Lufax: FinTech and the Transformation of Wealth Management in China SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Lufax: FinTech and the Transformation of Wealth Management in China
This case examines the rise and competitive positioning of Lufax, an online marketplace headquartered in Shanghai, China, and a pioneer in the origination and trading of financial assets. The company had grown at a remarkable rate, and was awarded "Trading Platform of the Year" for 2017 by the Asian Banker Financial Markets Awards Programme. Case protagonist Gregory Gibb, Chairman & CEO of Lufax, must decide how to navigate the challenging regulatory and competitive landscape, in order to achieve Lufax's goal of transforming and expanding the wealth management industry in China. Whether the technology giants (e.g. Baidu, Alibaba, and Tencent, often collectively known as "BAT") would be able to develop strong capabilities in the "Fin" part of "FinTech," and whether traditional financial institutions would become technologically sophisticated enough for their "Tech" capabilities to materialize, were among some of the key uncertainties and potential challenges that Lufax had to confront. There were also looming risks and lingering uncertainties on the political and regulatory front. The focal point of the case centers around how Gibb can strategize and position Lufax going forward, and leverage its unique "finance DNA" to try to win market share in the rapidly changing FinTech and wealth management sectors in mainland China.
Authors :: Christopher J. Malloy, Lauren H. Cohen, Anthony K. Woo
Swot Analysis of "Lufax: FinTech and the Transformation of Wealth Management in China" written by Christopher J. Malloy, Lauren H. Cohen, Anthony K. Woo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lufax Fintech facing as an external strategic factors. Some of the topics covered in Lufax: FinTech and the Transformation of Wealth Management in China case study are - Strategic Management Strategies, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Lufax: FinTech and the Transformation of Wealth Management in China casestudy better are - – cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption,
competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, etc
Introduction to SWOT Analysis of Lufax: FinTech and the Transformation of Wealth Management in China
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lufax: FinTech and the Transformation of Wealth Management in China case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lufax Fintech, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lufax Fintech 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 Lufax: FinTech and the Transformation of Wealth Management in China can be done for the following purposes –
1. Strategic planning using facts provided in Lufax: FinTech and the Transformation of Wealth Management in China case study
2. Improving business portfolio management of Lufax Fintech
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 Lufax Fintech
Strengths Lufax: FinTech and the Transformation of Wealth Management in China | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lufax Fintech in Lufax: FinTech and the Transformation of Wealth Management in China Harvard Business Review case study are -
Successful track record of launching new products
– Lufax Fintech has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lufax Fintech 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.
Organizational Resilience of Lufax Fintech
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lufax Fintech does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Lufax Fintech is one of the leading recruiters in the industry. Managers in the Lufax: FinTech and the Transformation of Wealth Management in China are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Finance & Accounting industry
– Lufax: FinTech and the Transformation of Wealth Management in China firm has clearly differentiated products in the market place. This has enabled Lufax Fintech to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Lufax Fintech to invest into research and development (R&D) and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Lufax Fintech digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lufax Fintech has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Strong track record of project management
– Lufax Fintech is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Lufax: FinTech and the Transformation of Wealth Management in China 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.
Ability to lead change in Finance & Accounting field
– Lufax Fintech 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 Lufax Fintech in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Lufax Fintech has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lufax Fintech to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Lufax Fintech is present in almost all the verticals within the industry. This has provided firm in Lufax: FinTech and the Transformation of Wealth Management in China 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.
Innovation driven organization
– Lufax Fintech is one of the most innovative firm in sector. Manager in Lufax: FinTech and the Transformation of Wealth Management in China Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Analytics focus
– Lufax Fintech 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 Christopher J. Malloy, Lauren H. Cohen, Anthony K. Woo 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.
Weaknesses Lufax: FinTech and the Transformation of Wealth Management in China | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lufax: FinTech and the Transformation of Wealth Management in China are -
Slow decision making process
– As mentioned earlier in the report, Lufax Fintech has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Lufax Fintech even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Need for greater diversity
– Lufax Fintech 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.
Products dominated business model
– Even though Lufax Fintech 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 - Lufax: FinTech and the Transformation of Wealth Management in China should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Lufax Fintech is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Lufax Fintech needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lufax Fintech to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Lufax: FinTech and the Transformation of Wealth Management in China, it seems that the employees of Lufax Fintech 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Lufax: FinTech and the Transformation of Wealth Management in China 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 Lufax Fintech 's lucrative customers.
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 Lufax Fintech supply chain. Even after few cautionary changes mentioned in the HBR case study - Lufax: FinTech and the Transformation of Wealth Management in China, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lufax Fintech vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Lufax Fintech 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.
Aligning sales with marketing
– It come across in the case study Lufax: FinTech and the Transformation of Wealth Management in China 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 Lufax: FinTech and the Transformation of Wealth Management in China can leverage the sales team experience to cultivate customer relationships as Lufax Fintech is planning to shift buying processes online.
Interest costs
– Compare to the competition, Lufax Fintech 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.
Low market penetration in new markets
– Outside its home market of Lufax Fintech, firm in the HBR case study Lufax: FinTech and the Transformation of Wealth Management in China needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Lufax: FinTech and the Transformation of Wealth Management in China | 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 Lufax: FinTech and the Transformation of Wealth Management in China are -
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 Lufax Fintech in the consumer business. Now Lufax Fintech can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lufax Fintech is facing challenges because of the dominance of functional experts in the organization. Lufax: FinTech and the Transformation of Wealth Management in China 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.
Loyalty marketing
– Lufax Fintech 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.
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. Lufax Fintech can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Lufax Fintech can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Lufax: FinTech and the Transformation of Wealth Management in China 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lufax Fintech 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 Lufax Fintech to hire the very best people irrespective of their geographical location.
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. Lufax Fintech can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lufax Fintech 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.
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. Lufax Fintech 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. Lufax Fintech 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.
Leveraging digital technologies
– Lufax Fintech 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lufax Fintech 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, Lufax: FinTech and the Transformation of Wealth Management in China, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lufax Fintech can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Lufax Fintech has opened avenues for new revenue streams for the organization in the industry. This can help Lufax Fintech to build a more holistic ecosystem as suggested in the Lufax: FinTech and the Transformation of Wealth Management in China case study. Lufax Fintech can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Lufax: FinTech and the Transformation of Wealth Management in China External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lufax: FinTech and the Transformation of Wealth Management in China are -
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. Lufax Fintech can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lufax Fintech 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 Lufax: FinTech and the Transformation of Wealth Management in China .
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 Lufax Fintech is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Lufax Fintech
– 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 Lufax Fintech.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lufax Fintech with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Lufax Fintech business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Lufax Fintech 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. Lufax Fintech can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 Lufax Fintech in the Finance & Accounting sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lufax Fintech 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.
High dependence on third party suppliers
– Lufax Fintech 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.
Technology acceleration in Forth Industrial Revolution
– Lufax Fintech has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Lufax Fintech 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.
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. Lufax Fintech needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Lufax: FinTech and the Transformation of Wealth Management in China 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 Lufax: FinTech and the Transformation of Wealth Management in China 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 Lufax: FinTech and the Transformation of Wealth Management in China 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 Lufax: FinTech and the Transformation of Wealth Management in China 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 Lufax: FinTech and the Transformation of Wealth Management in China 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 Lufax Fintech needs to make to build a sustainable competitive advantage.