Case Study Description of Santander Consumer Finance
To maximize their effectiveness, color cases should be printed in color.A Spanish company has to decide if they should expand into the fragmented European consumer finance market and has to make important organizational strategy decisions, in the midst of the world economic downturn that followed the 2007 US credit crunch. Since 2002, the consumer finance branch of the Spanish banking Grupo Santander, Santander Consumer Finance (SCF) had grown into one of the largest European consumer finance companies capturing the recent growth in Europe of the consumer finance market. Against a background of growing concern about the sustainability of household debt levels in Europe and the United States, in 2008 the new CEO, Magda Salarich FernA¡ndez de Valderrama, had to decide if this was the right time to expand or if instead she should focus on consolidation. She was also facing important organizational strategy decisions. Which functions should be left to national affiliates to decide, and which should be centralized at headquarters? What processes should be standardized, and which left to local initiatives?
Authors :: Gunnar Trumbull, Elena Corsi, Andrew Barron
Swot Analysis of "Santander Consumer Finance" written by Gunnar Trumbull, Elena Corsi, Andrew Barron includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Santander Finance facing as an external strategic factors. Some of the topics covered in Santander Consumer Finance case study are - Strategic Management Strategies, International business, Strategy and Global Business.
Some of the macro environment factors that can be used to understand the Santander Consumer Finance casestudy better are - – increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, technology disruption, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google,
geopolitical disruptions, increasing energy prices, etc
Introduction to SWOT Analysis of Santander Consumer Finance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Santander Consumer Finance case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Santander Finance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Santander Finance 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 Santander Consumer Finance can be done for the following purposes –
1. Strategic planning using facts provided in Santander Consumer Finance case study
2. Improving business portfolio management of Santander Finance
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Santander Finance
Strengths Santander Consumer Finance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Santander Finance in Santander Consumer Finance Harvard Business Review case study are -
High brand equity
– Santander Finance has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Santander Finance to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Santander Consumer Finance 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.
Innovation driven organization
– Santander Finance is one of the most innovative firm in sector. Manager in Santander Consumer Finance Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Santander Finance digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Santander Finance 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.
Analytics focus
– Santander Finance 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 Gunnar Trumbull, Elena Corsi, Andrew Barron 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)
– Santander Finance 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 Santander Consumer Finance - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Santander Finance has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Santander Finance has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High switching costs
– The high switching costs that Santander Finance 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.
Diverse revenue streams
– Santander Finance is present in almost all the verticals within the industry. This has provided firm in Santander Consumer Finance 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.
Low bargaining power of suppliers
– Suppliers of Santander Finance in the sector have low bargaining power. Santander Consumer Finance has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Santander Finance to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Santander Finance 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
- Santander Finance 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 Santander Finance is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Santander Consumer Finance Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Santander Consumer Finance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Santander Consumer Finance are -
Products dominated business model
– Even though Santander Finance 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 - Santander Consumer Finance should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Santander Finance is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Santander Consumer Finance can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Santander Finance products
– To increase the profitability and margins on the products, Santander Finance needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Santander Finance supply chain. Even after few cautionary changes mentioned in the HBR case study - Santander Consumer Finance, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Santander Finance vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the segment, Santander Finance 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 bargaining power of channel partners
– Because of the regulatory requirements, Gunnar Trumbull, Elena Corsi, Andrew Barron suggests that, Santander Finance 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.
High cash cycle compare to competitors
Santander Finance 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.
Slow decision making process
– As mentioned earlier in the report, Santander Finance has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Santander Finance even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Santander Finance 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 strategic competitive environment developments
– As Santander Consumer Finance HBR case study mentions - Santander Finance 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.
Aligning sales with marketing
– It come across in the case study Santander Consumer Finance 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 Santander Consumer Finance can leverage the sales team experience to cultivate customer relationships as Santander Finance is planning to shift buying processes online.
Opportunities Santander Consumer Finance | 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 Santander Consumer Finance are -
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. Santander Finance can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Santander Finance can use these opportunities to build new business models that can help the communities that Santander Finance operates in. Secondly it can use opportunities from government spending in Global Business sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Santander Finance is facing challenges because of the dominance of functional experts in the organization. Santander Consumer Finance 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.
Using analytics as competitive advantage
– Santander Finance has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Santander Consumer Finance - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Santander Finance to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Santander Finance 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. Santander Finance 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.
Learning at scale
– Online learning technologies has now opened space for Santander Finance 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Santander Finance 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
– Santander Finance can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Santander Consumer Finance 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.
Better consumer reach
– The expansion of the 5G network will help Santander Finance to increase its market reach. Santander Finance 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Santander Finance can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Santander Finance in the consumer business. Now Santander Finance can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Santander Finance 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, Santander Consumer Finance, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Santander Finance in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Threats Santander Consumer Finance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Santander Consumer Finance are -
Regulatory challenges
– Santander Finance 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 Global Business industry regulations.
Shortening product life cycle
– it is one of the major threat that Santander Finance is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Santander Finance 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
– Santander Finance 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.
Increasing wage structure of Santander Finance
– 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 Santander Finance.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Santander Consumer Finance, Santander Finance may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Consumer confidence and its impact on Santander Finance 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.
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. Santander Finance 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 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. Santander Finance needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
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.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Santander Finance can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Santander Finance with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Santander Finance 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 Santander Consumer Finance .
Weighted SWOT Analysis of Santander Consumer Finance 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 Santander Consumer Finance 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 Santander Consumer Finance 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 Santander Consumer Finance 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 Santander Consumer Finance 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 Santander Finance needs to make to build a sustainable competitive advantage.
