IG Group (IGG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for IG Group (United Kingdom)

Based on various researches at Oak Spring University , IG Group is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, wage bills are increasing, etc

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Introduction to SWOT Analysis of IG Group

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that IG Group can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the IG Group, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which IG Group 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of IG Group can be done for the following purposes –
1. Strategic planning of IG Group
2. Improving business portfolio management of IG Group
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Investment Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of IG Group

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Strengths of IG Group | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of IG Group are -

Operational resilience

– The operational resilience strategy of IG Group comprises – understanding the underlying the factors in the Investment 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.

Innovation driven organization

– IG Group is one of the most innovative firm in Investment Services sector.

Highly skilled collaborators

– IG Group has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Investment Services industry. Secondly the value chain collaborators of IG Group have helped the firm to develop new products and bring them quickly to the marketplace.

Cross disciplinary teams

– Horizontal connected teams at the IG Group 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.

Analytics focus

– IG Group 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 Investment Services industry. The technology infrastructure of United Kingdom 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.

Diverse revenue streams

– IG Group is present in almost all the verticals within the Investment Services industry. This has provided IG Group 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

- IG Group 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 IG Group is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at IG Group emphasize – knowledge, initiative, and innovation.

Superior customer experience

– The customer experience strategy of IG Group in Investment Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Effective Research and Development (R&D)

– IG Group has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – IG Group staying ahead in the Investment Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Ability to recruit top talent

– IG Group is one of the leading players in the Investment Services industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.

High brand equity

– IG Group has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled IG Group to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Organizational Resilience of IG Group

– The covid-19 pandemic has put organizational resilience at the centre of everthing IG Group does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

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Weaknesses of IG Group | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of IG Group are -

Low market penetration in new markets

– Outside its home market of United Kingdom, IG Group needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Slow to strategic competitive environment developments

– As IG Group is one of the leading players in the Investment Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Investment Services industry in last five years.

Ability to respond to the competition

– As the decision making is very deliberative at IG Group, in the dynamic environment of Investment Services industry it has struggled to respond to the nimble upstart competition. IG Group 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, IG Group 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 Investment Services industry using digital technology.

High bargaining power of channel partners in Investment Services industry

– because of the regulatory requirements in United Kingdom, IG Group 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 Investment Services industry.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, IG Group is slow explore the new channels of communication. These new channels of communication can help IG Group to provide better information regarding Investment Services products and services. It can also build an online community to further reach out to potential customers.

No frontier risks strategy

– From the 10K / annual statement of IG Group, it seems that company is thinking out the frontier risks that can impact Investment Services industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

High dependence on IG Group ‘s star products

– The top 2 products and services of IG Group still accounts for major business revenue. This dependence on star products in Investment Services industry has resulted into insufficient focus on developing new products, even though IG Group has relatively successful track record of launching new products.

Interest costs

– Compare to the competition, IG Group 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.

Workers concerns about automation

– As automation is fast increasing in the Investment Services industry, IG Group needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

High cash cycle compare to competitors

IG Group has a high cash cycle compare to other players in the Investment 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.

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IG Group Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of IG Group are -

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for IG Group 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 IG Group to hire the very best people irrespective of their geographical location.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Investment Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. IG Group 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. IG Group 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.

Learning at scale

– Online learning technologies has now opened space for IG Group 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, IG Group can use these opportunities to build new business models that can help the communities that IG Group operates in. Secondly it can use opportunities from government spending in Investment Services sector.

Building a culture of innovation

– managers at IG Group 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 Investment Services industry.

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 IG Group 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.

Buying journey improvements

– IG Group can improve the customer journey of consumers in the Investment 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.

Manufacturing automation

– IG Group can use the latest technology developments to improve its manufacturing and designing process in Investment 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, IG Group 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.

Using analytics as competitive advantage

– IG Group has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Investment Services sector. This continuous investment in analytics has enabled IG Group to build a competitive advantage using analytics. The analytics driven competitive advantage can help IG Group to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, IG Group 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 IG Group to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Investment Services industry, but it has also influenced the consumer preferences. IG Group can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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. IG Group can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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Threats IG Group External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of IG Group are -

Easy access to finance

– Easy access to finance in Investment Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. IG Group can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for IG Group in Investment Services industry. The Investment 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, IG Group may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Investment Services sector.

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.

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 IG Group in the Investment Services sector and impact the bottomline of the organization.

High dependence on third party suppliers

– IG Group 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 IG Group is facing in Investment Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, IG Group 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 IG Group prominent markets.

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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Investment Services industry are lowering. It can presents IG Group with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Investment Services sector.

Capital market disruption

– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of IG Group.

Stagnating economy with rate increase

– IG Group 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 Investment Services industry.

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. IG Group 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.

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Weighted SWOT Analysis of IG Group Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at IG Group 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 IG Group 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 IG Group 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 IG Group 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 IG Group needs to make to build a sustainable competitive advantage.

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