Case Study Description of Safaricom 2018: The Emerging-Markets Payments Battle
The case discusses the decision of a hypothetical London-based hedge fund manager, Greg Rubin, who manages a fund primarily investing in emerging and frontier markets to decide whether to buy (or short) Safaricom, a Kenya-based telecom and financial services company that became globally known more than a decade ago (2007) for its use of technology to facilitate payments via mobile phones. There was a real need in Kenya for a different system of payments and money transfers, given the large underbanked population (almost 80% lacking a formal bank account) and the widespread use of cash. M-Pesa, the system introduced by Safaricom was an astounding success and quickly achieved a dominant position in the Kenyan marketplace. Kenyans embraced the use of mobile phones to transfer money and pay bills. More than 10 years later, at the time of the case (March 2018), Safaricom's dominance is challenged by a series of missteps expanding abroad (e.g., to South Africa), increased competition at home, as well as the introduction of 3G and advanced smartphone technology. The case allows for an examination of the investment thesis for Safaricom and its valuation. This requires the analysis of payment systems and their evolution in frontier markets as well as the analysis of country/political risk, among others. It is the combination of an innovative company from a frontier market and the introduction of new technologies that make this case interesting (and challenging) to analyze-by no means an obvious decision for Rubin.
Swot Analysis of "Safaricom 2018: The Emerging-Markets Payments Battle" written by Yiorgos Allayannis, Jenny Craddock includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Safaricom Frontier facing as an external strategic factors. Some of the topics covered in Safaricom 2018: The Emerging-Markets Payments Battle case study are - Strategic Management Strategies, Financial markets, International business and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Safaricom 2018: The Emerging-Markets Payments Battle casestudy better are - – digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, technology disruption, increasing commodity prices,
increasing government debt because of Covid-19 spendings, there is backlash against globalization, etc
Introduction to SWOT Analysis of Safaricom 2018: The Emerging-Markets Payments Battle
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Safaricom 2018: The Emerging-Markets Payments Battle case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Safaricom Frontier, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Safaricom Frontier 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 Safaricom 2018: The Emerging-Markets Payments Battle can be done for the following purposes –
1. Strategic planning using facts provided in Safaricom 2018: The Emerging-Markets Payments Battle case study
2. Improving business portfolio management of Safaricom Frontier
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 Safaricom Frontier
Strengths Safaricom 2018: The Emerging-Markets Payments Battle | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Safaricom Frontier in Safaricom 2018: The Emerging-Markets Payments Battle Harvard Business Review case study are -
Strong track record of project management
– Safaricom Frontier is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Safaricom Frontier
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Safaricom Frontier does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Safaricom Frontier in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Safaricom Frontier is one of the leading recruiters in the industry. Managers in the Safaricom 2018: The Emerging-Markets Payments Battle are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Safaricom Frontier 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 Safaricom 2018: The Emerging-Markets Payments Battle HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Safaricom Frontier digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Safaricom Frontier has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Analytics focus
– Safaricom Frontier 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 Yiorgos Allayannis, Jenny Craddock 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.
Low bargaining power of suppliers
– Suppliers of Safaricom Frontier in the sector have low bargaining power. Safaricom 2018: The Emerging-Markets Payments Battle has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Safaricom Frontier to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Safaricom Frontier has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Safaricom Frontier to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Safaricom Frontier is one of the most innovative firm in sector. Manager in Safaricom 2018: The Emerging-Markets Payments Battle Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Safaricom Frontier 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
– Safaricom Frontier 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 Safaricom Frontier in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Safaricom 2018: The Emerging-Markets Payments Battle | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Safaricom 2018: The Emerging-Markets Payments Battle are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Safaricom 2018: The Emerging-Markets Payments Battle, in the dynamic environment Safaricom Frontier has struggled to respond to the nimble upstart competition. Safaricom Frontier has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners
– Because of the regulatory requirements, Yiorgos Allayannis, Jenny Craddock suggests that, Safaricom Frontier 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Safaricom 2018: The Emerging-Markets Payments Battle 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 Safaricom Frontier 's lucrative customers.
No frontier risks strategy
– After analyzing the HBR case study Safaricom 2018: The Emerging-Markets Payments Battle, 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.
Increasing silos among functional specialists
– The organizational structure of Safaricom Frontier is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Safaricom Frontier needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Safaricom Frontier to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Safaricom Frontier has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Safaricom 2018: The Emerging-Markets Payments Battle should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Safaricom Frontier has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to strategic competitive environment developments
– As Safaricom 2018: The Emerging-Markets Payments Battle HBR case study mentions - Safaricom Frontier 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.
High cash cycle compare to competitors
Safaricom Frontier 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.
Low market penetration in new markets
– Outside its home market of Safaricom Frontier, firm in the HBR case study Safaricom 2018: The Emerging-Markets Payments Battle needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Safaricom 2018: The Emerging-Markets Payments Battle, is just above the industry average. Safaricom Frontier 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.
Opportunities Safaricom 2018: The Emerging-Markets Payments Battle | 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 Safaricom 2018: The Emerging-Markets Payments Battle are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Safaricom Frontier 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Safaricom Frontier 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, Safaricom 2018: The Emerging-Markets Payments Battle, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Safaricom Frontier 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Safaricom Frontier 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 Safaricom Frontier to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Safaricom Frontier 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.
Manufacturing automation
– Safaricom Frontier can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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 Safaricom Frontier in the consumer business. Now Safaricom Frontier can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Safaricom Frontier 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.
Using analytics as competitive advantage
– Safaricom Frontier 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 Safaricom 2018: The Emerging-Markets Payments Battle - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Safaricom Frontier to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Safaricom Frontier is facing challenges because of the dominance of functional experts in the organization. Safaricom 2018: The Emerging-Markets Payments Battle case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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, Safaricom Frontier can use these opportunities to build new business models that can help the communities that Safaricom Frontier 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 Safaricom Frontier 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.
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. Safaricom Frontier can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Safaricom 2018: The Emerging-Markets Payments Battle External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Safaricom 2018: The Emerging-Markets Payments Battle are -
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. Safaricom Frontier needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Safaricom Frontier 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. Safaricom Frontier can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Safaricom Frontier has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Safaricom Frontier 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.
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.
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 Safaricom Frontier business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Safaricom Frontier 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
– Safaricom Frontier 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Safaricom Frontier 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 Safaricom 2018: The Emerging-Markets Payments Battle .
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 Safaricom Frontier.
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.
Shortening product life cycle
– it is one of the major threat that Safaricom Frontier is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Safaricom Frontier 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. Safaricom Frontier can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Weighted SWOT Analysis of Safaricom 2018: The Emerging-Markets Payments Battle 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 Safaricom 2018: The Emerging-Markets Payments Battle 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 Safaricom 2018: The Emerging-Markets Payments Battle 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 Safaricom 2018: The Emerging-Markets Payments Battle 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 Safaricom 2018: The Emerging-Markets Payments Battle 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 Safaricom Frontier needs to make to build a sustainable competitive advantage.