NextCard was a credit card issuer seeking to exploit the growing e-commerce market in the United States. It was founded in 1996, saw a successful initial public offering in 1999, and became an affiliate of Amazon.com, the largest online retailer. The year 2000 was a year of growth for NextCard, with the number of accounts more than tripling, to nearly three quarters of a million. However, on October 31, 2001, NextCard was placed under "new regulatory limitations" that imposed higher capital requirements than NextCard could meet. Goldman Sachs attempted to find a buyer for NextCard, but was not successful. On July 10, 2002, NextCard accounts were closed.
Swot Analysis of "NextCard" written by Andrew Watson, Ken Mark includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Nextcard Accounts facing as an external strategic factors. Some of the topics covered in NextCard case study are - Strategic Management Strategies, Growth strategy, Regulation and Strategy & Execution.
Some of the macro environment factors that can be used to understand the NextCard casestudy better are - – central banks are concerned over increasing inflation, wage bills are increasing, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs,
increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in NextCard case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nextcard Accounts, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nextcard Accounts 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 NextCard can be done for the following purposes –
1. Strategic planning using facts provided in NextCard case study
2. Improving business portfolio management of Nextcard Accounts
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nextcard Accounts
Strengths NextCard | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nextcard Accounts in NextCard Harvard Business Review case study are -
Innovation driven organization
– Nextcard Accounts is one of the most innovative firm in sector. Manager in NextCard Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Nextcard Accounts
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Nextcard Accounts does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Nextcard Accounts 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 NextCard - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Nextcard Accounts is one of the leading recruiters in the industry. Managers in the NextCard are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Nextcard Accounts 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.
Learning organization
- Nextcard Accounts 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 Nextcard Accounts is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in NextCard Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Nextcard Accounts has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nextcard Accounts to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the NextCard 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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Nextcard Accounts digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nextcard Accounts 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.
Analytics focus
– Nextcard Accounts 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 Andrew Watson, Ken Mark 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.
Ability to lead change in Strategy & Execution field
– Nextcard Accounts 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 Nextcard Accounts in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Nextcard Accounts 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 NextCard HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses NextCard | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of NextCard are -
Skills based hiring
– The stress on hiring functional specialists at Nextcard Accounts 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study NextCard, it seems that the employees of Nextcard Accounts don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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 Nextcard Accounts supply chain. Even after few cautionary changes mentioned in the HBR case study - NextCard, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nextcard Accounts vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study NextCard that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case NextCard can leverage the sales team experience to cultivate customer relationships as Nextcard Accounts is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Nextcard Accounts 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. Nextcard Accounts 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Nextcard Accounts 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the NextCard 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 Nextcard Accounts has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study NextCard, is just above the industry average. Nextcard Accounts 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study NextCard, in the dynamic environment Nextcard Accounts has struggled to respond to the nimble upstart competition. Nextcard Accounts has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners
– Because of the regulatory requirements, Andrew Watson, Ken Mark suggests that, Nextcard Accounts is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Need for greater diversity
– Nextcard Accounts 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.
Opportunities NextCard | 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 NextCard are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nextcard Accounts can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Nextcard Accounts can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nextcard Accounts 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, NextCard, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Nextcard Accounts has opened avenues for new revenue streams for the organization in the industry. This can help Nextcard Accounts to build a more holistic ecosystem as suggested in the NextCard case study. Nextcard Accounts can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Nextcard Accounts 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 NextCard - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nextcard Accounts to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nextcard Accounts can use these opportunities to build new business models that can help the communities that Nextcard Accounts operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Learning at scale
– Online learning technologies has now opened space for Nextcard Accounts 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.
Leveraging digital technologies
– Nextcard Accounts 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.
Developing new processes and practices
– Nextcard Accounts can develop new processes and procedures in Strategy & Execution 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.
Better consumer reach
– The expansion of the 5G network will help Nextcard Accounts to increase its market reach. Nextcard Accounts 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.
Manufacturing automation
– Nextcard Accounts can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nextcard Accounts in the consumer business. Now Nextcard Accounts 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 Nextcard Accounts in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Nextcard Accounts can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats NextCard External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study NextCard are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nextcard Accounts in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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 Nextcard Accounts in the Strategy & Execution sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Nextcard Accounts 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.
Shortening product life cycle
– it is one of the major threat that Nextcard Accounts is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nextcard Accounts can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Nextcard Accounts
– 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 Nextcard Accounts.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nextcard Accounts 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 NextCard .
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. Nextcard Accounts 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.
Environmental challenges
– Nextcard Accounts 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. Nextcard Accounts can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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 Nextcard Accounts business can come under increasing regulations regarding data privacy, data security, etc.
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.
Consumer confidence and its impact on Nextcard Accounts 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.
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. Nextcard Accounts needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Weighted SWOT Analysis of NextCard 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 NextCard 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 NextCard 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 NextCard 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 NextCard 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 Nextcard Accounts needs to make to build a sustainable competitive advantage.
