IDFC (IDFC) SWOT Analysis / TOWS Matrix / MBA Resources
Consumer Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for IDFC (India)
Based on various researches at Oak Spring University , IDFC is operating in a macro-environment that has been destablized by – increasing commodity prices, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion,
wage bills are increasing, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that IDFC can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the IDFC, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which IDFC 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 IDFC can be done for the following purposes –
1. Strategic planning of IDFC
2. Improving business portfolio management of IDFC
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 IDFC
Strengths of IDFC | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of IDFC are -
Sustainable margins compare to other players in Consumer Financial Services industry
– IDFC has clearly differentiated products in the market place. This has enabled IDFC to fetch slight price premium compare to the competitors in the Consumer Financial Services industry. The sustainable margins have also helped IDFC to invest into research and development (R&D) and innovation.
Analytics focus
– IDFC 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 Consumer Financial Services industry. The technology infrastructure of India is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy of IDFC comprises – understanding the underlying the factors in the Consumer Financial Services 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.
Superior customer experience
– The customer experience strategy of IDFC in Consumer Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that IDFC 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.
Effective Research and Development (R&D)
– IDFC has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – IDFC 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.
Digital Transformation in Consumer Financial Services industry
- digital transformation varies from industry to industry. For IDFC digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. IDFC 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.
Diverse revenue streams
– IDFC is present in almost all the verticals within the Consumer Financial Services industry. This has provided IDFC a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Learning organization
- IDFC 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 IDFC is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at IDFC emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– IDFC has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. IDFC 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.
High brand equity
– IDFC has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled IDFC to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– IDFC has one of the best training and development program in Financial industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses of IDFC | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of IDFC are -
Capital Spending Reduction
– Even during the low interest decade, IDFC 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.
Interest costs
– Compare to the competition, IDFC 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’ less understanding of IDFC strategy
– From the outside it seems that the employees of IDFC 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.
Low market penetration in new markets
– Outside its home market of India, IDFC needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, IDFC 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 IDFC lucrative customers.
Lack of clear differentiation of IDFC products
– To increase the profitability and margins on the products, IDFC needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
IDFC has a high cash cycle compare to other players in the Consumer Financial Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, IDFC is slow explore the new channels of communication. These new channels of communication can help IDFC 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.
Compensation and incentives
– The revenue per employee of IDFC is just above the Consumer Financial Services industry average. It 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.
Increasing silos among functional specialists
– The organizational structure of IDFC is dominated by functional specialists. It is not different from other players in the Consumer Financial Services industry, but IDFC needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help IDFC to focus more on services in the Consumer Financial Services industry rather than just following the product oriented approach.
High bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in India, IDFC 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.
IDFC Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of IDFC are -
Leveraging digital technologies
– IDFC 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, IDFC is facing challenges because of the dominance of functional experts in the organization. IDFC 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.
Buying journey improvements
– IDFC 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.
Building a culture of innovation
– managers at IDFC 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Consumer Financial Services industry, but it has also influenced the consumer preferences. IDFC can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects IDFC can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– IDFC can use the latest technology developments to improve its manufacturing and designing process in Consumer Financial Services sector. 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, IDFC 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 IDFC to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. IDFC can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, IDFC 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, IDFC can use these opportunities to build new business models that can help the communities that IDFC operates in. Secondly it can use opportunities from government spending in Consumer Financial Services sector.
Creating value in data economy
– The success of analytics program of IDFC has opened avenues for new revenue streams for the organization in Consumer Financial Services industry. This can help IDFC to build a more holistic ecosystem for IDFC products in the Consumer Financial Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for IDFC 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.
Threats IDFC External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of IDFC are -
Easy access to finance
– Easy access to finance in Consumer Financial Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. IDFC can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– IDFC 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 IDFC 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.
Consumer confidence and its impact on IDFC 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.
Stagnating economy with rate increase
– IDFC 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Consumer Financial Services industry are lowering. It can presents IDFC 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.
Increasing wage structure of IDFC
– 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 IDFC.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, IDFC 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 IDFC prominent markets.
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. IDFC needs to understand the core reasons impacting the Consumer Financial Services industry. This will help it in building a better workplace.
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 IDFC business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that IDFC is facing in Consumer Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. IDFC 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.
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.
Weighted SWOT Analysis of IDFC Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at IDFC 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 IDFC 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 IDFC 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 IDFC 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 IDFC needs to make to build a sustainable competitive advantage.