, 2017, para. 7). In order to compute the

weighted score, every factor is multiplied by its rating (Maxi-pedia, 2017, para. 8).

Table 1: EFE Matrix

Weight Rating Weighted

Score
Opportunities
New technology standards 0.06 4 0.24
Government’s green initiative 0.10 3 0.30
Market development 0.10 4 0.40
Economic development 0.03 4 0.12
Technological development 0.06 4 0.24
Low inflation rate 0.05 4 0.20
Taxation policy 0.02 4 0.08
Threats
Irregular supply of products 0.12 2 0.24
Intense competition 0.10 2 0.20
Technological disruption 0.07 2 0.14
Consumers’ buying behavior 0.06 2 0.12
Many product development 0.10 2 0.20
New regulations 0.13 1 0.13
MOODY’S CORPORATION STRATEGIC ANALYSIS 12

Total 1.00 2.61

The rating scale is: 1=minor threats, 2=major threats, 3=minor opportunities, and 4=major

opportunities (Maxi-pedia, 2017, para. 7). Based on the EFE matrix, Moody’s is above average

to the macro environment factors by exploiting opportunities to reduce the threats.

Internal Factors Evaluation (IFE) Matrix

The IFE matrix is a strategic tool for highlighting the firm’s internal environment,

including the strengths and weaknesses and presents the foundation for identifying and

evaluating associations (Zulkarnain et al., 2018, p. 2). The strengths and weaknesses will be

calculated to get a total weighted score as in the EFE Matrix.

Table 2: IFE Matrix

Weight Rating Weighted score
Strengths
Strong cash flow 0.10 4 0.04
Success in new markets 0.20 4 0.80
Expertise 0.07 3 0.21
Mergers and acquisitions 0.03 3 0.09
Reliable suppliers 0.05 4 0.20
Dealer community 0.06 4 0.24
Automation of operations 0.03 3 0.09
Threats
Long inventory days 0.01 2 0.02
New entrants 0.03 2 0.06
R&D 0.10 2 0.20
Organizational structure 0.20 2 0.40
Forecasting demand limits 0.10 2 0.20
Gap in product range 0.02 1 0.02
Total 1.00 2.57

The rating scale is: 1=major weaknesses, 2=minor weaknesses, 3=minor strengths, and 4=major

strengths (Zulkarnain et al., 2018, p. 4). Based on the IFE matrix, Moody’s appears to maintain a

strong internal position because the weighted score is above average.

Competitive Profile Matrix (CPM)

CPM is used to compare an organization to its competitors while demonstrating their

strengths and weaknesses using critical success factors (Capps III & Cassidy, 2016, p.11).

Moody’s CPM integrates Fitch Group, Inc., DBRS Limited, and Standard & Poor's Financial

Services LLC.
 MOODY’S CORPORATION STRATEGIC ANALYSIS 13

Table 3: CPM
Moody’s Fitch Group DBRS Standard & Poor’s

Critical success Weighted Weighted Weighted Weighted

Weight Rating Rating Rating Rating
factors score score score score

Product development 0.20 4 0.80 2 0.40 2 0.40 3 0.60

Advertisement 0.15 4 0.60 4 0.45 3 0.45 4 0.60

Price 0.10 2 0.20 2 0.20 2 0.20 3 0.30

Management 0.10 3 0.30 3 0.30 2 0.20 3 0.30

Financial position 0.15 4 0.60 3 0.45 2 0.30 3 0.45

Global expansion 0.10 3 0.30 3 0.30 2 0.20 3 0.30

Market share 0.15 2 0.30 2 0.30 2 0.30 2 0.30

Customer loyalty 0.05 3 0.15 2 0.10 2 0.10 2 0.10

Total 1.00 3.25 2.50 2.15 2.95

The CPM makes it evident that Moody’s is dominant within the credit rating industry because

their weighted score is higher than their rivals’.

Boston Consulting Group (BCG) Matrix

The Boston Consulting Group (BCG) matrix is a tool used to evaluate the firm’s product

portfolio. The matrix categorizes products and services into market group and share as shown

below.

Table 4: BCG Matrix

BCG Matrix
Relative Market Share
High 1.0 Med 0.5 Low 0.0

Hig

Market Growth
h +20
Medi
Rate
um 0
Low

-20
In 2017, Moody's Corporation reported revenues both in the United States and
MOODY’S CORPORATION STRATEGIC ANALYSIS 14

International markets for their investor and analytic services. Revenue for Moody's United States

segment generated $2,348.4 (in millions), while the total International segment generated

$1,855.7 (in millions) (Moody's Corporation, 2018c, p. 40). The largest competitor for Moody's

Corporation is S&P Global. S&P reported revenue of $3,658.0 (in millions) for their United

States segment and $2,405.0 (in millions) for their International segment (S&P Global, 2017, p.

22). Moody's Corporation’s market share in the United States segment is 0.64 (2348.4/3658.0)

and in the International segment is 0.77 (1855.7/2405.0). The average growth rates were

calculated as 9% for the United States segment and 16.5% for the International segment. Both

the United States and International segments for Moody's Corporations are located in Quadrant II

of the BCG Matrix. These products, referred to as "stars”, offer a high industry growth rate and

relative market share and strategies such as market development, market penetration, forward,

backward and horizontal integration should be considered (NetMBA, n.d., para 6).

Grand Strategy Matrix

The Grand Strategy Matrix is a strategic tool used to compile other strategies. The matrix

depends on four aspects: Quadrant I (rapid market growth), Quadrant II (slow market growth),

Quadrant III (competitive position), and Quadrant IV (weak competitive position) (Johnston,

n.d., para. 2). Organizations in Quadrant I have a strong strategic position and an emphasis on an

established competitive edge (Johnston, n.d., para. 3). Moody’s can be placed in Quadrant I since

it focuses on market development and penetration strategies to expand into different markets. In

Quadrant II, organizations have rapid growth, but they do not effectively compete (Johnston,

n.d., para. 2). For that reason, they need to assess their current strategies to remain competitive.

Slow market growth companies can use liquidation to get revenue by acquiring other businesses.

Moody’s can also be categorized in Quadrant II because it has used mergers and acquisition to
MOODY’S CORPORATION STRATEGIC ANALYSIS 15

acquire technology firms to restructure its operations while creating a reliable supply chain.

Organizations in Quadrant III not only have slow market growth, but also a weak position

(Johnston, n.d., para. 2). They must make changes to sustain their market position and can use

diversification to transfer resources or liquidation (Johnston, n.d., para. 4). Although they are

competitive, companies in Quadrant IV have slow market growth (Johnston, n.d., para. 2). They

can diversify in other business using available resources. Joint ventures can also be used to

improve internal growth (Johnston, n.d., para. 4).

Figure 1: Grand Strategy Matrix

In the Grand Strategy Matrix, Moody’s lies in the first quadrant. For that reason, the firm’s

management should concentrate on existing markets whilst implementing penetration strategies,

product development, and market development.

Alternative Strategy Generation

Potential strategies are often generated from two competitive dimensions: the source of

an organization's competitive advantage and its scope of operations (Strategic Management,

2014b, Selecting Business-Level Strategies, p. 140). Moody's competitive advantage is derived

from its operations in financial markets worldwide and the ability to meet the ever-changing

needs of Wall Street for over a century (Moody's Corporation, 2012, para. 1). Defining Moody's

competitive advantage and its scope of operations presents several alternative strategies worth

comparing to see which will aid them in maintaining a strong presence and being a top

competitor in the industry.

MOODY’S CORPORATION STRATEGIC ANALYSIS 16

One alternative strategy is disruptive innovation which is the introduction of a product so

innovative that it threatens to replace traditional products in the industry (Strategic Management,

2014d, Supporting Business-Level Strategy, p. 185). Moody’s developed an innovative analytical

tool called RiskAnalyst. They offered the tool in the Chinese language to improve accuracy for

risk analysis and decisions (Moody's Corporation, 2012, para. 7). Offering a similar tool in a

variety of different languages suited to countries’ individual markets could prove extremely

successful for Moody's. Disruptive innovations can often lead to an initial period of slow growth,

so it is important for Moody's to consider and plan for accordingly if the disruptive innovation

strategy is chosen (Strategic Management, 2014d, Supporting the Business-Level Strategy, p.

186).

Moody's Corporation could pursue the first mover strategy. Becoming a first mover in an

industry often proves to be extremely successful (Strategic Management, 2014d, Supporting the

Business-Level Strategy, p. 184). Moody's has already proven the ability to make first moves

when it became the first international rating company to work hand-in-hand with the Chinese

government by rating Chinese companies' securities (Moody's Corporation, 2012, para. 7).

Moody's could offer a similar service to other countries.

Bricolage is another example of an alternative strategy that Moody’s could use by

combining concepts from their current businesses to create a new one (Strategic Management,

2014d, Supporting Business-Level Strategy, p. 188). They could use their wealth of analysis and

corporate research to devise a new financial product to offer such as small business management

services or delve into corporate banking services. They could potentially offer market research

services for businesses to use to conduct their own environmental analysis.

Market penetration is a strategy Moody’s could utilize to make a move to gain more
MOODY’S CORPORATION STRATEGIC ANALYSIS 17

customers using their current offerings (Strategic Management, 2014c, Selecting Corporate-

Level Strategy, p. 241). Market development would occur when Moody’s offers its current

financial and analysis offerings to an entirely new market (Strategic Management, 2014c,

Selecting Corporate-Level Strategy, p. 242). By combining these two strategies, Moody's

Corporation could seek to offer credit and risk management services to individuals. This type of

service could provide on a micro scale to people what Moody's does on a macro scale for

businesses. This type of development expands on Moody's strengths to deliver a trusted service

to a new line of customers and increase customer loyalty.

Moody’s Corporation could utilize an acquisition of their rival company, Fitch Ratings. In

fact, they already subcontract with Fitch Ratings (Agarwal et al., 2016, p. 2220). This horizontal

integration would be attractive as they are accustomed to working together so some of the culture

clashes between the two businesses might be offset as well as some of the potential financial

disappointment (Strategic Management, 2014c, Selecting Corporate-Level Strategy, p. 245-247).

This would also provide Moody’s with new distribution channels, while at the same time,

potentially increasing shareholder profits (Strategic Management, 2014c, Selecting Corporate-

Level Strategy, p. 247).

Alternative Strategy Selection

Quantitative Strategic Planning (QSP) matrix

The QSP Matrix is a strategic tool that is used for evaluating alternative approaches

(Zulkarnain et al., 2018, p.2). To compare the alternative strategies, the EFE and IFE matrix

weights are used. The Attractiveness Score (AS) is assigned to these factors ranging from 1 to 4,

where 1 is the least important and 4 is the most important. The Total Attractive Score (TAS) is

computed by multiplying weight and AS (Allahyari, Nasehi, Salehi & Zebardast, 2017, QSPM).
 MOODY’S CORPORATION STRATEGIC ANALYSIS 18

For Moody’s to retain its market position, it should focus on market development and penetration

strategies to expand in new markets.

Table 5: QSP Matrix

Market
Market Penetration Bricolage First Mover Acquisition
Development
Weight AS TAS AS TAS AS TAS AS TAS AS TAS
Strengths
Strong cash flow 0.10 4 0.40 4 0.40 3 0.30 3 0.30 3 0.30
Success in new markets 0.20 4 0.80 4 0.80 3 0.60 4 0.80 3 0.60
Expertise 0.07 3 0.21 4 0.28 4 0.28 4 0.28 3 0.21
Merger and acquisition 0.03 3 0.09 3 0.90 2 0.06 3 0.90 4 0.12
Reliable suppliers 0.05 4 0.20 2 0.10 4 0.20 2 0.10 2 0.10
Strong dealers 0.06 3 0.18 3 0.18 3 0.18 3 0.18 2 0.12
Automation of operations 0.03 3 0.09 2 0.06 3 0.09 2 0.06 2 0.06
Weaknesses
Long inventory days 0.01 2 0.02 1 0.01 2 0.02 1 0.01 2 0.01
New entrants 0.03 2 0.06 2 0.06 1 0.03 1 0.03 2 0.06
R&D 0.10 2 0.20 2 0.20 1 0.10 2 0.20 2 0.20
Organizational structure 0.10 1 0.10 2 0.20 2 0.20 1 0.10 2 0.20
Poor forecasting 0.10 1 0.10 1 0.20 1 0.10 2 0.20 1 0.10
Gap in product range 0.02 1 0.02 2 0.04 2 0.04 2 0.04 1 0.02
Opportunities
New technology standards 0.06 4 0.24 4 0.24 4 0.24 4 0.24 4 0.24
Government’s green initiative 0.10 3 0.30 3 0.30 3 0.30 4 0.04 3 0.30
Market development 0.10 4 0.40 4 0.40 3 0.30 4 0.40 3 0.30
Economic development 0.03 3 0.09 3 0.09 3 0.09 3 0.09 3 0.09
Technological development 0.06 3 0.18 4 0.24 4 0.24 4 0.24 3 0.18
Low inflation rate 0.05 3 0.15 3 0.15 3 0.15 3 0.15 3 0.15
Taxation policy 0.02 3 0.06 4 0.08 3 0.24 3 0.06 3 0.06
Threats
Irregular supply of products 0.12 2 0.24 2 0.24 2 0.24 2 0.24 3 0.36
Intense competition 0.10 2 0.20 3 0.30 2 0.20 3 0.30 3 0.30
Technological disruption 0.07 1 0.07 2 0.14 1 0.07 2 0.14 1 0.07
Consumers’ buying behavior 0.06 2 0.12 2 0.12 1 0.06 2 0.12 2 0.12
Many product development 0.10 2 0.20 3 0.30 2 0.20 3 0.30 3 0.30
New regulations 0.13 1 0.13 1 0.13 1 0.13 2 0.26 1 0.13
1.00 4.85 6.16 4.66 5.78 4.7

The AS is valued as 1=not attractive, 2=somewhat attractive, 3=reasonably attractive, 4=highly

attractive if the factor affects the choice (Kasi, n.d., Step 4). Market penetration is the one with

the highest total attractiveness score, so it is the best choice for Moody’s.

Strategy and Prioritization Selection

There are a variety of strategies that Moody’s Corporation could implement to work

towards meeting their mission and vision of creating transparent and integrated financial markets

by educating individuals. However, due to the constraints of resources it is vital that the

organization prioritize and narrow the strategy options down to one strategy to successfully
MOODY’S CORPORATION STRATEGIC ANALYSIS 19

implement. Prioritization is the process that determines which strategies are most important,

most urgent, and the most likely to be successful. This process allows an organization to

determine which strategy should be implemented based on how well the strategy will meet the

goals of the organization, the resources required to implement the strategy and with an

acceptable amount of strategic risk. Utilizing prioritization and the results from the QSPM,

market penetration is the best strategy for Moody’s Corporation to implement to successfully

meet their short and long-term goals while adequately addressing the strengths, weaknesses,

threats, and opportunities of the organization. Market penetration is a strategy that can be utilized

to gain more customers using current offerings (Strategic Management, 2014c, Selecting

Corporate-Level Strategy, p. 241).

Action Plan for Implementation

Implementation is the most important aspect of strategic planning because if it is not done

correctly, the plan will not be successful. Implementation of the market penetration strategy for

Moody’s Corporation would involve identifying the best avenue for implementing the chosen

strategy. Moody’s could combine market penetration and market development to offer credit and

risk management services to individuals. To devise such an individualized tool, Moody’s could

create an easily accessible and user-friendly app, “MyMoody’s”, that would allow individuals to

access a variety of products and services from Moody’s expansive portfolio. For example, they

could make their financial market forecasts and regional financial information readily available

and easily accessible. By offering their services in a smartphone app format, they could market

towards a younger adult audience. Even among the college educated, studies have shown that

nearly 50% of young adults have low financial literacy (de Bassa Scheresberg, 2013, p. 1).

The implementation of this strategy would involve multiple phases including the design
MOODY’S CORPORATION STRATEGIC ANALYSIS 20

phase; small scale launch phase; feedback and modification phase; large scale launch phase; and

the monitoring and evaluation phase. During the design phase, the specifics regarding the

application and the services provided will be determined and the application will be designed.

Once the organization is comfortable with the application, it will be released to a small select

group of individuals located in influential markets who will use the application and provide

Moody’s with feedback on what modifications should be made or if there are any usability errors

or missing key elements. It could be tested on markets in New York and Germany –

concentrating on cities that have great-influence and a diverse population. Based on the feedback

provided, the organization will finalize the application and prepare for the full-scale launch. The

full-scale launch will consist of marketing and events to raise awareness of the application and

its benefits to get consumers interested in the product. Target areas for marketing would include

college campuses, banks and investment firms, and other personal financial institutions.

Following the full-scale launch of the application, Moody’s will monitor and evaluate the success

of the application based on sales and related factors to determine if the strategy is effective in

meeting the short and long-term goals of the organization.

Evaluative Plan

An evaluative plan is designed to evaluate the implementation stages of the strategic plan

against the strategic goals of the organization. To create an effective evaluative plan, the

organization must determine what to measure, establish standards, measure performance, and

compare the results to the expected limits to determine if corrective action or modifications are

needed (Cook, 2012). The measures for this strategy would include the number of downloads, in-

app purchases made, the customer feedback, and the logistics data collected from the

application’s use. Moody’s would then determine what the standards of success should be for this
MOODY’S CORPORATION STRATEGIC ANALYSIS 21

strategy according to information being gathered and measured. These could include: the

application needs to be reach 85,000 downloads, have a customer rating of 4 stars or above, and

be consistently reliable in technical performance of the application in order to be considered

successfully implemented. In addition, they can determine if the strategy fulfills their desire to

create transparent & integrated financial markets by educating the public. Once these standards

have been identified, the organization will measure the success of the application in meeting

these standards and use the information collected to determine if the strategy is implemented

successfully or if there are modifications that need to be made. Based on the results of the

evaluative plan, the organization could decide to continue with the strategy as implemented,

modify the strategy implementation, or abandon the strategy and pursue an alternative strategy to

implement that will be more successful.

Conclusion

By pursuing a market development/penetration strategy, Moody’s will be able to solidify

their top position within the credit report/financial industry. Identifying their mission, vision and

background allowed for Moody’s to determine their strategic goals. However, that is not the only

consideration that needed to be made. Moody’s also conducted analyses of their external and

internal environments. By doing so, they understood their position within their industry and the

business environment as a whole. Although they generated several strategies to choose from,

Moody’s determined that pursuing a market development and penetration strategy was the best

choice for them. It helped them to fulfill their strategic goals & objectives, made use of their

strengths to take advantage of opportunities, and minimized threats.

MOODY’S CORPORATION STRATEGIC ANALYSIS 22

References

Allahyari, H., Nasehi, S., Salehi, E., & Zebardast, L. (2017). Evaluation of visual pollution in

urban squares, using SWOT, AHP, and QSPM techniques (Case study: Tehran squares of

Enghelab and Vanak). Pollution, 3(4), 655-667. https://10.22059/poll.2017.62780

Agarwal, S., Chen, V. Y., & Zhang, W. (2016). The information value of credit rating action

reports: A textual analysis. Management Science, 62(8), 2218-2240.

https://doi.org/10.1287/mnsc.2015.2243

Capps III, C. J., & Cassidy, C. M. (2016). Expanding the Competitive Profile Matrix (CPM):

Introducing the Financial Competitive Profile Matrix (FCPM). Academy of Strategic

Management Journal, 15(2), 9-14. Retrieved from:

http://eds.b.ebscohost.com.ezproxy.umuc.edu/eds/pdfviewer/pdfviewer?

vid=11&sid=2bb424d0-84aa-49c7-aeb9-5dea6b62c87a%40sessionmgr120

Collins, J. (2017, July 27). The net working capital to assets ratio. Retrieved from

https://pocketsense.com/net-working-capital-assets-ratio-8229187.html.

Cook, B. (2012, September 24). Executive finance: 10 strategic management: Strategy

evaluation and control [Video File]. Retrieved from https://www.youtube.com/watch?

v=NfKLoGZiR4s

de Bassa Scheresberg, C. (2013). Financial literacy and financial behavior among young adults:

Evidence and implications. Numeracy, 6(2), 1-21. doi: http://dx.doi.org/10.5038/1936-

4660.6.2

Johnston, K. (n.d.). How to develop a grand strategy matrix. Retrieved from:

http://smallbusiness.chron.com/develop-grand-strategy-matrix-37514.html

Kasi. (n.d.). Quantitative Strategic Planning Matrix (QSPM). Retrieved from: http://mba-
MOODY’S CORPORATION STRATEGIC ANALYSIS 23

tutorials.com/strategy/230-quantitative-strategic-planning-matrix-qspm.html

Lim, M. (2017, January 26). Searching for moats: Moody’s, S&P, and the credit rating industry.

Retrieved from: https://fifthperson.com/searching-for-moats-moodys-sp-and-the-credit-

rating-industry/

Management Study Guide. (2018). Strategic management process- Meaning, steps, and

components. Retrieved from: https://www.managementstudyguide.com/strategic-

management-process.htm

Maxi-pedia. (2017). EFE matrix (External factor evaluation). Retrieved from http://www.maxi-

pedia.com/EFE+matrix+external

Mergent Online. (2018a). Comparison report. Retrieved from:

http://www.mergentonline.com.ezproxy.umuc.edu/companyreports.php?

pagetype=comparisonreport&compnumber=2604

Mergent Online. (2018b). Moody’s Corp. (NYS: MCO). Retrieved from:

http://www.mergentonline.com.ezproxy.umuc.edu/companydetail.php?

pagetype=history&compnumber=2604

Moody’s Analytics, Inc. (2018). History. Retrieved from:

https://www.moodysanalytics.com/about-us/history

Moody’s Corporation. (2017). 2016–2017 annual report. Retrieved from

http://www.mergentonline.com.ezproxy.umuc.edu/documents.php?compnumber=2604

Moody's Corporation. (2012). In D. Jacques & P. Kepos (Eds), International directory of

company histories (Vol. 136). Retrieved from http://www.gale.com

Moody’s Corporation (2016). 2016 Corporate social responsibility report. Retrieved from
MOODY’S CORPORATION STRATEGIC ANALYSIS 24

https://www.moodys.com/microsites/csr/moodys_csr2016.pdf

Moody’s Corporation. (2018a). Moody’s Corporation. Retrieved from:

https://www.moodys.com/Pages/atc.aspx

Moody’s Corporation. (2018b). Moody’s corporate social responsibility. Retrieved from:

https://csr.moodys.io/

Moody's Corporation. (2018c). 2017 10-K form. Retrieved from www.mergentonline.com

Moody’s Investors Service (2016). Moody’s approach to environmental, social and governance

(ESG) risk and green bonds assessment (GBA). Retrieved from

https://www.nctreasurer.com/slg/Sparking_Sustainability/3A_Damutz_Moodys_Presentat

ion_LGC_Sustaibability_Conference_April_2016.pdf

Moody’s Investors Service (2017, February 16). Future US climate policy shifts would not stall

global emissions reduction efforts. Retrieved from

https://www.moodys.com/research/Moodys-Future-US-climate-policy-shifts-would-not-

stall-global--PR_362012.

Moody’s Investors Service, Inc. (2018a). Moody’s Corporation. Retrieved from:

https://www.moodys.com/Pages/atc.aspx

Moody’s Investors Service, Inc. (2018b). Who we are. Retrieved from:

http://ir.moodys.com/moodys-overview/who-we-are/default.aspx

NetMBA. (n.d.). BCG Matrix. Retrieved from http://www.netmba.com/strategy/matrix/bcg/

O’Reilly, K.B. (2003, May 19). The ratings game. Retrieved from

https://www.insurancejournal.com/magazines/mag-coverstory/2003/05/19/29677.htm.
MOODY’S CORPORATION STRATEGIC ANALYSIS 25

Partnoy, F. (1999). The Siskel and Ebert of financial markets: Two thumbs down for the credit

rating agencies. Washington University Law Review, 77(3), 619-714. Retrieved from

https://openscholarship.wustl.edu/cgi/viewcontent.cgi?

article=1481&context=law_lawreview.

Strategic Management. (2014a). Leading strategically. Washington, D.C.: The Saylor

Foundation

Strategic Management. (2014b). Selecting business-level strategies. Washington, D.C.: The

Saylor Foundation

Strategic Management. (2014c). Selecting corporate-level strategies. Washington, D.C.:

The Saylor Foundation

Strategic Management. (2014d). Supporting business-level strategies. Washington, D.C.:

The Saylor Foundation

Sull, D. (1999). Why good companies go bad. Retrieved from: https://hbr.org/1999/07/why-

good-companies-go-bad

S&P Global. (2018). 2017 10-K form. Retrieved from www.mergentonline.com

White, L.J. (2010). Markets: The credit rating agencies. The Journal of Economic Perspectives,

24(2), 211-226. doi: 10.1257/jep.24.2.211.

Zulkarnain, A., Wahyuningtias, D., & Putranto, T. S. (2018, March). Analysis of IFE, EFE and

QSPM matrix on business development strategy. IOP Conference Series: Earth and

Environmental Science, 126(1), 1-8. https://doi.org/10.1088/1755-1315/126/1/012062