In November 2015, Square, Inc. launched its initial public offering (IPO). The IPO had an offering price of $9 per share, lower than the $11 to $13 estimate that had been outlined in the preliminary prospectus and 42% below the $15.50 share price in its most recent financing less than a year before. The lower than anticipated pricing of Square's IPO, and the implied valuation, had left investors and market observers wondering if this was an indication of a valuation bubble, or a shift in the market. The case provides an overview of the IPO process, and examines U.S. IPO trends from the 1980s to mid-2010s. It explores the rationales behind an increasing number of $billion + private valuations, known as 'unicorns', and explores who the winners and losers are when such firms go public at lower valuations.
Authors :: Ramana Nanda, Robert White, Lauren G. Pickle
Swot Analysis of "Square, Inc. IPO" written by Ramana Nanda, Robert White, Lauren G. Pickle includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ipo Valuations facing as an external strategic factors. Some of the topics covered in Square, Inc. IPO case study are - Strategic Management Strategies, Financial markets, IPO, Venture capital and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Square, Inc. IPO casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, increasing transportation and logistics costs, increasing commodity prices, geopolitical disruptions, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies,
digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Square, Inc. IPO case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ipo Valuations, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ipo Valuations 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 Square, Inc. IPO can be done for the following purposes –
1. Strategic planning using facts provided in Square, Inc. IPO case study
2. Improving business portfolio management of Ipo Valuations
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 Ipo Valuations
Strengths Square, Inc. IPO | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ipo Valuations in Square, Inc. IPO Harvard Business Review case study are -
Innovation driven organization
– Ipo Valuations is one of the most innovative firm in sector. Manager in Square, Inc. IPO Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Ipo Valuations
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ipo Valuations does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Ipo Valuations 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.
Low bargaining power of suppliers
– Suppliers of Ipo Valuations in the sector have low bargaining power. Square, Inc. IPO has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ipo Valuations to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Ipo Valuations has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ipo Valuations to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Finance & Accounting field
– Ipo Valuations 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 Ipo Valuations in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Ipo Valuations is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Ipo Valuations has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Square, Inc. IPO 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 Ipo Valuations digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ipo Valuations 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.
High switching costs
– The high switching costs that Ipo Valuations 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
- Ipo Valuations 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 Ipo Valuations is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Square, Inc. IPO Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Ipo Valuations 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 Square, Inc. IPO - 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 Square, Inc. IPO | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Square, Inc. IPO are -
Interest costs
– Compare to the competition, Ipo Valuations 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Square, Inc. IPO, it seems that the employees of Ipo Valuations 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 harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ipo Valuations is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Square, Inc. IPO can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
Ipo Valuations 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.
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 Ipo Valuations supply chain. Even after few cautionary changes mentioned in the HBR case study - Square, Inc. IPO, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ipo Valuations vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Ipo Valuations, firm in the HBR case study Square, Inc. IPO needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Ipo Valuations products
– To increase the profitability and margins on the products, Ipo Valuations needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Ramana Nanda, Robert White, Lauren G. Pickle suggests that, Ipo Valuations 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.
Products dominated business model
– Even though Ipo Valuations 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 - Square, Inc. IPO should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Square, Inc. IPO HBR case study mentions - Ipo Valuations 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Square, Inc. IPO, in the dynamic environment Ipo Valuations has struggled to respond to the nimble upstart competition. Ipo Valuations has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Square, Inc. IPO | 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 Square, Inc. IPO are -
Developing new processes and practices
– Ipo Valuations can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Better consumer reach
– The expansion of the 5G network will help Ipo Valuations to increase its market reach. Ipo Valuations 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.
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. Ipo Valuations 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. Ipo Valuations 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Ipo Valuations is facing challenges because of the dominance of functional experts in the organization. Square, Inc. IPO 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ipo Valuations 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
– Ipo Valuations 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.
Manufacturing automation
– Ipo Valuations 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ipo Valuations 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, Ipo Valuations 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.
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. Ipo Valuations can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Ipo Valuations has opened avenues for new revenue streams for the organization in the industry. This can help Ipo Valuations to build a more holistic ecosystem as suggested in the Square, Inc. IPO case study. Ipo Valuations can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ipo Valuations 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 Ipo Valuations to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Ipo Valuations can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Square, Inc. IPO External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Square, Inc. IPO are -
Regulatory challenges
– Ipo Valuations 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ipo Valuations 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.
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. Ipo Valuations 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.
High dependence on third party suppliers
– Ipo Valuations 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.
Environmental challenges
– Ipo Valuations 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. Ipo Valuations can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Ipo Valuations can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Ipo Valuations has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Ipo Valuations needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Ipo Valuations 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 Ipo Valuations business can come under increasing regulations regarding data privacy, data security, etc.
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.
Increasing wage structure of Ipo Valuations
– 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 Ipo Valuations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ipo Valuations with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Square, Inc. IPO, Ipo Valuations 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 .
Weighted SWOT Analysis of Square, Inc. IPO 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 Square, Inc. IPO 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 Square, Inc. IPO 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 Square, Inc. IPO 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 Square, Inc. IPO 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 Ipo Valuations needs to make to build a sustainable competitive advantage.