BASIX, an Indian microfinance corporation, must decide whether to continue to sell weather insurance to its clients. A brand-new financial product, weather insurance pays if measured rainfall during the growing season falls below a pre-specified limit. Mr. Sattaiah, managing director of the BASIX's bank, considers a revised insurance policy for the coming season, weighing the costs and potential risks of expanding the product against the potential benefits.
Swot Analysis of "BASIX" written by Shawn Cole, Peter Tufano includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Basix Insurance facing as an external strategic factors. Some of the topics covered in BASIX case study are - Strategic Management Strategies, Entrepreneurial finance, Financial analysis, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the BASIX casestudy better are - – there is backlash against globalization, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion,
there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in BASIX case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Basix Insurance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Basix Insurance 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 BASIX can be done for the following purposes –
1. Strategic planning using facts provided in BASIX case study
2. Improving business portfolio management of Basix Insurance
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 Basix Insurance
Strengths BASIX | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Basix Insurance in BASIX Harvard Business Review case study are -
Successful track record of launching new products
– Basix Insurance has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Basix Insurance 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.
Ability to lead change in Finance & Accounting field
– Basix Insurance 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 Basix Insurance in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Basix Insurance 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 Basix Insurance is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in BASIX Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Basix Insurance 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 Shawn Cole, Peter Tufano 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.
High brand equity
– Basix Insurance has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Basix Insurance to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Basix Insurance in the sector have low bargaining power. BASIX has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Basix Insurance to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Basix Insurance is present in almost all the verticals within the industry. This has provided firm in BASIX 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
– Basix Insurance is one of the most innovative firm in sector. Manager in BASIX Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Basix Insurance has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in BASIX 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.
Strong track record of project management
– Basix Insurance is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Basix Insurance 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 BASIX 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 Basix Insurance digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Basix Insurance 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.
Weaknesses BASIX | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of BASIX are -
Slow decision making process
– As mentioned earlier in the report, Basix Insurance 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. Basix Insurance 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the BASIX HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Basix Insurance has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study BASIX, it seems that the employees of Basix Insurance 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.
Slow to strategic competitive environment developments
– As BASIX HBR case study mentions - Basix Insurance 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.
Interest costs
– Compare to the competition, Basix Insurance 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.
Need for greater diversity
– Basix Insurance 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 cash cycle compare to competitors
Basix Insurance 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.
No frontier risks strategy
– After analyzing the HBR case study BASIX, 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.
Low market penetration in new markets
– Outside its home market of Basix Insurance, firm in the HBR case study BASIX needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Basix Insurance 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.
Increasing silos among functional specialists
– The organizational structure of Basix Insurance is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Basix Insurance needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Basix Insurance to focus more on services rather than just following the product oriented approach.
Opportunities BASIX | 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 BASIX 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 Basix Insurance in the consumer business. Now Basix Insurance can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Basix Insurance can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. BASIX 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.
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 Basix Insurance 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Basix Insurance 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 Basix Insurance to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Basix Insurance 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, Basix Insurance 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, BASIX, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Basix Insurance 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 BASIX - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Basix Insurance to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Basix Insurance 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.
Loyalty marketing
– Basix Insurance 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.
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. Basix Insurance 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. Basix Insurance 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.
Manufacturing automation
– Basix Insurance 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.
Building a culture of innovation
– managers at Basix Insurance 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.
Better consumer reach
– The expansion of the 5G network will help Basix Insurance to increase its market reach. Basix Insurance 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.
Threats BASIX External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study BASIX 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 Basix Insurance business can come under increasing regulations regarding data privacy, data security, etc.
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. Basix Insurance 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.
Regulatory challenges
– Basix Insurance 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.
Environmental challenges
– Basix Insurance 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. Basix Insurance 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 Basix Insurance in the Finance & Accounting sector and impact the bottomline of the organization.
Consumer confidence and its impact on Basix Insurance 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.
Shortening product life cycle
– it is one of the major threat that Basix Insurance is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Basix Insurance 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 BASIX .
Increasing wage structure of Basix Insurance
– 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 Basix Insurance.
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.
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. Basix Insurance needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Basix Insurance has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Basix Insurance 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.
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. Basix Insurance 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 BASIX 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 BASIX 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 BASIX 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 BASIX 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 BASIX 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 Basix Insurance needs to make to build a sustainable competitive advantage.
