Merchants (MRCH) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Merchants (United Kingdom)
Based on various researches at Oak Spring University , Merchants is operating in a macro-environment that has been destablized by – increasing energy prices, increasing commodity prices, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, talent flight as more people leaving formal jobs,
supply chains are disrupted by pandemic , geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Merchants can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Merchants, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Merchants 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 Merchants can be done for the following purposes –
1. Strategic planning of Merchants
2. Improving business portfolio management of Merchants
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Misc. Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Merchants
Strengths of Merchants | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Merchants are -
Diverse revenue streams
– Merchants is present in almost all the verticals within the Misc. Financial Services industry. This has provided Merchants 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.
Digital Transformation in Misc. Financial Services industry
- digital transformation varies from industry to industry. For Merchants digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Merchants 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.
High brand equity
– Merchants has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Merchants to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Merchants in the Financial sector have low bargaining power. Merchants has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Merchants to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Merchants 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.
Analytics focus
– Merchants 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 Misc. Financial 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.
Sustainable margins compare to other players in Misc. Financial Services industry
– Merchants has clearly differentiated products in the market place. This has enabled Merchants to fetch slight price premium compare to the competitors in the Misc. Financial Services industry. The sustainable margins have also helped Merchants to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Merchants has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Merchants staying ahead in the Misc. Financial Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Merchants has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Misc. Financial Services industry. Secondly the value chain collaborators of Merchants have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Merchants
– The covid-19 pandemic has put organizational resilience at the centre of everthing Merchants does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Merchants 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 Merchants is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Merchants emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Merchants 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.
Weaknesses of Merchants | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Merchants are -
High bargaining power of channel partners in Misc. Financial Services industry
– because of the regulatory requirements in United Kingdom, Merchants 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 Misc. Financial Services industry.
Capital Spending Reduction
– Even during the low interest decade, Merchants 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 Misc. Financial Services industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Merchants is dominated by functional specialists. It is not different from other players in the Misc. Financial Services industry, but Merchants needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Merchants to focus more on services in the Misc. Financial Services industry rather than just following the product oriented approach.
Products dominated business model
– Even though Merchants has some of the most successful models in the Misc. Financial Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Merchants should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Merchants has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Misc. Financial Services industry over the last five years. Merchants 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, Merchants 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 Misc. Financial Services industry, Merchants 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 dependence on Merchants ‘s star products
– The top 2 products and services of Merchants still accounts for major business revenue. This dependence on star products in Misc. Financial Services industry has resulted into insufficient focus on developing new products, even though Merchants has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of Merchants, it seems that company is thinking out the frontier risks that can impact Misc. Financial 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.
Lack of clear differentiation of Merchants products
– To increase the profitability and margins on the products, Merchants needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring in Misc. Financial Services industry
– The stress on hiring functional specialists at Merchants 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.
Merchants Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Merchants are -
Leveraging digital technologies
– Merchants 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Merchants 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.
Loyalty marketing
– Merchants has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Developing new processes and practices
– Merchants can develop new processes and procedures in Misc. Financial 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.
Learning at scale
– Online learning technologies has now opened space for Merchants 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Merchants can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Misc. Financial Services industry, but it has also influenced the consumer preferences. Merchants can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Merchants to increase its market reach. Merchants 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.
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 Merchants 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.
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. Merchants can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Merchants 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 Misc. Financial Services industry.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Merchants in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Misc. Financial Services industry, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions in Misc. Financial Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Merchants in the Misc. Financial Services industry. Now Merchants can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Merchants External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Merchants are -
High dependence on third party suppliers
– Merchants 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.
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 Merchants business can come under increasing regulations regarding data privacy, data security, 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. Merchants 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.
Shortening product life cycle
– it is one of the major threat that Merchants is facing in Misc. Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Misc. Financial Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Merchants can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Merchants in the Misc. Financial Services sector and impact the bottomline of the organization.
Consumer confidence and its impact on Merchants 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 Misc. Financial Services industry and other sectors.
Environmental challenges
– Merchants 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. Merchants can take advantage of this fund but it will also bring new competitors in the Misc. Financial Services industry.
Technology acceleration in Forth Industrial Revolution
– Merchants has witnessed rapid integration of technology during Covid-19 in the Misc. Financial Services industry. As one of the leading players in the industry, Merchants needs to keep up with the evolution of technology in the Misc. 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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Merchants 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 Merchants prominent markets.
Stagnating economy with rate increase
– Merchants 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 Misc. Financial Services industry.
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.
Weighted SWOT Analysis of Merchants Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Merchants 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 Merchants 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 Merchants 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 Merchants 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 Merchants needs to make to build a sustainable competitive advantage.