Case Study Description of Financial Services at Falabella (A)
In 2010, the board and senior management team of Falabella, a leading retailer with operations throughout Latin America, faced choices about what to do with its financial services division. More than 4.5 million customers had CMR credit cards that could be used in Falabella stores, and Banco Falabella competed with other banks by offering personal banking services. The case covers many of the key questions the leaders of the firm faced, including whether to allow credit card holders to use their cards for purchases outside of Falabella stores, whether to develop personal banking services further, and whether to make substantial changes to the strategy or to exit the business.
Swot Analysis of "Financial Services at Falabella (A)" written by C. Fritz Foley, Agustin M. Hurtado includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Falabella Cards facing as an external strategic factors. Some of the topics covered in Financial Services at Falabella (A) case study are - Strategic Management Strategies, Economics, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Financial Services at Falabella (A) casestudy better are - – increasing energy prices, increasing commodity prices, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings,
banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, etc
Introduction to SWOT Analysis of Financial Services at Falabella (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Financial Services at Falabella (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Falabella Cards, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Falabella Cards 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 Financial Services at Falabella (A) can be done for the following purposes –
1. Strategic planning using facts provided in Financial Services at Falabella (A) case study
2. Improving business portfolio management of Falabella Cards
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 Falabella Cards
Strengths Financial Services at Falabella (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Falabella Cards in Financial Services at Falabella (A) Harvard Business Review case study are -
Ability to recruit top talent
– Falabella Cards is one of the leading recruiters in the industry. Managers in the Financial Services at Falabella (A) 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 Falabella Cards 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.
Ability to lead change in Finance & Accounting field
– Falabella Cards 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 Falabella Cards in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Finance & Accounting industry
– Financial Services at Falabella (A) firm has clearly differentiated products in the market place. This has enabled Falabella Cards to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Falabella Cards to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Falabella Cards has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Falabella Cards 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 Falabella Cards 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.
Organizational Resilience of Falabella Cards
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Falabella Cards does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Falabella Cards is one of the most innovative firm in sector. Manager in Financial Services at Falabella (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Falabella Cards digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Falabella Cards 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.
Low bargaining power of suppliers
– Suppliers of Falabella Cards in the sector have low bargaining power. Financial Services at Falabella (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Falabella Cards to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Falabella Cards has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Financial Services at Falabella (A) 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.
Diverse revenue streams
– Falabella Cards is present in almost all the verticals within the industry. This has provided firm in Financial Services at Falabella (A) 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.
Weaknesses Financial Services at Falabella (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Financial Services at Falabella (A) are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Financial Services at Falabella (A) 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 Falabella Cards has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study Financial Services at Falabella (A) 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 Financial Services at Falabella (A) can leverage the sales team experience to cultivate customer relationships as Falabella Cards is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Financial Services at Falabella (A), is just above the industry average. Falabella Cards 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.
High bargaining power of channel partners
– Because of the regulatory requirements, C. Fritz Foley, Agustin M. Hurtado suggests that, Falabella Cards 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.
Capital Spending Reduction
– Even during the low interest decade, Falabella Cards 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.
Increasing silos among functional specialists
– The organizational structure of Falabella Cards is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Falabella Cards needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Falabella Cards to focus more on services rather than just following the product oriented approach.
High cash cycle compare to competitors
Falabella Cards 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Financial Services at Falabella (A), it seems that the employees of Falabella Cards 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.
Low market penetration in new markets
– Outside its home market of Falabella Cards, firm in the HBR case study Financial Services at Falabella (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– After analyzing the HBR case study Financial Services at Falabella (A), it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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.
Need for greater diversity
– Falabella Cards 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 Financial Services at Falabella (A) | 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 Financial Services at Falabella (A) are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Falabella Cards 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.
Building a culture of innovation
– managers at Falabella Cards 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.
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. Falabella Cards can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Falabella Cards 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, Financial Services at Falabella (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Falabella Cards can use these opportunities to build new business models that can help the communities that Falabella Cards operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Loyalty marketing
– Falabella Cards 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.
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 Falabella Cards in the consumer business. Now Falabella Cards can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Falabella Cards 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 Falabella Cards to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Falabella Cards 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Falabella Cards can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Falabella Cards can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Financial Services at Falabella (A) 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.
Developing new processes and practices
– Falabella Cards 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.
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 Falabella Cards 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.
Threats Financial Services at Falabella (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Financial Services at Falabella (A) are -
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 Falabella Cards in the Finance & Accounting sector and impact the bottomline of the organization.
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. Falabella Cards needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Financial Services at Falabella (A), Falabella Cards may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Stagnating economy with rate increase
– Falabella Cards 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.
Regulatory challenges
– Falabella Cards 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 Finance & Accounting industry regulations.
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.
Consumer confidence and its impact on Falabella Cards 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.
Shortening product life cycle
– it is one of the major threat that Falabella Cards is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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. Falabella Cards 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.
Increasing wage structure of Falabella Cards
– 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 Falabella Cards.
Technology acceleration in Forth Industrial Revolution
– Falabella Cards has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Falabella Cards needs to keep up with the evolution of technology in the Finance & Accounting 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Falabella Cards in the Finance & Accounting industry. The Finance & Accounting 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.
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 Falabella Cards business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Financial Services at Falabella (A) 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 Financial Services at Falabella (A) 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 Financial Services at Falabella (A) 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 Financial Services at Falabella (A) 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 Financial Services at Falabella (A) 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 Falabella Cards needs to make to build a sustainable competitive advantage.