Case Study Description of H&R Block and "Everyday Financial Services"
H&R Block, the U.S. market leader in tax preparation services, must decide whether to offer financial services to its low-income clients. H&R Block is facing increased competition from branded and nonbranded tax preparers, and the number of returns prepared by the company has declined in recent years. The CEO, Mark Ernst, considers a proposal for Block to differentiate itself from these competitors by offering its low-income clients a range of financial services, including check cashing, money transfer, and savings products. Ernst must decide whether this new suite of services would be profitable for the company and determine its impact on Block's brand and how the company and the marketplace would receive it.
Swot Analysis of "H&R Block and "Everyday Financial Services"" written by Peter Tufano, Daniel Schneider includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Block Ernst facing as an external strategic factors. Some of the topics covered in H&R Block and "Everyday Financial Services" case study are - Strategic Management Strategies, Branding, Economic development, Strategy and Finance & Accounting.
Some of the macro environment factors that can be used to understand the H&R Block and "Everyday Financial Services" casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic ,
increasing commodity prices, technology disruption, etc
Introduction to SWOT Analysis of H&R Block and "Everyday Financial Services"
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in H&R Block and "Everyday Financial Services" case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Block Ernst, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Block Ernst 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 H&R Block and "Everyday Financial Services" can be done for the following purposes –
1. Strategic planning using facts provided in H&R Block and "Everyday Financial Services" case study
2. Improving business portfolio management of Block Ernst
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 Block Ernst
Strengths H&R Block and "Everyday Financial Services" | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Block Ernst in H&R Block and "Everyday Financial Services" Harvard Business Review case study are -
Analytics focus
– Block Ernst 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 Peter Tufano, Daniel Schneider 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.
Sustainable margins compare to other players in Finance & Accounting industry
– H&R Block and "Everyday Financial Services" firm has clearly differentiated products in the market place. This has enabled Block Ernst to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Block Ernst to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Block Ernst in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Block Ernst 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 Finance & Accounting segment
- digital transformation varies from industry to industry. For Block Ernst digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Block Ernst 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.
Organizational Resilience of Block Ernst
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Block Ernst does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Block Ernst is one of the leading recruiters in the industry. Managers in the H&R Block and "Everyday Financial Services" are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Block Ernst has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Block Ernst to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Finance & Accounting field
– Block Ernst 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 Block Ernst in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Block Ernst 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 Block Ernst is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in H&R Block and "Everyday Financial Services" Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Block Ernst has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Block Ernst 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.
Effective Research and Development (R&D)
– Block Ernst 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 H&R Block and "Everyday Financial Services" - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses H&R Block and "Everyday Financial Services" | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of H&R Block and "Everyday Financial Services" are -
Lack of clear differentiation of Block Ernst products
– To increase the profitability and margins on the products, Block Ernst 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 Block Ernst supply chain. Even after few cautionary changes mentioned in the HBR case study - H&R Block and "Everyday Financial Services", it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Block Ernst vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Block Ernst 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study H&R Block and "Everyday Financial Services", it seems that the employees of Block Ernst 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.
Products dominated business model
– Even though Block Ernst 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 - H&R Block and "Everyday Financial Services" should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study H&R Block and "Everyday Financial Services", in the dynamic environment Block Ernst has struggled to respond to the nimble upstart competition. Block Ernst has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– After analyzing the HBR case study H&R Block and "Everyday Financial Services", 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the H&R Block and "Everyday Financial Services" 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 Block Ernst has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study H&R Block and "Everyday Financial Services" 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 H&R Block and "Everyday Financial Services" can leverage the sales team experience to cultivate customer relationships as Block Ernst is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Block Ernst is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Block Ernst needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Block Ernst to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Block Ernst has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Opportunities H&R Block and "Everyday Financial Services" | 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 H&R Block and "Everyday Financial Services" are -
Developing new processes and practices
– Block Ernst 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.
Manufacturing automation
– Block Ernst 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Block Ernst can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Block Ernst can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Block Ernst to increase its market reach. Block Ernst 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Block Ernst in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
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. Block Ernst can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Block Ernst 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 Block Ernst to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Block Ernst has opened avenues for new revenue streams for the organization in the industry. This can help Block Ernst to build a more holistic ecosystem as suggested in the H&R Block and "Everyday Financial Services" case study. Block Ernst can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Block Ernst 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 Finance & Accounting segment.
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 Block Ernst 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.
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 Block Ernst in the consumer business. Now Block Ernst can target international markets with far fewer capital restrictions requirements than the existing system.
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. Block Ernst 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. Block Ernst 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.
Threats H&R Block and "Everyday Financial Services" External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study H&R Block and "Everyday Financial Services" 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 Block Ernst in the Finance & Accounting sector and impact the bottomline of the organization.
Consumer confidence and its impact on Block Ernst 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study H&R Block and "Everyday Financial Services", Block Ernst 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 .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Block Ernst with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Block Ernst business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Block Ernst has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Block Ernst 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.
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. Block Ernst 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.
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.
Shortening product life cycle
– it is one of the major threat that Block Ernst is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Block Ernst
– 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 Block Ernst.
Environmental challenges
– Block Ernst 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. Block Ernst can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Stagnating economy with rate increase
– Block Ernst 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.
Weighted SWOT Analysis of H&R Block and "Everyday Financial Services" 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 H&R Block and "Everyday Financial Services" 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 H&R Block and "Everyday Financial Services" 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 H&R Block and "Everyday Financial Services" 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 H&R Block and "Everyday Financial Services" 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 Block Ernst needs to make to build a sustainable competitive advantage.