To maximize their effectiveness, color cases should be printed in color.Kevin Laracey, founder of Paydiant, needed to figure out how to launch a payment processing company with a new technology based on smart phones. Consumers had increasingly turned to electronic payment methods such as credit cards and debit cards to make purchases. Retailers, however, felt that major credit and debit card issuers had too much market power which was leading to higher costs for retailers to accept such payment forms. Consumers were increasingly adopting smart phones and using those phones to manage their lives. Market watchers believed that consumers would soon demand to use their smart phones to make purchases. Retailers liked this because it increased competition in the payments industry. Paydiant had developed a software-based product that required no new hardware for retailers and enabled consumers to use their smart phones to make purchases. The company needed to decide how to bring this new product to market. The case also describes the existing payment processing market structure, identifies some of its major players, and introduces some other new entrants into the payment industry.
Authors :: Jose B. Alvarez, Elizabeth C. Williamson, James Weber
Swot Analysis of "Paydiant" written by Jose B. Alvarez, Elizabeth C. Williamson, James Weber includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Paydiant Phones facing as an external strategic factors. Some of the topics covered in Paydiant case study are - Strategic Management Strategies, Financial markets, Marketing, Strategy and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Paydiant casestudy better are - – increasing transportation and logistics costs, technology disruption, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, increasing commodity prices,
banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Paydiant case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Paydiant Phones, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Paydiant Phones 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 Paydiant can be done for the following purposes –
1. Strategic planning using facts provided in Paydiant case study
2. Improving business portfolio management of Paydiant Phones
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Paydiant Phones
Strengths Paydiant | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Paydiant Phones in Paydiant Harvard Business Review case study are -
Training and development
– Paydiant Phones has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Paydiant 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.
High brand equity
– Paydiant Phones has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Paydiant Phones to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Paydiant Phones 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 Jose B. Alvarez, Elizabeth C. Williamson, James Weber 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.
Innovation driven organization
– Paydiant Phones is one of the most innovative firm in sector. Manager in Paydiant Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Paydiant Phones in the sector have low bargaining power. Paydiant has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Paydiant Phones to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Sales & Marketing industry
– Paydiant firm has clearly differentiated products in the market place. This has enabled Paydiant Phones to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Paydiant Phones to invest into research and development (R&D) and innovation.
Strong track record of project management
– Paydiant Phones is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Paydiant Phones digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Paydiant Phones 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.
Learning organization
- Paydiant Phones is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Paydiant Phones is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Paydiant Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Paydiant Phones 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.
Successful track record of launching new products
– Paydiant Phones has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Paydiant Phones 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.
Ability to lead change in Sales & Marketing field
– Paydiant Phones 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 Paydiant Phones in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Paydiant | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Paydiant are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Paydiant, in the dynamic environment Paydiant Phones has struggled to respond to the nimble upstart competition. Paydiant Phones has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Paydiant Phones 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.
No frontier risks strategy
– After analyzing the HBR case study Paydiant, it seems that company is thinking about the frontier risks that can impact Sales & Marketing 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.
Skills based hiring
– The stress on hiring functional specialists at Paydiant Phones has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Products dominated business model
– Even though Paydiant Phones 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 - Paydiant should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Paydiant Phones, firm in the HBR case study Paydiant needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Paydiant Phones 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.
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 Paydiant Phones supply chain. Even after few cautionary changes mentioned in the HBR case study - Paydiant, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Paydiant Phones vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Paydiant, is just above the industry average. Paydiant Phones 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Paydiant Phones is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Paydiant can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Paydiant Phones needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Opportunities Paydiant | 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 Paydiant are -
Using analytics as competitive advantage
– Paydiant Phones 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 Paydiant - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Paydiant Phones to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Paydiant Phones 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 Paydiant Phones to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Paydiant Phones is facing challenges because of the dominance of functional experts in the organization. Paydiant 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.
Creating value in data economy
– The success of analytics program of Paydiant Phones has opened avenues for new revenue streams for the organization in the industry. This can help Paydiant Phones to build a more holistic ecosystem as suggested in the Paydiant case study. Paydiant Phones can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Paydiant Phones can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Paydiant Phones 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 Sales & Marketing segment.
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 Paydiant Phones 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.
Better consumer reach
– The expansion of the 5G network will help Paydiant Phones to increase its market reach. Paydiant Phones 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Paydiant Phones in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Paydiant Phones 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, Paydiant, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Paydiant Phones 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 Paydiant Phones 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.
Buying journey improvements
– Paydiant Phones can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Paydiant 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.
Threats Paydiant External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Paydiant are -
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Paydiant Phones 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
– Paydiant Phones 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. Paydiant Phones can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Paydiant Phones 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 Paydiant .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Paydiant Phones with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Paydiant Phones in the Sales & Marketing sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Paydiant Phones 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Paydiant, Paydiant Phones may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Technology acceleration in Forth Industrial Revolution
– Paydiant Phones has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Paydiant Phones needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High dependence on third party suppliers
– Paydiant Phones 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.
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. Paydiant Phones 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.
Consumer confidence and its impact on Paydiant Phones 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.
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 Paydiant 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 Paydiant 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 Paydiant 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 Paydiant 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 Paydiant 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 Paydiant Phones needs to make to build a sustainable competitive advantage.
