SWOT Analysis / TOWS Matrix for Aavas Financiers (India)
Based on various researches at Oak Spring University , Aavas Financiers is operating in a macro-environment that has been destablized by – increasing commodity prices, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing,
increasing transportation and logistics costs, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Aavas Financiers can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aavas Financiers, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aavas Financiers 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 Aavas Financiers can be done for the following purposes –
1. Strategic planning of Aavas Financiers
2. Improving business portfolio management of Aavas Financiers
3. Assessing feasibility of the new initiative in India
4. Making a Consumer Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Aavas Financiers
Strengths of Aavas Financiers | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aavas Financiers are -
Cross disciplinary teams
– Horizontal connected teams at the Aavas Financiers 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.
Sustainable margins compare to other players in Consumer Financial Services industry
– Aavas Financiers has clearly differentiated products in the market place. This has enabled Aavas Financiers to fetch slight price premium compare to the competitors in the Consumer Financial Services industry. The sustainable margins have also helped Aavas Financiers to invest into research and development (R&D) and innovation.
Organizational Resilience of Aavas Financiers
– The covid-19 pandemic has put organizational resilience at the centre of everthing Aavas Financiers does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Aavas Financiers has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aavas Financiers to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Aavas Financiers 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 Aavas Financiers is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Aavas Financiers emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Aavas Financiers in the Financial sector have low bargaining power. Aavas Financiers has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aavas Financiers to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Aavas Financiers has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Aavas Financiers 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.
Strong track record of project management in the Consumer Financial Services industry
– Aavas Financiers is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Aavas Financiers in Consumer Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Aavas Financiers has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Aavas Financiers staying ahead in the Consumer Financial Services 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 Aavas Financiers 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.
Innovation driven organization
– Aavas Financiers is one of the most innovative firm in Consumer Financial Services sector.
Weaknesses of Aavas Financiers | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Aavas Financiers are -
Lack of clear differentiation of Aavas Financiers products
– To increase the profitability and margins on the products, Aavas Financiers needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Aavas Financiers has some of the most successful models in the Consumer Financial Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Aavas Financiers should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Aavas Financiers 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Aavas Financiers is slow explore the new channels of communication. These new channels of communication can help Aavas Financiers to provide better information regarding Consumer Financial Services products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Aavas Financiers is one of the leading players in the Consumer Financial Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Consumer Financial Services industry in last five years.
High bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in India, Aavas Financiers 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 Consumer Financial Services industry.
Increasing silos among functional specialists
– The organizational structure of Aavas Financiers is dominated by functional specialists. It is not different from other players in the Consumer Financial Services industry, but Aavas Financiers needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aavas Financiers to focus more on services in the Consumer Financial Services industry rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative at Aavas Financiers, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. Aavas Financiers has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Aavas Financiers 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 Consumer Financial Services industry using digital technology.
Employees’ less understanding of Aavas Financiers strategy
– From the outside it seems that the employees of Aavas Financiers 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.
High operating costs
– Compare to the competitors, Aavas Financiers has high operating costs in the Consumer Financial Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Aavas Financiers lucrative customers.
Aavas Financiers Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Aavas Financiers are -
Creating value in data economy
– The success of analytics program of Aavas Financiers has opened avenues for new revenue streams for the organization in Consumer Financial Services industry. This can help Aavas Financiers to build a more holistic ecosystem for Aavas Financiers products in the Consumer Financial Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Aavas Financiers 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 Aavas Financiers to hire the very best people irrespective of their geographical location.
Use of Bitcoin and other crypto currencies for transactions in Consumer Financial Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Aavas Financiers in the Consumer Financial Services industry. Now Aavas Financiers can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aavas Financiers 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.
Buying journey improvements
– Aavas Financiers can improve the customer journey of consumers in the Consumer Financial Services industry by using analytics and artificial intelligence. It 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Aavas Financiers can use these opportunities to build new business models that can help the communities that Aavas Financiers operates in. Secondly it can use opportunities from government spending in Consumer Financial Services sector.
Learning at scale
– Online learning technologies has now opened space for Aavas Financiers 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aavas Financiers 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 Aavas Financiers to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Aavas Financiers to increase its market reach. Aavas Financiers 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.
Leveraging digital technologies
– Aavas Financiers 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aavas Financiers is facing challenges because of the dominance of functional experts in the organization. Aavas Financiers can utilize new technology in the field of Consumer Financial Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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 Aavas Financiers 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.
Building a culture of innovation
– managers at Aavas Financiers 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 Consumer Financial Services industry.
Threats Aavas Financiers External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Aavas Financiers are -
Stagnating economy with rate increase
– Aavas Financiers 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 Consumer Financial Services industry.
Regulatory challenges
– Aavas Financiers 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 Consumer Financial Services industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aavas Financiers in Consumer Financial Services industry. The Consumer Financial Services 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Consumer Financial Services industry are lowering. It can presents Aavas Financiers with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Consumer Financial Services sector.
Consumer confidence and its impact on Aavas Financiers 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 Consumer Financial Services industry and other sectors.
Increasing wage structure of Aavas Financiers
– 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 Aavas Financiers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Aavas Financiers may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Consumer Financial Services sector.
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.
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. Aavas Financiers 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.
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 Aavas Financiers in the Consumer Financial Services sector and impact the bottomline of the organization.
Environmental challenges
– Aavas Financiers 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. Aavas Financiers can take advantage of this fund but it will also bring new competitors in the Consumer Financial Services industry.
Technology acceleration in Forth Industrial Revolution
– Aavas Financiers has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, Aavas Financiers needs to keep up with the evolution of technology in the Consumer Financial Services 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.
Weighted SWOT Analysis of Aavas Financiers Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Aavas Financiers 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 Aavas Financiers 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 Aavas Financiers 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 Aavas Financiers 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 Aavas Financiers needs to make to build a sustainable competitive advantage.