Alliance Data Systems (ADS) SWOT Analysis / TOWS Matrix / MBA Resources
Consumer Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Alliance Data Systems (United States)
Based on various researches at Oak Spring University , Alliance Data Systems is operating in a macro-environment that has been destablized by – geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, increasing energy prices,
increasing commodity prices, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Alliance Data Systems
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Alliance Data Systems can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Alliance Data Systems, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Alliance Data Systems 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 Alliance Data Systems can be done for the following purposes –
1. Strategic planning of Alliance Data Systems
2. Improving business portfolio management of Alliance Data Systems
3. Assessing feasibility of the new initiative in United States
4. Making a Consumer Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Alliance Data Systems
Strengths of Alliance Data Systems | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Alliance Data Systems are -
Organizational Resilience of Alliance Data Systems
– The covid-19 pandemic has put organizational resilience at the centre of everthing Alliance Data Systems does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of Alliance Data Systems 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 Alliance Data Systems in Consumer Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Consumer Financial Services industry
- digital transformation varies from industry to industry. For Alliance Data Systems digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Alliance Data Systems 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.
Learning organization
- Alliance Data Systems 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 Alliance Data Systems is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Alliance Data Systems emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Alliance Data Systems is present in almost all the verticals within the Consumer Financial Services industry. This has provided Alliance Data Systems 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.
Ability to recruit top talent
– Alliance Data Systems is one of the leading players in the Consumer Financial Services industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– Alliance Data Systems is one of the most innovative firm in Consumer Financial Services sector.
Analytics focus
– Alliance Data Systems 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 United States 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.
Ability to lead change in Consumer Financial Services
– Alliance Data Systems is one of the leading players in the Consumer Financial Services industry in United States. Over the years it has not only transformed the business landscape in the Consumer Financial Services industry in United States but also across the existing markets. The ability to lead change has enabled Alliance Data Systems in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Alliance Data Systems 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.
High brand equity
– Alliance Data Systems has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Alliance Data Systems to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Alliance Data Systems | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alliance Data Systems are -
Workers concerns about automation
– As automation is fast increasing in the Consumer Financial Services industry, Alliance Data Systems 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 bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in United States, Alliance Data Systems 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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Alliance Data Systems supply chain. Even after few cautionary changes, Alliance Data Systems is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Alliance Data Systems vulnerable to further global disruptions in South East Asia.
High dependence on Alliance Data Systems ‘s star products
– The top 2 products and services of Alliance Data Systems still accounts for major business revenue. This dependence on star products in Consumer Financial Services industry has resulted into insufficient focus on developing new products, even though Alliance Data Systems has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee of Alliance Data Systems 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.
Ability to respond to the competition
– As the decision making is very deliberative at Alliance Data Systems, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. Alliance Data Systems has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, Alliance Data Systems 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 Alliance Data Systems lucrative customers.
No frontier risks strategy
– From the 10K / annual statement of Alliance Data Systems, it seems that company is thinking out the frontier risks that can impact Consumer 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.
Low market penetration in new markets
– Outside its home market of United States, Alliance Data Systems needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Alliance Data Systems 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.
Skills based hiring in Consumer Financial Services industry
– The stress on hiring functional specialists at Alliance Data Systems 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.
Alliance Data Systems Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Alliance Data Systems are -
Building a culture of innovation
– managers at Alliance Data Systems 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.
Developing new processes and practices
– Alliance Data Systems can develop new processes and procedures in Consumer 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 Alliance Data Systems 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.
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 Alliance Data Systems in the Consumer Financial Services industry. Now Alliance Data Systems 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, Alliance Data Systems 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.
Better consumer reach
– The expansion of the 5G network will help Alliance Data Systems to increase its market reach. Alliance Data Systems 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Consumer Financial Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Alliance Data Systems 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. Alliance Data Systems 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.
Manufacturing automation
– Alliance Data Systems 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.
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. Alliance Data Systems can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Alliance Data Systems can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Alliance Data Systems 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Alliance Data Systems in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Consumer Financial Services industry, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Alliance Data Systems is facing challenges because of the dominance of functional experts in the organization. Alliance Data Systems 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.
Threats Alliance Data Systems External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Alliance Data Systems are -
Increasing wage structure of Alliance Data Systems
– 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 Alliance Data Systems.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Alliance Data Systems 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 Alliance Data Systems prominent markets.
Consumer confidence and its impact on Alliance Data Systems 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.
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.
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. Alliance Data Systems needs to understand the core reasons impacting the Consumer Financial Services industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Alliance Data Systems 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.
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 Alliance Data Systems in the Consumer Financial Services sector and impact the bottomline of the organization.
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.
Shortening product life cycle
– it is one of the major threat that Alliance Data Systems is facing in Consumer Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Alliance Data Systems 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Alliance Data Systems 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.
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. Alliance Data Systems 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.
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 Alliance Data Systems business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Alliance Data Systems Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Alliance Data Systems 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 Alliance Data Systems 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 Alliance Data Systems 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 Alliance Data Systems 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 Alliance Data Systems needs to make to build a sustainable competitive advantage.