New Century Financial Corporation (Abridged) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of New Century Financial Corporation (Abridged)
After years of rapid growth and stock price appreciation, New Century Financial Corporation, one of the largest subprime loan originators in the U.S., reported accounting problems in early 2007. The resulting liquidity crisis forced the company to file for Chapter 11 bankruptcy protection. According to the Bankruptcy Examiner assigned to investigate New Century, the company's troubles "were an early contributor to the subprime meltdown" which fueled a financial crisis in the U.S. and beyond. The case study examines New Century's business model and accounting practices and focuses on the role of management, audit committee, and external auditors in the problems at New Century based on the findings of the Bankruptcy Examiner.
Authors :: Krishna G. Palepu, Suraj Srinivasan, Ian Cornell
Swot Analysis of "New Century Financial Corporation (Abridged)" written by Krishna G. Palepu, Suraj Srinivasan, Ian Cornell includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Century Examiner facing as an external strategic factors. Some of the topics covered in New Century Financial Corporation (Abridged) case study are - Strategic Management Strategies, Boards, Financial analysis, Financial management, Financial markets and Finance & Accounting.
Some of the macro environment factors that can be used to understand the New Century Financial Corporation (Abridged) casestudy better are - – there is backlash against globalization, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, increasing energy prices, increasing government debt because of Covid-19 spendings,
central banks are concerned over increasing inflation, technology disruption, etc
Introduction to SWOT Analysis of New Century Financial Corporation (Abridged)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in New Century Financial Corporation (Abridged) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Century Examiner, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Century Examiner 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 New Century Financial Corporation (Abridged) can be done for the following purposes –
1. Strategic planning using facts provided in New Century Financial Corporation (Abridged) case study
2. Improving business portfolio management of Century Examiner
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 Century Examiner
Strengths New Century Financial Corporation (Abridged) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Century Examiner in New Century Financial Corporation (Abridged) Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the New Century Financial Corporation (Abridged) 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.
High switching costs
– The high switching costs that Century Examiner 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.
High brand equity
– Century Examiner has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Century Examiner to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Century Examiner 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.
Training and development
– Century Examiner has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in New Century Financial Corporation (Abridged) 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.
Organizational Resilience of Century Examiner
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Century Examiner does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Century Examiner in the sector have low bargaining power. New Century Financial Corporation (Abridged) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Century Examiner to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Century Examiner is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Century Examiner 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 Century Examiner is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in New Century Financial Corporation (Abridged) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Century Examiner 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 Krishna G. Palepu, Suraj Srinivasan, Ian Cornell 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.
Ability to lead change in Finance & Accounting field
– Century Examiner 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 Century Examiner in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Finance & Accounting industry
– New Century Financial Corporation (Abridged) firm has clearly differentiated products in the market place. This has enabled Century Examiner to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Century Examiner to invest into research and development (R&D) and innovation.
Weaknesses New Century Financial Corporation (Abridged) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of New Century Financial Corporation (Abridged) are -
Lack of clear differentiation of Century Examiner products
– To increase the profitability and margins on the products, Century Examiner needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As New Century Financial Corporation (Abridged) HBR case study mentions - Century Examiner 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.
Increasing silos among functional specialists
– The organizational structure of Century Examiner is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Century Examiner needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Century Examiner to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study New Century Financial Corporation (Abridged) 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 Century Examiner 's lucrative customers.
Need for greater diversity
– Century Examiner 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.
Aligning sales with marketing
– It come across in the case study New Century Financial Corporation (Abridged) 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 New Century Financial Corporation (Abridged) can leverage the sales team experience to cultivate customer relationships as Century Examiner is planning to shift buying processes online.
Skills based hiring
– The stress on hiring functional specialists at Century Examiner 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Century Examiner needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study New Century Financial Corporation (Abridged), in the dynamic environment Century Examiner has struggled to respond to the nimble upstart competition. Century Examiner has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Century Examiner is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study New Century Financial Corporation (Abridged) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of Century Examiner, firm in the HBR case study New Century Financial Corporation (Abridged) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities New Century Financial Corporation (Abridged) | 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 New Century Financial Corporation (Abridged) are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Century Examiner is facing challenges because of the dominance of functional experts in the organization. New Century Financial Corporation (Abridged) 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.
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 Century Examiner in the consumer business. Now Century Examiner can target international markets with far fewer capital restrictions requirements than the existing system.
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. Century Examiner 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. Century Examiner 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.
Better consumer reach
– The expansion of the 5G network will help Century Examiner to increase its market reach. Century Examiner 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.
Leveraging digital technologies
– Century Examiner 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.
Buying journey improvements
– Century Examiner can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. New Century Financial Corporation (Abridged) 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Century Examiner 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Century Examiner 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 Century Examiner to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Century Examiner can use these opportunities to build new business models that can help the communities that Century Examiner operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Century Examiner 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.
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 Century Examiner 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Century Examiner 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, New Century Financial Corporation (Abridged), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Century Examiner 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.
Threats New Century Financial Corporation (Abridged) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study New Century Financial Corporation (Abridged) are -
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Century Examiner 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 New Century Financial Corporation (Abridged) .
Increasing wage structure of Century Examiner
– 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 Century Examiner.
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 Century Examiner in the Finance & Accounting sector and impact the bottomline of the organization.
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. Century Examiner 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.
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 Century Examiner.
Technology acceleration in Forth Industrial Revolution
– Century Examiner has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Century Examiner 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study New Century Financial Corporation (Abridged), Century Examiner 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 .
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 Century Examiner is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Century Examiner can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Century Examiner 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.
Environmental challenges
– Century Examiner 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. Century Examiner can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Weighted SWOT Analysis of New Century Financial Corporation (Abridged) 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 New Century Financial Corporation (Abridged) 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 New Century Financial Corporation (Abridged) 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 New Century Financial Corporation (Abridged) 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 New Century Financial Corporation (Abridged) 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 Century Examiner needs to make to build a sustainable competitive advantage.