Plus500 (PLUSP) SWOT Analysis / TOWS Matrix / MBA Resources
Investment Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Plus500 (United Kingdom)
Based on various researches at Oak Spring University , Plus500 is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, increasing commodity prices, increasing transportation and logistics costs, geopolitical disruptions,
cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Plus500 can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Plus500, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Plus500 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 Plus500 can be done for the following purposes –
1. Strategic planning of Plus500
2. Improving business portfolio management of Plus500
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 Plus500
Strengths of Plus500 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Plus500 are -
Diverse revenue streams
– Plus500 is present in almost all the verticals within the Investment Services industry. This has provided Plus500 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.
Innovation driven organization
– Plus500 is one of the most innovative firm in Investment Services sector.
Operational resilience
– The operational resilience strategy of Plus500 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.
Cross disciplinary teams
– Horizontal connected teams at the Plus500 are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to recruit top talent
– Plus500 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.
Sustainable margins compare to other players in Investment Services industry
– Plus500 has clearly differentiated products in the market place. This has enabled Plus500 to fetch slight price premium compare to the competitors in the Investment Services industry. The sustainable margins have also helped Plus500 to invest into research and development (R&D) and innovation.
High brand equity
– Plus500 has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Plus500 to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Plus500 has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Plus500 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.
Training and development
– Plus500 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.
Organizational Resilience of Plus500
– The covid-19 pandemic has put organizational resilience at the centre of everthing Plus500 does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Plus500 in Investment Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Plus500 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 Plus500 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Plus500 emphasize – knowledge, initiative, and innovation.
Weaknesses of Plus500 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Plus500 are -
No frontier risks strategy
– From the 10K / annual statement of Plus500, 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.
Increasing silos among functional specialists
– The organizational structure of Plus500 is dominated by functional specialists. It is not different from other players in the Investment Services industry, but Plus500 needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Plus500 to focus more on services in the Investment Services industry rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, Plus500 has high operating costs in the Investment Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Plus500 lucrative customers.
High cash cycle compare to competitors
Plus500 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.
Slow decision making process
– As mentioned earlier in the report, Plus500 has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Investment Services industry over the last five years. Plus500 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.
Low market penetration in new markets
– Outside its home market of United Kingdom, Plus500 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Plus500 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.
Slow to strategic competitive environment developments
– As Plus500 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 Plus500, in the dynamic environment of Investment Services industry it has struggled to respond to the nimble upstart competition. Plus500 has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Plus500 products
– To increase the profitability and margins on the products, Plus500 needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of Plus500 strategy
– From the outside it seems that the employees of Plus500 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.
Plus500 Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Plus500 are -
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. Plus500 can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Plus500 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 Plus500 to build a competitive advantage using analytics. The analytics driven competitive advantage can help Plus500 to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Plus500 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.
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. Plus500 can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Plus500 has opened avenues for new revenue streams for the organization in Investment Services industry. This can help Plus500 to build a more holistic ecosystem for Plus500 products in the Investment Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Plus500 in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Investment Services industry, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, Plus500 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Plus500 is facing challenges because of the dominance of functional experts in the organization. Plus500 can utilize new technology in the field of Investment Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Leveraging digital technologies
– Plus500 can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Plus500 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Plus500 can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Plus500 can develop new processes and procedures in Investment Services industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Plus500 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 Plus500 to hire the very best people irrespective of their geographical location.
Threats Plus500 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Plus500 are -
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. Plus500 needs to understand the core reasons impacting the Investment Services industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Plus500 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.
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 Plus500.
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 Plus500 business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Plus500 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 Investment Services industry and other sectors.
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 Plus500 in the Investment Services sector and impact the bottomline of the organization.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Plus500 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.
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. Plus500 can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Plus500 has witnessed rapid integration of technology during Covid-19 in the Investment Services industry. As one of the leading players in the industry, Plus500 needs to keep up with the evolution of technology in the Investment 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.
Increasing wage structure of Plus500
– 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 Plus500.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Plus500 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 Plus500 prominent markets.
Environmental challenges
– Plus500 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. Plus500 can take advantage of this fund but it will also bring new competitors in the Investment Services industry.
Weighted SWOT Analysis of Plus500 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Plus500 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 Plus500 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 Plus500 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 Plus500 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 Plus500 needs to make to build a sustainable competitive advantage.