SWOT Analysis / TOWS Matrix for Credit Acceptance (United States)
Based on various researches at Oak Spring University , Credit Acceptance is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, central banks are concerned over increasing inflation,
increasing commodity prices, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Credit Acceptance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Credit Acceptance can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Credit Acceptance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Credit Acceptance 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 Credit Acceptance can be done for the following purposes –
1. Strategic planning of Credit Acceptance
2. Improving business portfolio management of Credit Acceptance
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 Credit Acceptance
Strengths of Credit Acceptance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Credit Acceptance are -
Ability to recruit top talent
– Credit Acceptance 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.
Low bargaining power of suppliers
– Suppliers of Credit Acceptance in the Financial sector have low bargaining power. Credit Acceptance has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Credit Acceptance to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Credit Acceptance 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
– Credit Acceptance is one of the most innovative firm in Consumer Financial Services sector.
Effective Research and Development (R&D)
– Credit Acceptance has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Credit Acceptance staying ahead in the Consumer 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
– Credit Acceptance has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Consumer Financial Services industry. Secondly the value chain collaborators of Credit Acceptance have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Credit Acceptance are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to lead change in Consumer Financial Services
– Credit Acceptance 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 Credit Acceptance 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 Consumer Financial Services industry
– Credit Acceptance has clearly differentiated products in the market place. This has enabled Credit Acceptance to fetch slight price premium compare to the competitors in the Consumer Financial Services industry. The sustainable margins have also helped Credit Acceptance to invest into research and development (R&D) and innovation.
High brand equity
– Credit Acceptance has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Credit Acceptance to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Credit Acceptance is present in almost all the verticals within the Consumer Financial Services industry. This has provided Credit Acceptance 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 Consumer Financial Services industry
- digital transformation varies from industry to industry. For Credit Acceptance digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Credit Acceptance 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.
Weaknesses of Credit Acceptance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Credit Acceptance are -
Slow to strategic competitive environment developments
– As Credit Acceptance 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.
Skills based hiring in Consumer Financial Services industry
– The stress on hiring functional specialists at Credit Acceptance 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.
High dependence on Credit Acceptance ‘s star products
– The top 2 products and services of Credit Acceptance 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 Credit Acceptance has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative at Credit Acceptance, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. Credit Acceptance has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Credit Acceptance is slow explore the new channels of communication. These new channels of communication can help Credit Acceptance 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.
Lack of clear differentiation of Credit Acceptance products
– To increase the profitability and margins on the products, Credit Acceptance needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Credit Acceptance has a high cash cycle compare to other players in the Consumer 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.
High bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in United States, Credit Acceptance 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.
No frontier risks strategy
– From the 10K / annual statement of Credit Acceptance, 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, Credit Acceptance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Credit Acceptance has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Consumer Financial Services industry over the last five years. Credit Acceptance 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.
Credit Acceptance Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Credit Acceptance are -
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 Credit Acceptance in the Consumer Financial Services industry. Now Credit Acceptance can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Credit Acceptance 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Credit Acceptance 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.
Learning at scale
– Online learning technologies has now opened space for Credit Acceptance 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Credit Acceptance is facing challenges because of the dominance of functional experts in the organization. Credit Acceptance 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.
Creating value in data economy
– The success of analytics program of Credit Acceptance has opened avenues for new revenue streams for the organization in Consumer Financial Services industry. This can help Credit Acceptance to build a more holistic ecosystem for Credit Acceptance products in the Consumer Financial Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Credit Acceptance 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Credit Acceptance 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Credit Acceptance can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Credit Acceptance to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Credit Acceptance 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.
Better consumer reach
– The expansion of the 5G network will help Credit Acceptance to increase its market reach. Credit Acceptance 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.
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. Credit Acceptance 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 Credit Acceptance can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Credit Acceptance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Credit Acceptance are -
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. Credit Acceptance can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Credit Acceptance 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Credit Acceptance 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 Credit Acceptance prominent markets.
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.
Environmental challenges
– Credit Acceptance 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. Credit Acceptance can take advantage of this fund but it will also bring new competitors in the Consumer Financial Services industry.
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 Credit Acceptance in the Consumer Financial Services sector and impact the bottomline of the organization.
Consumer confidence and its impact on Credit Acceptance 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Credit Acceptance may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Consumer Financial Services sector.
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. Credit Acceptance needs to understand the core reasons impacting the Consumer Financial Services industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Credit Acceptance is facing in Consumer Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Credit Acceptance has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, Credit Acceptance needs to keep up with the evolution of technology in the Consumer 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Consumer Financial Services industry are lowering. It can presents Credit Acceptance 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.
High dependence on third party suppliers
– Credit Acceptance 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 Credit Acceptance Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Credit Acceptance 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 Credit Acceptance 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 Credit Acceptance 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 Credit Acceptance 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 Credit Acceptance needs to make to build a sustainable competitive advantage.