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 - – there is backlash against globalization, increasing energy prices, talent flight as more people leaving formal jobs, technology disruption, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, cloud computing is disrupting traditional business models,
challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, 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 -
Superior customer experience
– The customer experience strategy of Santander Finance in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Santander Finance
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Santander Finance does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Sustainable margins compare to other players in Global Business industry
– Santander Consumer Finance firm has clearly differentiated products in the market place. This has enabled Santander Finance to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Santander Finance to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Santander Finance 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.
Ability to lead change in Global Business field
– Santander Finance 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 Santander Finance in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Highly skilled collaborators
– Santander Finance has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Santander Consumer Finance HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
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 -
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.
Increasing silos among functional specialists
– The organizational structure of Santander Finance is dominated by functional specialists. It is not different from other players in the Global Business segment. Santander Finance needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Santander Finance to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Santander Finance 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.
Low market penetration in new markets
– Outside its home market of Santander Finance, firm in the HBR case study Santander Consumer Finance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Santander Consumer Finance 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 Santander Finance has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Santander Consumer Finance, is just above the industry average. Santander Finance needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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.
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 -
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.
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.
Loyalty marketing
– Santander Finance 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.
Leveraging digital technologies
– Santander Finance can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Buying journey improvements
– 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.
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.
Manufacturing automation
– Santander Finance can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
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.
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.
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.
Creating value in data economy
– The success of analytics program of Santander Finance has opened avenues for new revenue streams for the organization in the industry. This can help Santander Finance to build a more holistic ecosystem as suggested in the Santander Consumer Finance case study. Santander Finance can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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 Santander Finance 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.
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 -
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 Santander Finance in the Global Business sector and impact the bottomline of the organization.
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.
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Santander Finance in the Global Business industry. The Global Business 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. 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.
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.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Santander Finance has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Santander Finance needs to keep up with the evolution of technology in the Global Business 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.
Environmental challenges
– Santander Finance 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. Santander Finance can take advantage of this fund but it will also bring new competitors in the Global Business industry.
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.