Case Study Description of Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables
Commercial Financial Services (CFS) is a company that buys charged-off credit card receivables, securitizes them, and then attempts to collect on the receivables. The case deals with how the firm makes money and the limits of securitization as an efficient financing strategy.
Swot Analysis of "Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables" written by Kenneth A. Froot, Ivan Farman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Receivables Securitization facing as an external strategic factors. Some of the topics covered in Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables case study are - Strategic Management Strategies, Entrepreneurship, Financial management, Financial markets, Policy, Strategy execution and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , increasing energy prices, technology disruption,
digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, etc
Introduction to SWOT Analysis of Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Receivables Securitization, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Receivables Securitization 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 Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables can be done for the following purposes –
1. Strategic planning using facts provided in Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables case study
2. Improving business portfolio management of Receivables Securitization
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 Receivables Securitization
Strengths Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Receivables Securitization in Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables Harvard Business Review case study are -
Analytics focus
– Receivables Securitization 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 Kenneth A. Froot, Ivan Farman 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.
Highly skilled collaborators
– Receivables Securitization 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 Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Receivables Securitization has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Receivables Securitization to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Receivables Securitization 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 Receivables Securitization is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Receivables Securitization digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Receivables Securitization 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables firm has clearly differentiated products in the market place. This has enabled Receivables Securitization to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Receivables Securitization to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Receivables Securitization 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.
Superior customer experience
– The customer experience strategy of Receivables Securitization in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Finance & Accounting field
– Receivables Securitization 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 Receivables Securitization in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Receivables Securitization is one of the leading recruiters in the industry. Managers in the Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Receivables Securitization 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 Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Receivables Securitization 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.
Weaknesses Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables 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 Receivables Securitization has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Receivables Securitization is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Receivables Securitization 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. Receivables Securitization even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Receivables Securitization 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 Receivables Securitization 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 - Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, firm in the HBR case study Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Receivables Securitization 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Receivables Securitization 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Kenneth A. Froot, Ivan Farman suggests that, Receivables Securitization 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.
Need for greater diversity
– Receivables Securitization 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables, is just above the industry average. Receivables Securitization 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables, it seems that the employees of Receivables Securitization 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.
Opportunities Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables | 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 Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Receivables Securitization 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 Receivables Securitization to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Receivables Securitization is facing challenges because of the dominance of functional experts in the organization. Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Receivables Securitization 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.
Leveraging digital technologies
– Receivables Securitization 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
– Receivables Securitization can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables 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.
Building a culture of innovation
– managers at Receivables Securitization 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Receivables Securitization 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, Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Receivables Securitization can use these opportunities to build new business models that can help the communities that Receivables Securitization operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Receivables Securitization 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. Receivables Securitization 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.
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 Receivables Securitization 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 Receivables Securitization in the consumer business. Now Receivables Securitization can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Receivables Securitization 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.
Creating value in data economy
– The success of analytics program of Receivables Securitization has opened avenues for new revenue streams for the organization in the industry. This can help Receivables Securitization to build a more holistic ecosystem as suggested in the Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables case study. Receivables Securitization can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables are -
Regulatory challenges
– Receivables Securitization 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 Finance & Accounting industry regulations.
Stagnating economy with rate increase
– Receivables Securitization can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Receivables Securitization 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 Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Receivables Securitization with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Receivables Securitization
– 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 Receivables Securitization.
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 Receivables Securitization in the Finance & Accounting sector and impact the bottomline 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 Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables, Receivables Securitization 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 .
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. Receivables Securitization 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.
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 Receivables Securitization business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Receivables Securitization 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. Receivables Securitization can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Receivables Securitization needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Receivables Securitization 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.
Shortening product life cycle
– it is one of the major threat that Receivables Securitization is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables 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 Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables 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 Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables 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 Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables 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 Commercial Financial Services, Inc.: Securitization of Charged-off Credit Card Receivables 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 Receivables Securitization needs to make to build a sustainable competitive advantage.
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