Case Study Description of Paytm: Accelerating Growth through Diversification
Paytm Payments Bank Limited (Paytm) was the leading firm in the digital wallet (also known as the "mobile wallet" or "e-wallet") industry in India; yet, the company had reported a loss of more than INR15,485 million for fiscal year 2016. Paytm's resources were stretched further when, on May 23, 2017, it started its long-awaited payments bank operation. There were also doubts about the viability and sustainability of the online payments industry in general as a result of; India's demonetization exercise in 2016; the introduction of the uniform Goods and Services Tax in 2017; and a general slowdown in the economy's growth rate. In the highly competitive and crowded banking sector, how could Paytm survive, grow, and achieve continued success in this complex business landscape? Shernaz Bodhanwala and Diganta Chakrabarti are affiliated with FLAME University.
Swot Analysis of "Paytm: Accelerating Growth through Diversification" written by Shernaz Bodhanwala, Diganta Chakrabarti includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Paytm Wallet facing as an external strategic factors. Some of the topics covered in Paytm: Accelerating Growth through Diversification case study are - Strategic Management Strategies, and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Paytm: Accelerating Growth through Diversification casestudy better are - – digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%,
increasing commodity prices, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Paytm: Accelerating Growth through Diversification
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Paytm: Accelerating Growth through Diversification case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Paytm Wallet, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Paytm Wallet 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 Paytm: Accelerating Growth through Diversification can be done for the following purposes –
1. Strategic planning using facts provided in Paytm: Accelerating Growth through Diversification case study
2. Improving business portfolio management of Paytm Wallet
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Paytm Wallet
Strengths Paytm: Accelerating Growth through Diversification | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Paytm Wallet in Paytm: Accelerating Growth through Diversification Harvard Business Review case study are -
Training and development
– Paytm Wallet has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Paytm: Accelerating Growth through Diversification 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.
Operational resilience
– The operational resilience strategy in the Paytm: Accelerating Growth through Diversification 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.
Effective Research and Development (R&D)
– Paytm Wallet 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 Paytm: Accelerating Growth through Diversification - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Paytm: Accelerating Growth through Diversification firm has clearly differentiated products in the market place. This has enabled Paytm Wallet to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Paytm Wallet to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Paytm Wallet is one of the leading recruiters in the industry. Managers in the Paytm: Accelerating Growth through Diversification are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Paytm Wallet 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 Shernaz Bodhanwala, Diganta Chakrabarti 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 Innovation & Entrepreneurship field
– Paytm Wallet 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 Paytm Wallet in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Paytm Wallet 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 Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Paytm Wallet digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Paytm Wallet 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.
Innovation driven organization
– Paytm Wallet is one of the most innovative firm in sector. Manager in Paytm: Accelerating Growth through Diversification Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Paytm Wallet 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.
High brand equity
– Paytm Wallet has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Paytm Wallet to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Paytm: Accelerating Growth through Diversification | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Paytm: Accelerating Growth through Diversification are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Paytm Wallet is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Paytm: Accelerating Growth through Diversification can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Paytm: Accelerating Growth through Diversification 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 Paytm Wallet has relatively successful track record of launching new products.
High cash cycle compare to competitors
Paytm Wallet 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Paytm: Accelerating Growth through Diversification, is just above the industry average. Paytm Wallet 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 operating costs
– Compare to the competitors, firm in the HBR case study Paytm: Accelerating Growth through Diversification has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Paytm Wallet 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Paytm Wallet, firm in the HBR case study Paytm: Accelerating Growth through Diversification needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Paytm Wallet is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Paytm Wallet needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Paytm Wallet to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Paytm: Accelerating Growth through Diversification HBR case study mentions - Paytm Wallet takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Lack of clear differentiation of Paytm Wallet products
– To increase the profitability and margins on the products, Paytm Wallet needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study Paytm: Accelerating Growth through Diversification 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 Paytm: Accelerating Growth through Diversification can leverage the sales team experience to cultivate customer relationships as Paytm Wallet is planning to shift buying processes online.
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 Paytm Wallet supply chain. Even after few cautionary changes mentioned in the HBR case study - Paytm: Accelerating Growth through Diversification, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Paytm Wallet vulnerable to further global disruptions in South East Asia.
Opportunities Paytm: Accelerating Growth through Diversification | 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 Paytm: Accelerating Growth through Diversification are -
Leveraging digital technologies
– Paytm Wallet 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.
Better consumer reach
– The expansion of the 5G network will help Paytm Wallet to increase its market reach. Paytm Wallet 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
– Paytm Wallet can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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 Paytm Wallet in the consumer business. Now Paytm Wallet 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 Paytm Wallet 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 Paytm Wallet to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Paytm Wallet 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.
Loyalty marketing
– Paytm Wallet 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.
Building a culture of innovation
– managers at Paytm Wallet 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 Innovation & Entrepreneurship segment.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Paytm Wallet can use these opportunities to build new business models that can help the communities that Paytm Wallet operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Creating value in data economy
– The success of analytics program of Paytm Wallet has opened avenues for new revenue streams for the organization in the industry. This can help Paytm Wallet to build a more holistic ecosystem as suggested in the Paytm: Accelerating Growth through Diversification case study. Paytm Wallet can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Paytm Wallet 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Paytm Wallet 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. Paytm Wallet 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, Paytm Wallet 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, Paytm: Accelerating Growth through Diversification, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Paytm: Accelerating Growth through Diversification External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Paytm: Accelerating Growth through Diversification are -
Regulatory challenges
– Paytm Wallet 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 Innovation & Entrepreneurship industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Paytm: Accelerating Growth through Diversification, Paytm Wallet may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
High dependence on third party suppliers
– Paytm Wallet 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Paytm Wallet in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
Environmental challenges
– Paytm Wallet 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. Paytm Wallet can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship 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 Paytm Wallet business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Paytm Wallet with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Paytm Wallet
– 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 Paytm Wallet.
Stagnating economy with rate increase
– Paytm Wallet 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.
Consumer confidence and its impact on Paytm Wallet demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Paytm Wallet has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Paytm Wallet needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Paytm Wallet 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 Paytm: Accelerating Growth through Diversification .
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 Paytm Wallet in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Paytm: Accelerating Growth through Diversification 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 Paytm: Accelerating Growth through Diversification 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 Paytm: Accelerating Growth through Diversification 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 Paytm: Accelerating Growth through Diversification 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 Paytm: Accelerating Growth through Diversification 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 Paytm Wallet needs to make to build a sustainable competitive advantage.