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 - – central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , increasing transportation and logistics costs, talent flight as more people leaving formal jobs, there is backlash against globalization, cloud computing is disrupting traditional business models, wage bills are increasing,
technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
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.
Innovation driven organization
– Block Ernst is one of the most innovative firm in sector. Manager in H&R Block and "Everyday Financial Services" Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– 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.
Strong track record of project management
– Block Ernst is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Block Ernst 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 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.
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.
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.
Low bargaining power of suppliers
– Suppliers of Block Ernst in the sector have low bargaining power. H&R Block and "Everyday Financial Services" has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Block Ernst to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the H&R Block and "Everyday Financial Services" 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.
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.
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.
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 -
Interest costs
– Compare to the competition, Block Ernst 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 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.
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.
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.
Slow to strategic competitive environment developments
– As H&R Block and "Everyday Financial Services" HBR case study mentions - Block Ernst 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.
High cash cycle compare to competitors
Block Ernst 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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Block Ernst is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study H&R Block and "Everyday Financial Services" can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study H&R Block and "Everyday Financial Services", is just above the industry average. Block Ernst 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 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.
Slow decision making process
– As mentioned earlier in the report, Block Ernst 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. Block Ernst 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.
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 -
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Block Ernst can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Leveraging digital technologies
– Block Ernst 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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Block Ernst can use these opportunities to build new business models that can help the communities that Block Ernst operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Block Ernst 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.
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.
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.
Loyalty marketing
– Block Ernst 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.
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 -
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.
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.
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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Block Ernst can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Block Ernst in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High dependence on third party suppliers
– Block Ernst 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.
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.
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.
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.