Case Study Description of Financial Services at Falabella (A)
In 2010, the board and senior management team of Falabella, a leading retailer with operations throughout Latin America, faced choices about what to do with its financial services division. More than 4.5 million customers had CMR credit cards that could be used in Falabella stores, and Banco Falabella competed with other banks by offering personal banking services. The case covers many of the key questions the leaders of the firm faced, including whether to allow credit card holders to use their cards for purchases outside of Falabella stores, whether to develop personal banking services further, and whether to make substantial changes to the strategy or to exit the business.
Swot Analysis of "Financial Services at Falabella (A)" written by C. Fritz Foley, Agustin M. Hurtado includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Falabella Cards facing as an external strategic factors. Some of the topics covered in Financial Services at Falabella (A) case study are - Strategic Management Strategies, Economics, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Financial Services at Falabella (A) casestudy better are - – supply chains are disrupted by pandemic , increasing energy prices, there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies,
wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Financial Services at Falabella (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Financial Services at Falabella (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Falabella Cards, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Falabella Cards 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 Financial Services at Falabella (A) can be done for the following purposes –
1. Strategic planning using facts provided in Financial Services at Falabella (A) case study
2. Improving business portfolio management of Falabella Cards
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 Falabella Cards
Strengths Financial Services at Falabella (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Falabella Cards in Financial Services at Falabella (A) Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Financial Services at Falabella (A) 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Financial Services at Falabella (A) firm has clearly differentiated products in the market place. This has enabled Falabella Cards to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Falabella Cards to invest into research and development (R&D) and innovation.
Learning organization
- Falabella Cards 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 Falabella Cards is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Financial Services at Falabella (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Falabella Cards 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.
Innovation driven organization
– Falabella Cards is one of the most innovative firm in sector. Manager in Financial Services at Falabella (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Falabella Cards has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Falabella Cards to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Falabella Cards 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 Financial Services at Falabella (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Falabella Cards in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Finance & Accounting field
– Falabella Cards 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 Falabella Cards in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Falabella Cards 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.
Training and development
– Falabella Cards has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Financial Services at Falabella (A) 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 Falabella Cards digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Falabella Cards 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 Financial Services at Falabella (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Financial Services at Falabella (A) are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Financial Services at Falabella (A) 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 Falabella Cards has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Falabella Cards has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Falabella Cards is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Financial Services at Falabella (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Falabella Cards 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.
High cash cycle compare to competitors
Falabella Cards 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 Falabella Cards supply chain. Even after few cautionary changes mentioned in the HBR case study - Financial Services at Falabella (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Falabella Cards vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study Financial Services at Falabella (A), 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Financial Services at Falabella (A), in the dynamic environment Falabella Cards has struggled to respond to the nimble upstart competition. Falabella Cards has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Falabella Cards is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Falabella Cards needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Falabella Cards to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Financial Services at Falabella (A), it seems that the employees of Falabella Cards 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.
Capital Spending Reduction
– Even during the low interest decade, Falabella Cards 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.
Opportunities Financial Services at Falabella (A) | 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 Financial Services at Falabella (A) are -
Learning at scale
– Online learning technologies has now opened space for Falabella Cards 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Falabella Cards 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, Financial Services at Falabella (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Falabella Cards can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Falabella Cards is facing challenges because of the dominance of functional experts in the organization. Financial Services at Falabella (A) 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.
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. Falabella Cards 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. Falabella Cards 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
– Falabella Cards 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Falabella Cards 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 Falabella Cards to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Falabella Cards 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.
Creating value in data economy
– The success of analytics program of Falabella Cards has opened avenues for new revenue streams for the organization in the industry. This can help Falabella Cards to build a more holistic ecosystem as suggested in the Financial Services at Falabella (A) case study. Falabella Cards can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Falabella Cards can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Falabella Cards can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Financial Services at Falabella (A) 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.
Developing new processes and practices
– Falabella Cards 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.
Leveraging digital technologies
– Falabella Cards 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.
Threats Financial Services at Falabella (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Financial Services at Falabella (A) are -
High dependence on third party suppliers
– Falabella Cards 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.
Technology acceleration in Forth Industrial Revolution
– Falabella Cards has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Falabella Cards 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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Falabella Cards 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.
Consumer confidence and its impact on Falabella Cards 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.
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 Falabella Cards in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Falabella Cards 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Financial Services at Falabella (A), Falabella Cards 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 .
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. Falabella Cards can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Falabella Cards
– 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 Falabella Cards.
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.
Environmental challenges
– Falabella Cards 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. Falabella Cards can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Falabella Cards needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Financial Services at Falabella (A) 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 Financial Services at Falabella (A) 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 Financial Services at Falabella (A) 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 Financial Services at Falabella (A) 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 Financial Services at Falabella (A) 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 Falabella Cards needs to make to build a sustainable competitive advantage.
