Ares Capital (ARCC) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Ares Capital (United States)
Based on various researches at Oak Spring University , Ares Capital is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings,
increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Ares Capital can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ares Capital, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ares Capital 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 Ares Capital can be done for the following purposes –
1. Strategic planning of Ares Capital
2. Improving business portfolio management of Ares Capital
3. Assessing feasibility of the new initiative in United States
4. Making a Misc. Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ares Capital
Strengths of Ares Capital | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ares Capital are -
Superior customer experience
– The customer experience strategy of Ares Capital in Misc. Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Misc. Financial Services
– Ares Capital is one of the leading players in the Misc. Financial Services industry in United States. Over the years it has not only transformed the business landscape in the Misc. Financial Services industry in United States but also across the existing markets. The ability to lead change has enabled Ares Capital in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Misc. Financial Services industry
– Ares Capital has clearly differentiated products in the market place. This has enabled Ares Capital to fetch slight price premium compare to the competitors in the Misc. Financial Services industry. The sustainable margins have also helped Ares Capital to invest into research and development (R&D) and innovation.
Training and development
– Ares Capital 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.
Cross disciplinary teams
– Horizontal connected teams at the Ares Capital 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.
High switching costs
– The high switching costs that Ares Capital has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Innovation driven organization
– Ares Capital is one of the most innovative firm in Misc. Financial Services sector.
Organizational Resilience of Ares Capital
– The covid-19 pandemic has put organizational resilience at the centre of everthing Ares Capital does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Ares Capital 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 Ares Capital have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Ares Capital has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ares Capital to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Ares Capital is one of the leading players in the Misc. 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.
Operational resilience
– The operational resilience strategy of Ares Capital comprises – understanding the underlying the factors in the Misc. 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.
Weaknesses of Ares Capital | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Ares Capital are -
Workers concerns about automation
– As automation is fast increasing in the Misc. Financial Services industry, Ares Capital 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
Ares Capital has a high cash cycle compare to other players in the Misc. Financial 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.
Aligning sales with marketing
– From the outside it seems that Ares Capital needs to have more collaboration between its sales team and marketing team. Sales professionals in the Misc. Financial Services industry have deep experience in developing customer relationships. Marketing department at Ares Capital can leverage the sales team experience to cultivate customer relationships as Ares Capital is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Ares Capital 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.
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 Ares Capital supply chain. Even after few cautionary changes, Ares Capital is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ares Capital vulnerable to further global disruptions in South East Asia.
Skills based hiring in Misc. Financial Services industry
– The stress on hiring functional specialists at Ares Capital 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ares Capital is slow explore the new channels of communication. These new channels of communication can help Ares Capital to provide better information regarding Misc. Financial Services products and services. It can also build an online community to further reach out to potential customers.
High dependence on Ares Capital ‘s star products
– The top 2 products and services of Ares Capital 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 Ares Capital has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Ares Capital 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.
Increasing silos among functional specialists
– The organizational structure of Ares Capital is dominated by functional specialists. It is not different from other players in the Misc. Financial Services industry, but Ares Capital needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ares Capital to focus more on services in the Misc. Financial Services industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Ares Capital, 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.
Ares Capital Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Ares Capital are -
Leveraging digital technologies
– Ares Capital 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.
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. Ares Capital can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Ares Capital can use the latest technology developments to improve its manufacturing and designing process in Misc. 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.
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 Ares Capital in the Misc. Financial Services industry. Now Ares Capital can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Ares Capital to increase its market reach. Ares Capital 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.
Creating value in data economy
– The success of analytics program of Ares Capital has opened avenues for new revenue streams for the organization in Misc. Financial Services industry. This can help Ares Capital to build a more holistic ecosystem for Ares Capital products in the Misc. Financial Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Ares Capital 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.
Using analytics as competitive advantage
– Ares Capital has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Misc. Financial Services sector. This continuous investment in analytics has enabled Ares Capital to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ares Capital to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ares Capital 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 Ares Capital to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Ares Capital is facing challenges because of the dominance of functional experts in the organization. Ares Capital can utilize new technology in the field of Misc. Financial Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ares Capital 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Misc. Financial Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ares Capital 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. Ares Capital 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.
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 Ares Capital 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.
Threats Ares Capital External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Ares Capital are -
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. Ares Capital can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Ares Capital.
Technology acceleration in Forth Industrial Revolution
– Ares Capital has witnessed rapid integration of technology during Covid-19 in the Misc. Financial Services industry. As one of the leading players in the industry, Ares Capital 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.
Consumer confidence and its impact on Ares Capital 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.
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 Ares Capital business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Ares Capital may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Misc. Financial Services sector.
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. Ares Capital 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ares Capital 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 Ares Capital prominent markets.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Financial Services industry are lowering. It can presents Ares Capital with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Misc. Financial Services sector.
Increasing wage structure of Ares Capital
– 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 Ares Capital.
Shortening product life cycle
– it is one of the major threat that Ares Capital is facing in Misc. Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Ares Capital 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 Misc. Financial Services industry regulations.
Weighted SWOT Analysis of Ares Capital Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Ares Capital 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 Ares Capital 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 Ares Capital 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 Ares Capital 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 Ares Capital needs to make to build a sustainable competitive advantage.