Retail Credit Scoring for Auto Finance Limited SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of Retail Credit Scoring for Auto Finance Limited
Auto Finance Ltd. was a part of one of India's large conglomerates. The conglomerate was a major player in the two-wheeler business in India. Many of the people buying two-wheelers belonged to the lower middle class of India and did not have access to enough capital to buy the two-wheelers outright - typically costing between twenty-five to hundred thousand Indian Rupees (at the time of the setting of this case, i.e., January 2007, 1 USD ~ 50 INR). For this reason, Auto Finance used to extend loans, typically on a fixed interest rate for 3 5 years, to enable cash-strapped customers to buy the vehicles. The loan facility enabled the two-wheeler division to reach out to a section of consumers that had hitherto not been able to purchase two-wheelers. However, the increased penetration was being achieved at a cost as there were a significant number of people defaulting on their loans. Auto Finance Ltd. was interested in developing and implementing a credit scoring approach to screen out risky consumers from the pool of applicants and improve profitability.
Swot Analysis of "Retail Credit Scoring for Auto Finance Limited" written by Sujoy Roychowdhury, Srinivas Prakhya includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Wheelers Auto facing as an external strategic factors. Some of the topics covered in Retail Credit Scoring for Auto Finance Limited case study are - Strategic Management Strategies, and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Retail Credit Scoring for Auto Finance Limited casestudy better are - – increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, increasing energy prices, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%,
there is increasing trade war between United States & China, technology disruption, etc
Introduction to SWOT Analysis of Retail Credit Scoring for Auto Finance Limited
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Retail Credit Scoring for Auto Finance Limited case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wheelers Auto, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wheelers Auto 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 Retail Credit Scoring for Auto Finance Limited can be done for the following purposes –
1. Strategic planning using facts provided in Retail Credit Scoring for Auto Finance Limited case study
2. Improving business portfolio management of Wheelers Auto
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 Wheelers Auto
Strengths Retail Credit Scoring for Auto Finance Limited | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Wheelers Auto in Retail Credit Scoring for Auto Finance Limited Harvard Business Review case study are -
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Wheelers Auto digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Wheelers Auto 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 lead change in Sales & Marketing field
– Wheelers Auto 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 Wheelers Auto in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Wheelers Auto has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wheelers Auto to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Wheelers Auto in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Wheelers Auto has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Wheelers Auto 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.
High switching costs
– The high switching costs that Wheelers Auto 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.
Effective Research and Development (R&D)
– Wheelers Auto 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 Retail Credit Scoring for Auto Finance Limited - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Wheelers Auto is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Retail Credit Scoring for Auto Finance Limited Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Sales & Marketing industry
– Retail Credit Scoring for Auto Finance Limited firm has clearly differentiated products in the market place. This has enabled Wheelers Auto to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Wheelers Auto to invest into research and development (R&D) and innovation.
Training and development
– Wheelers Auto has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Retail Credit Scoring for Auto Finance Limited 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.
Highly skilled collaborators
– Wheelers Auto 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 Retail Credit Scoring for Auto Finance Limited HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Retail Credit Scoring for Auto Finance Limited | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Retail Credit Scoring for Auto Finance Limited are -
Need for greater diversity
– Wheelers Auto 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.
Skills based hiring
– The stress on hiring functional specialists at Wheelers Auto 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.
Capital Spending Reduction
– Even during the low interest decade, Wheelers Auto 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.
Low market penetration in new markets
– Outside its home market of Wheelers Auto, firm in the HBR case study Retail Credit Scoring for Auto Finance Limited needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Retail Credit Scoring for Auto Finance Limited 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 Wheelers Auto has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Wheelers Auto 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. Wheelers Auto 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.
No frontier risks strategy
– After analyzing the HBR case study Retail Credit Scoring for Auto Finance Limited, 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.
Lack of clear differentiation of Wheelers Auto products
– To increase the profitability and margins on the products, Wheelers Auto needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study Retail Credit Scoring for Auto Finance Limited 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 Wheelers Auto 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Wheelers Auto 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.
Products dominated business model
– Even though Wheelers Auto 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 - Retail Credit Scoring for Auto Finance Limited should strive to include more intangible value offerings along with its core products and services.
Opportunities Retail Credit Scoring for Auto Finance Limited | 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 Retail Credit Scoring for Auto Finance Limited are -
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 Wheelers Auto 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Wheelers Auto 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.
Learning at scale
– Online learning technologies has now opened space for Wheelers Auto 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.
Using analytics as competitive advantage
– Wheelers Auto 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 Retail Credit Scoring for Auto Finance Limited - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wheelers Auto to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Wheelers Auto can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Retail Credit Scoring for Auto Finance Limited 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.
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 Wheelers Auto in the consumer business. Now Wheelers Auto can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Wheelers Auto 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Wheelers Auto 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 Wheelers Auto to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Wheelers Auto can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Wheelers Auto can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Wheelers Auto 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.
Manufacturing automation
– Wheelers Auto can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing 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.
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. Wheelers Auto can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Retail Credit Scoring for Auto Finance Limited External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Retail Credit Scoring for Auto Finance Limited are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Shortening product life cycle
– it is one of the major threat that Wheelers Auto is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Wheelers Auto 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.
Increasing wage structure of Wheelers Auto
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Wheelers Auto.
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 Wheelers Auto.
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 Wheelers Auto in the Sales & Marketing sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Wheelers Auto 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.
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 Wheelers Auto business can come under increasing regulations regarding data privacy, data security, etc.
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. Wheelers Auto 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Wheelers Auto with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Wheelers Auto 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 Sales & Marketing industry regulations.
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. Wheelers Auto needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Retail Credit Scoring for Auto Finance Limited 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 Retail Credit Scoring for Auto Finance Limited 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 Retail Credit Scoring for Auto Finance Limited 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 Retail Credit Scoring for Auto Finance Limited 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 Retail Credit Scoring for Auto Finance Limited 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 Wheelers Auto needs to make to build a sustainable competitive advantage.