Case Study Description of CreditEase: Taking Inclusive Finance Online
The world's largest peer-to-peer (P2P) lender annually disbursing over a million loans totaling $10 billion, China's CreditEase, must decide whether to IPO in the NYSE its online lending platform, Yirendai, before the year-end window closes in 2015. Yirendai sought to capture its customers and make virtually instantaneous credit decisions online. CreditEase's commercial success makes funding Yirendai's growth not an issue. P2P lending in China, after explosive growth followed by notorious frauds, is increasingly controversial. On the way to becoming a global example of financial inclusion, as a result of its original business model, CreditEase also pioneered and became a leader in the wealth management industry in China, serving the country's new mass affluent and high net worth families. With so many options, how should Ning Tang, founder and CEO, chart the future strategic direction of CreditEase?
Swot Analysis of "CreditEase: Taking Inclusive Finance Online" written by Michael Chu, John S. Ji, Nancy Hua Dai includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Creditease Yirendai facing as an external strategic factors. Some of the topics covered in CreditEase: Taking Inclusive Finance Online case study are - Strategic Management Strategies, Growth strategy, Internet and Finance & Accounting.
Some of the macro environment factors that can be used to understand the CreditEase: Taking Inclusive Finance Online casestudy better are - – increasing government debt because of Covid-19 spendings, increasing energy prices, geopolitical disruptions, wage bills are increasing, there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic ,
cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of CreditEase: Taking Inclusive Finance Online
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in CreditEase: Taking Inclusive Finance Online case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Creditease Yirendai, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Creditease Yirendai 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 CreditEase: Taking Inclusive Finance Online can be done for the following purposes –
1. Strategic planning using facts provided in CreditEase: Taking Inclusive Finance Online case study
2. Improving business portfolio management of Creditease Yirendai
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Creditease Yirendai
Strengths CreditEase: Taking Inclusive Finance Online | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Creditease Yirendai in CreditEase: Taking Inclusive Finance Online Harvard Business Review case study are -
Successful track record of launching new products
– Creditease Yirendai has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Creditease Yirendai 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.
Highly skilled collaborators
– Creditease Yirendai 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 CreditEase: Taking Inclusive Finance Online HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Creditease Yirendai in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Creditease Yirendai has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in CreditEase: Taking Inclusive Finance Online 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.
Organizational Resilience of Creditease Yirendai
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Creditease Yirendai does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Creditease Yirendai digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Creditease Yirendai 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.
Strong track record of project management
– Creditease Yirendai is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Finance & Accounting field
– Creditease Yirendai 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 Creditease Yirendai in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Creditease Yirendai is one of the leading recruiters in the industry. Managers in the CreditEase: Taking Inclusive Finance Online are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Creditease Yirendai 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.
Diverse revenue streams
– Creditease Yirendai is present in almost all the verticals within the industry. This has provided firm in CreditEase: Taking Inclusive Finance Online case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High brand equity
– Creditease Yirendai has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Creditease Yirendai to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses CreditEase: Taking Inclusive Finance Online | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of CreditEase: Taking Inclusive Finance Online are -
Low market penetration in new markets
– Outside its home market of Creditease Yirendai, firm in the HBR case study CreditEase: Taking Inclusive Finance Online needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Creditease Yirendai 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. Creditease Yirendai 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.
High cash cycle compare to competitors
Creditease Yirendai 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 star products
– The top 2 products and services of the firm as mentioned in the CreditEase: Taking Inclusive Finance Online 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 Creditease Yirendai has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Creditease Yirendai 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study CreditEase: Taking Inclusive Finance Online, in the dynamic environment Creditease Yirendai has struggled to respond to the nimble upstart competition. Creditease Yirendai has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Creditease Yirendai products
– To increase the profitability and margins on the products, Creditease Yirendai needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Creditease Yirendai is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Creditease Yirendai needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Creditease Yirendai to focus more on services rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Creditease Yirendai is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study CreditEase: Taking Inclusive Finance Online can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Creditease Yirendai 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.
Need for greater diversity
– Creditease Yirendai 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 CreditEase: Taking Inclusive Finance Online | 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 CreditEase: Taking Inclusive Finance Online are -
Using analytics as competitive advantage
– Creditease Yirendai 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 CreditEase: Taking Inclusive Finance Online - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Creditease Yirendai to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Creditease Yirendai 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 Finance & Accounting segment.
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 Creditease Yirendai in the consumer business. Now Creditease Yirendai can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Creditease Yirendai 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. Creditease Yirendai 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.
Creating value in data economy
– The success of analytics program of Creditease Yirendai has opened avenues for new revenue streams for the organization in the industry. This can help Creditease Yirendai to build a more holistic ecosystem as suggested in the CreditEase: Taking Inclusive Finance Online case study. Creditease Yirendai can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Creditease Yirendai can use these opportunities to build new business models that can help the communities that Creditease Yirendai operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Creditease Yirendai can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Creditease Yirendai in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
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 Creditease Yirendai 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.
Learning at scale
– Online learning technologies has now opened space for Creditease Yirendai 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.
Better consumer reach
– The expansion of the 5G network will help Creditease Yirendai to increase its market reach. Creditease Yirendai 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Creditease Yirendai 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.
Developing new processes and practices
– Creditease Yirendai can develop new processes and procedures in Finance & Accounting 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.
Threats CreditEase: Taking Inclusive Finance Online External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study CreditEase: Taking Inclusive Finance Online are -
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 Creditease Yirendai.
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 Creditease Yirendai in the Finance & Accounting sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Creditease Yirendai can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Creditease Yirendai needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing wage structure of Creditease Yirendai
– 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 Creditease Yirendai.
Shortening product life cycle
– it is one of the major threat that Creditease Yirendai is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Creditease Yirendai with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Creditease Yirendai business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Creditease Yirendai 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. Creditease Yirendai can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Creditease Yirendai 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 CreditEase: Taking Inclusive Finance Online .
Stagnating economy with rate increase
– Creditease Yirendai 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.
Weighted SWOT Analysis of CreditEase: Taking Inclusive Finance Online 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 CreditEase: Taking Inclusive Finance Online 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 CreditEase: Taking Inclusive Finance Online 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 CreditEase: Taking Inclusive Finance Online 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 CreditEase: Taking Inclusive Finance Online 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 Creditease Yirendai needs to make to build a sustainable competitive advantage.