Promise (A): Building a Consumer Finance Company in Japan SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Promise (A): Building a Consumer Finance Company in Japan
Describes Promise, the third-largest consumer finance company in Japan. Promise was created in 1963 by an entrepreneur and has grown rapidly, especially in the 1990s when commercial banks struggled. Promise's core business consists of providing unsecured loans of up to about $10,000 to individuals. The company has maintained an entrepreneurial culture despite its growth. At the time of the case (July 2000), Promise has around 2.2 million customers and is faced with increasing competition and several regulatory changes. Management must make a number of decisions going forward, including new sources of growth and financing, as well as a potential listing on a foreign stock exchange.
Swot Analysis of "Promise (A): Building a Consumer Finance Company in Japan" written by Walter Kuemmerle, William J. Coughlin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Promise Promise's facing as an external strategic factors. Some of the topics covered in Promise (A): Building a Consumer Finance Company in Japan case study are - Strategic Management Strategies, Entrepreneurial finance, Financial management and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Promise (A): Building a Consumer Finance Company in Japan casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, technology disruption, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization,
geopolitical disruptions, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Promise (A): Building a Consumer Finance Company in Japan
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Promise (A): Building a Consumer Finance Company in Japan case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Promise Promise's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Promise Promise's 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 Promise (A): Building a Consumer Finance Company in Japan can be done for the following purposes –
1. Strategic planning using facts provided in Promise (A): Building a Consumer Finance Company in Japan case study
2. Improving business portfolio management of Promise Promise's
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Promise Promise's
Strengths Promise (A): Building a Consumer Finance Company in Japan | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Promise Promise's in Promise (A): Building a Consumer Finance Company in Japan Harvard Business Review case study are -
High switching costs
– The high switching costs that Promise Promise's 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.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Promise Promise's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Promise Promise's 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.
Effective Research and Development (R&D)
– Promise Promise's 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 Promise (A): Building a Consumer Finance Company in Japan - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Promise Promise's 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 Promise Promise's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Promise (A): Building a Consumer Finance Company in Japan Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Promise Promise's 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 Promise (A): Building a Consumer Finance Company in Japan HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Promise Promise's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Promise Promise's is one of the most innovative firm in sector. Manager in Promise (A): Building a Consumer Finance Company in Japan Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Promise (A): Building a Consumer Finance Company in Japan firm has clearly differentiated products in the market place. This has enabled Promise Promise's to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Promise Promise's to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Promise (A): Building a Consumer Finance Company in Japan 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.
Low bargaining power of suppliers
– Suppliers of Promise Promise's in the sector have low bargaining power. Promise (A): Building a Consumer Finance Company in Japan has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Promise Promise's to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Promise Promise's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Promise Promise's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Promise Promise's is one of the leading recruiters in the industry. Managers in the Promise (A): Building a Consumer Finance Company in Japan are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Promise (A): Building a Consumer Finance Company in Japan | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Promise (A): Building a Consumer Finance Company in Japan are -
Increasing silos among functional specialists
– The organizational structure of Promise Promise's is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Promise Promise's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Promise Promise's to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Promise Promise's 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 - Promise (A): Building a Consumer Finance Company in Japan should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Promise Promise's products
– To increase the profitability and margins on the products, Promise Promise's needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Promise Promise's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Promise (A): Building a Consumer Finance Company in Japan can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– It come across in the case study Promise (A): Building a Consumer Finance Company in Japan 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 Promise (A): Building a Consumer Finance Company in Japan can leverage the sales team experience to cultivate customer relationships as Promise Promise's is planning to shift buying processes online.
Interest costs
– Compare to the competition, Promise Promise's has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Promise (A): Building a Consumer Finance Company in Japan, it seems that the employees of Promise Promise's 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, Promise Promise's 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Promise (A): Building a Consumer Finance Company in Japan, is just above the industry average. Promise Promise's 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.
No frontier risks strategy
– After analyzing the HBR case study Promise (A): Building a Consumer Finance Company in Japan, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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.
Low market penetration in new markets
– Outside its home market of Promise Promise's, firm in the HBR case study Promise (A): Building a Consumer Finance Company in Japan needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Promise (A): Building a Consumer Finance Company in Japan | 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 Promise (A): Building a Consumer Finance Company in Japan are -
Better consumer reach
– The expansion of the 5G network will help Promise Promise's to increase its market reach. Promise Promise's will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Promise Promise's 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. Promise Promise's 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Promise Promise's can use these opportunities to build new business models that can help the communities that Promise Promise's operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Loyalty marketing
– Promise Promise's has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Manufacturing automation
– Promise Promise's can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
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 Promise Promise's in the consumer business. Now Promise Promise's can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Promise Promise's 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.
Developing new processes and practices
– Promise Promise's can develop new processes and procedures in Innovation & Entrepreneurship 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.
Building a culture of innovation
– managers at Promise Promise's can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Innovation & Entrepreneurship segment.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Promise Promise's 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 Promise Promise's to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Promise Promise's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Promise Promise's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Promise Promise's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Promise (A): Building a Consumer Finance Company in Japan External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Promise (A): Building a Consumer Finance Company in Japan are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Promise (A): Building a Consumer Finance Company in Japan, Promise Promise's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
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 Promise Promise's 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 Promise Promise's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Promise Promise's 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Promise Promise's 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 Promise (A): Building a Consumer Finance Company in Japan .
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Promise Promise's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Promise Promise's in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
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 Promise Promise's in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Environmental challenges
– Promise Promise's 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. Promise Promise's can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
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.
Regulatory challenges
– Promise Promise's 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 Innovation & Entrepreneurship industry regulations.
Shortening product life cycle
– it is one of the major threat that Promise Promise's is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Promise Promise's 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.
Weighted SWOT Analysis of Promise (A): Building a Consumer Finance Company in Japan 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 Promise (A): Building a Consumer Finance Company in Japan 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 Promise (A): Building a Consumer Finance Company in Japan 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 Promise (A): Building a Consumer Finance Company in Japan 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 Promise (A): Building a Consumer Finance Company in Japan 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 Promise Promise's needs to make to build a sustainable competitive advantage.
