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 – increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , geopolitical disruptions,
customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, 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 -
Low bargaining power of suppliers
– Suppliers of Alliance Data Systems in the Financial sector have low bargaining power. Alliance Data Systems has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Alliance Data Systems to manage not only supply disruptions but also source products at highly competitive prices.
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.
Strong track record of project management in the Consumer Financial Services industry
– Alliance Data Systems is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Successful track record of launching new products
– Alliance Data Systems has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Alliance Data Systems 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
– 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.
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.
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.
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.
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.
Innovation driven organization
– Alliance Data Systems is one of the most innovative firm in Consumer Financial Services sector.
Sustainable margins compare to other players in Consumer Financial Services industry
– Alliance Data Systems has clearly differentiated products in the market place. This has enabled Alliance Data Systems to fetch slight price premium compare to the competitors in the Consumer Financial Services industry. The sustainable margins have also helped Alliance Data Systems to invest into research and development (R&D) and innovation.
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 -
Aligning sales with marketing
– From the outside it seems that Alliance Data Systems needs to have more collaboration between its sales team and marketing team. Sales professionals in the Consumer Financial Services industry have deep experience in developing customer relationships. Marketing department at Alliance Data Systems can leverage the sales team experience to cultivate customer relationships as Alliance Data Systems is planning to shift buying processes online.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Alliance Data Systems is slow explore the new channels of communication. These new channels of communication can help Alliance Data Systems 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.
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.
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.
Slow to strategic competitive environment developments
– As Alliance Data Systems is one of the leading players in the Consumer Financial Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Consumer Financial Services industry in last five years.
Need for greater diversity
– Alliance Data Systems has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Employees’ less understanding of Alliance Data Systems strategy
– From the outside it seems that the employees of Alliance Data Systems 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.
Products dominated business model
– Even though Alliance Data Systems has some of the most successful models in the Consumer Financial Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Alliance Data Systems should strive to include more intangible value offerings along with its core products and services.
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.
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 -
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.
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.
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.
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 Alliance Data Systems 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.
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.
Using analytics as competitive advantage
– Alliance Data Systems has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Consumer Financial Services sector. This continuous investment in analytics has enabled Alliance Data Systems to build a competitive advantage using analytics. The analytics driven competitive advantage can help Alliance Data Systems to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
Leveraging digital technologies
– Alliance Data Systems 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.
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. Alliance Data Systems can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
Buying journey improvements
– Alliance Data Systems 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.
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 -
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 Alliance Data Systems.
Regulatory challenges
– Alliance Data Systems 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.
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.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Consumer Financial Services industry are lowering. It can presents Alliance Data Systems 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.
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.
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. Alliance Data Systems can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Alliance Data Systems 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. Alliance Data Systems can take advantage of this fund but it will also bring new competitors in the Consumer Financial Services industry.
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.
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.
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.