Lending Club follows the path of founder and CEO Renaud Laplanche as he scales his successful P2P lending company both pre- and post-IPO. From debating with bankers on the proper valuation metrics for the company, to managing customer acquisition costs as the competitive landscape rapidly changes, the Lending Club case explores several key challenges that come with operating a fin-tech company at scale.
Swot Analysis of "Lending Club" written by Matthew Saucedo, Robert Siegel includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lending Club facing as an external strategic factors. Some of the topics covered in Lending Club case study are - Strategic Management Strategies, Technology and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Lending Club casestudy better are - – increasing energy prices, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption,
increasing commodity prices, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lending Club case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lending Club, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lending Club 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 Lending Club can be done for the following purposes –
1. Strategic planning using facts provided in Lending Club case study
2. Improving business portfolio management of Lending Club
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 Lending Club
Strengths Lending Club | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lending Club in Lending Club Harvard Business Review case study are -
High brand equity
– Lending Club has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lending Club to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Finance & Accounting industry
– Lending Club firm has clearly differentiated products in the market place. This has enabled Lending Club to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Lending Club to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Lending Club in the sector have low bargaining power. Lending Club has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lending Club to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Lending Club 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 Lending Club is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lending Club Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Lending Club is present in almost all the verticals within the industry. This has provided firm in Lending Club 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.
Operational resilience
– The operational resilience strategy in the Lending Club 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 Lending Club 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.
Analytics focus
– Lending Club 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 Matthew Saucedo, Robert Siegel can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Effective Research and Development (R&D)
– Lending Club 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 Lending Club - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Lending Club digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lending Club 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.
Strong track record of project management
– Lending Club is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Lending Club is one of the most innovative firm in sector. Manager in Lending Club Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Lending Club | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lending Club are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lending Club is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Lending Club 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 operating costs
– Compare to the competitors, firm in the HBR case study Lending Club 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 Lending Club 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Lending Club, firm in the HBR case study Lending Club needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Lending Club has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Lending Club supply chain. Even after few cautionary changes mentioned in the HBR case study - Lending Club, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lending Club vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Lending Club 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.
Interest costs
– Compare to the competition, Lending Club 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.
High cash cycle compare to competitors
Lending Club 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.
Aligning sales with marketing
– It come across in the case study Lending Club 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 Lending Club can leverage the sales team experience to cultivate customer relationships as Lending Club is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Lending Club 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.
No frontier risks strategy
– After analyzing the HBR case study Lending Club, 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.
Opportunities Lending Club | 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 Lending Club are -
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. Lending Club can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lending Club can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Lending Club to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Developing new processes and practices
– Lending Club 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.
Creating value in data economy
– The success of analytics program of Lending Club has opened avenues for new revenue streams for the organization in the industry. This can help Lending Club to build a more holistic ecosystem as suggested in the Lending Club case study. Lending Club can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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 Lending Club in the consumer business. Now Lending Club can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Lending Club 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.
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 Lending Club 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.
Buying journey improvements
– Lending Club can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Lending Club 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lending Club 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.
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. Lending Club can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lending Club 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lending Club can use these opportunities to build new business models that can help the communities that Lending Club operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Threats Lending Club External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lending Club are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lending Club 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.
Increasing wage structure of Lending Club
– 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 Lending Club.
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. Lending Club can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Lending Club 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
– Lending Club has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Lending Club 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.
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 Lending Club in the Finance & Accounting sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Lending Club 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.
Stagnating economy with rate increase
– Lending Club 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
– Lending Club 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. Lending Club can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lending Club 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 Lending Club .
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 Lending Club business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lending Club with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Weighted SWOT Analysis of Lending Club 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 Lending Club 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 Lending Club 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 Lending Club 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 Lending Club 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 Lending Club needs to make to build a sustainable competitive advantage.
