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 - – challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, geopolitical disruptions, central banks are concerned over increasing inflation, there is backlash against globalization,
customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, 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 -
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.
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.
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.
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.
Superior customer experience
– The customer experience strategy of Lufax Fintech in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
High switching costs
– The high switching costs that Lufax Fintech 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.
Learning organization
- Lufax Fintech is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Lufax Fintech is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lufax: FinTech and the Transformation of Wealth Management in China Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
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.
Effective Research and Development (R&D)
– Lufax Fintech 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 Lufax: FinTech and the Transformation of Wealth Management in China - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 -
Capital Spending Reduction
– Even during the low interest decade, Lufax Fintech 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Lufax: FinTech and the Transformation of Wealth Management in China, in the dynamic environment Lufax Fintech has struggled to respond to the nimble upstart competition. Lufax Fintech has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
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.
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.
Lack of clear differentiation of Lufax Fintech products
– To increase the profitability and margins on the products, Lufax Fintech needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
Slow to strategic competitive environment developments
– As Lufax: FinTech and the Transformation of Wealth Management in China HBR case study mentions - Lufax Fintech 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.
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 -
Building a culture of innovation
– managers at Lufax Fintech 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.
Manufacturing automation
– Lufax Fintech 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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Lufax Fintech to increase its market reach. Lufax Fintech 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.
Using analytics as competitive advantage
– Lufax Fintech 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 Lufax: FinTech and the Transformation of Wealth Management in China - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lufax Fintech to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Lufax Fintech 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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lufax Fintech 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.
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.
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 Lufax Fintech 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.
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.
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.
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 -
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.
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.
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.
Stagnating economy with rate increase
– Lufax Fintech 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.
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. Lufax Fintech 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Lufax: FinTech and the Transformation of Wealth Management in China, Lufax Fintech may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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.
Consumer confidence and its impact on Lufax Fintech 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.
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.
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.
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.
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.
