Case Study Description of Social Entrepreneurship: Banco Compartamos
Banco Compartamos was formed in 1990 as a non-governmental organization to aid the poor in rural areas of Chiapas and Oaxaca, Mexico by providing microloans. In 2001 Carlos Danel and Carlos Labarthe took the organization private and then in 2007 took Compartamos public in an IPO valued at $1.53 billion. Compartamos executives received $150 million of the $450 million in proceeds. Banco Compartamos became one of Mexico's most successful banks, with an average return on equity of 40 percent since becoming for-profit. Critics, however, charged that Compartamos managed its business to benefit its investors, not its borrowers and did a disservice to the world of microfinance. This case briefly explores Banco Compartamos and microfinance approaches.
Swot Analysis of "Social Entrepreneurship: Banco Compartamos" written by David P. Baron includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Compartamos Banco facing as an external strategic factors. Some of the topics covered in Social Entrepreneurship: Banco Compartamos case study are - Strategic Management Strategies, Ethics, Financial markets, Social enterprise and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Social Entrepreneurship: Banco Compartamos casestudy better are - – increasing energy prices, technology disruption, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices,
wage bills are increasing, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Social Entrepreneurship: Banco Compartamos
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Social Entrepreneurship: Banco Compartamos case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Compartamos Banco, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Compartamos Banco 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 Social Entrepreneurship: Banco Compartamos can be done for the following purposes –
1. Strategic planning using facts provided in Social Entrepreneurship: Banco Compartamos case study
2. Improving business portfolio management of Compartamos Banco
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 Compartamos Banco
Strengths Social Entrepreneurship: Banco Compartamos | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Compartamos Banco in Social Entrepreneurship: Banco Compartamos Harvard Business Review case study are -
Highly skilled collaborators
– Compartamos Banco 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 Social Entrepreneurship: Banco Compartamos HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Compartamos Banco in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Compartamos Banco has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Social Entrepreneurship: Banco Compartamos 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Compartamos Banco digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Compartamos Banco 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.
Effective Research and Development (R&D)
– Compartamos Banco 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 Social Entrepreneurship: Banco Compartamos - 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 Finance & Accounting industry
– Social Entrepreneurship: Banco Compartamos firm has clearly differentiated products in the market place. This has enabled Compartamos Banco to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Compartamos Banco to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Compartamos Banco is one of the leading recruiters in the industry. Managers in the Social Entrepreneurship: Banco Compartamos are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Compartamos Banco 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 Compartamos Banco is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Social Entrepreneurship: Banco Compartamos Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Compartamos Banco 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.
Organizational Resilience of Compartamos Banco
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Compartamos Banco does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Compartamos Banco has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Compartamos Banco to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Compartamos Banco is present in almost all the verticals within the industry. This has provided firm in Social Entrepreneurship: Banco Compartamos 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.
Weaknesses Social Entrepreneurship: Banco Compartamos | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Social Entrepreneurship: Banco Compartamos are -
Skills based hiring
– The stress on hiring functional specialists at Compartamos Banco has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Social Entrepreneurship: Banco Compartamos, is just above the industry average. Compartamos Banco 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.
Lack of clear differentiation of Compartamos Banco products
– To increase the profitability and margins on the products, Compartamos Banco needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Compartamos Banco 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.
Interest costs
– Compare to the competition, Compartamos Banco 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 decision making process
– As mentioned earlier in the report, Compartamos Banco 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. Compartamos Banco 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.
High bargaining power of channel partners
– Because of the regulatory requirements, David P. Baron suggests that, Compartamos Banco 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.
Low market penetration in new markets
– Outside its home market of Compartamos Banco, firm in the HBR case study Social Entrepreneurship: Banco Compartamos needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Compartamos Banco 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.
Products dominated business model
– Even though Compartamos Banco 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 - Social Entrepreneurship: Banco Compartamos should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Compartamos Banco 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.
Opportunities Social Entrepreneurship: Banco Compartamos | 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 Social Entrepreneurship: Banco Compartamos are -
Leveraging digital technologies
– Compartamos Banco 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 Compartamos Banco to increase its market reach. Compartamos Banco 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.
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. Compartamos Banco can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Compartamos Banco 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.
Loyalty marketing
– Compartamos Banco 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Compartamos Banco can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Compartamos Banco 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. Compartamos Banco 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. Compartamos Banco 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.
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. Compartamos Banco 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, Compartamos Banco 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, Social Entrepreneurship: Banco Compartamos, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Compartamos Banco can use these opportunities to build new business models that can help the communities that Compartamos Banco operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Compartamos Banco 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.
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 Compartamos Banco in the consumer business. Now Compartamos Banco can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Social Entrepreneurship: Banco Compartamos External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Social Entrepreneurship: Banco Compartamos 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. Compartamos Banco can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Compartamos Banco
– 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 Compartamos Banco.
Consumer confidence and its impact on Compartamos Banco 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Social Entrepreneurship: Banco Compartamos, Compartamos Banco 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 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. Compartamos Banco needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 Compartamos Banco business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Compartamos Banco has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Compartamos Banco 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.
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 Compartamos Banco.
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.
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.
Stagnating economy with rate increase
– Compartamos Banco 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Compartamos Banco 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
– Compartamos Banco 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.
Weighted SWOT Analysis of Social Entrepreneurship: Banco Compartamos 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 Social Entrepreneurship: Banco Compartamos 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 Social Entrepreneurship: Banco Compartamos 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 Social Entrepreneurship: Banco Compartamos 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 Social Entrepreneurship: Banco Compartamos 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 Compartamos Banco needs to make to build a sustainable competitive advantage.