Case Study Description of Square, Inc.: Financing a Unicorn
In 2014, mobile payment company Square, Inc., based in San Francisco, California, was one of an increasing number of venture capital financed firms with valuations above US$1 billion, which had become known as "unicorns." By September 2014, the company had raised $371 million over five rounds of venture capital financing. Since the first funding round had been almost five years previous, it was possible that venture funding investors would be pushing for an exit. The firm considered an acquisition offer and an initial public offering, but it was apparent that neither option would yield its desired $6 billion exit value. With $139 million in cash on hand, Square, Inc., was on track to use $138 million of cash in 2014. It approached venture capital investors for a sixth round of financing. It was then up to the investors to determine if they could agree to suitable terms. Mark Simonson is affiliated with Arizona State University.
Swot Analysis of "Square, Inc.: Financing a Unicorn" written by Mark Simonson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Square Venture facing as an external strategic factors. Some of the topics covered in Square, Inc.: Financing a Unicorn case study are - Strategic Management Strategies, Venture capital and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Square, Inc.: Financing a Unicorn casestudy better are - – increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, technology disruption, wage bills are increasing,
banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Square, Inc.: Financing a Unicorn
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Square, Inc.: Financing a Unicorn case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Square Venture, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Square Venture 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 Square, Inc.: Financing a Unicorn can be done for the following purposes –
1. Strategic planning using facts provided in Square, Inc.: Financing a Unicorn case study
2. Improving business portfolio management of Square Venture
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 Square Venture
Strengths Square, Inc.: Financing a Unicorn | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Square Venture in Square, Inc.: Financing a Unicorn Harvard Business Review case study are -
Highly skilled collaborators
– Square Venture 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 Square, Inc.: Financing a Unicorn HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Finance & Accounting industry
– Square, Inc.: Financing a Unicorn firm has clearly differentiated products in the market place. This has enabled Square Venture to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Square Venture to invest into research and development (R&D) and innovation.
Training and development
– Square Venture has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Square, Inc.: Financing a Unicorn 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.
Superior customer experience
– The customer experience strategy of Square Venture in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Square Venture 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Square Venture digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Square Venture 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 recruit top talent
– Square Venture is one of the leading recruiters in the industry. Managers in the Square, Inc.: Financing a Unicorn 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 Square Venture 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.
Ability to lead change in Finance & Accounting field
– Square Venture 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 Square Venture in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Square Venture is present in almost all the verticals within the industry. This has provided firm in Square, Inc.: Financing a Unicorn 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.
Low bargaining power of suppliers
– Suppliers of Square Venture in the sector have low bargaining power. Square, Inc.: Financing a Unicorn has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Square Venture to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Square Venture is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Square, Inc.: Financing a Unicorn | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Square, Inc.: Financing a Unicorn are -
Skills based hiring
– The stress on hiring functional specialists at Square Venture 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.
Need for greater diversity
– Square Venture 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.
Lack of clear differentiation of Square Venture products
– To increase the profitability and margins on the products, Square Venture needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Square, Inc.: Financing a Unicorn, in the dynamic environment Square Venture has struggled to respond to the nimble upstart competition. Square Venture has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Square Venture is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Square, Inc.: Financing a Unicorn can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Square Venture 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 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 Square Venture supply chain. Even after few cautionary changes mentioned in the HBR case study - Square, Inc.: Financing a Unicorn, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Square Venture vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Square Venture, firm in the HBR case study Square, Inc.: Financing a Unicorn needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Square Venture 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Square, Inc.: Financing a Unicorn, is just above the industry average. Square Venture 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.
No frontier risks strategy
– After analyzing the HBR case study Square, Inc.: Financing a Unicorn, 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.
Opportunities Square, Inc.: Financing a Unicorn | 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 Square, Inc.: Financing a Unicorn are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Square Venture 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 Square Venture 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
– Square Venture 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.
Building a culture of innovation
– managers at Square Venture 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 Square Venture in the consumer business. Now Square Venture can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Square Venture can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Square, Inc.: Financing a Unicorn 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Square Venture 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, Square, Inc.: Financing a Unicorn, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Square Venture 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. Square Venture 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.
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. Square Venture can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Square Venture to increase its market reach. Square Venture 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Square Venture can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Square Venture can use these opportunities to build new business models that can help the communities that Square Venture operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Square Venture 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 Square, Inc.: Financing a Unicorn External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Square, Inc.: Financing a Unicorn are -
Increasing wage structure of Square Venture
– 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 Square Venture.
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 Square Venture business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Square Venture 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Square Venture with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Square Venture 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.
High dependence on third party suppliers
– Square Venture 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.
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. Square Venture 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. Square Venture needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Environmental challenges
– Square Venture 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. Square Venture 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, Square Venture 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 Square, Inc.: Financing a Unicorn .
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 Square Venture is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Square Venture 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 Square, Inc.: Financing a Unicorn 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 Square, Inc.: Financing a Unicorn 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 Square, Inc.: Financing a Unicorn 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 Square, Inc.: Financing a Unicorn 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 Square, Inc.: Financing a Unicorn 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 Square Venture needs to make to build a sustainable competitive advantage.
