Home Capital Group (HCG) SWOT Analysis / TOWS Matrix / MBA Resources
Consumer Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Home Capital Group (Canada)
Based on various researches at Oak Spring University , Home Capital Group is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, increasing transportation and logistics costs, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings,
increasing commodity prices, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Home Capital Group
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Home Capital Group can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Home Capital Group, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Home Capital Group 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 Home Capital Group can be done for the following purposes –
1. Strategic planning of Home Capital Group
2. Improving business portfolio management of Home Capital Group
3. Assessing feasibility of the new initiative in Canada
4. Making a Consumer Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Home Capital Group
Strengths of Home Capital Group | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Home Capital Group are -
Strong track record of project management in the Consumer Financial Services industry
– Home Capital Group is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Home Capital Group is present in almost all the verticals within the Consumer Financial Services industry. This has provided Home Capital Group 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 Home Capital Group digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Home Capital Group 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.
Organizational Resilience of Home Capital Group
– The covid-19 pandemic has put organizational resilience at the centre of everthing Home Capital Group does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Home Capital Group 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 Home Capital Group is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Home Capital Group emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Consumer Financial Services industry
– Home Capital Group has clearly differentiated products in the market place. This has enabled Home Capital Group to fetch slight price premium compare to the competitors in the Consumer Financial Services industry. The sustainable margins have also helped Home Capital Group to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Home Capital Group is one of the leading players in the Consumer Financial Services industry in Canada. It is in a position to attract the best talent available in Canada. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy of Home Capital Group 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.
Effective Research and Development (R&D)
– Home Capital Group has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Home Capital Group 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.
High brand equity
– Home Capital Group has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Home Capital Group to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Home Capital Group 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 Home Capital Group are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses of Home Capital Group | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Home Capital Group are -
Products dominated business model
– Even though Home Capital Group 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. Home Capital Group should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Home Capital Group has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Workers concerns about automation
– As automation is fast increasing in the Consumer Financial Services industry, Home Capital Group 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.
Ability to respond to the competition
– As the decision making is very deliberative at Home Capital Group, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. Home Capital Group has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring in Consumer Financial Services industry
– The stress on hiring functional specialists at Home Capital Group 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.
Increasing silos among functional specialists
– The organizational structure of Home Capital Group is dominated by functional specialists. It is not different from other players in the Consumer Financial Services industry, but Home Capital Group needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Home Capital Group to focus more on services in the Consumer Financial Services industry rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee of Home Capital Group 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.
Lack of clear differentiation of Home Capital Group products
– To increase the profitability and margins on the products, Home Capital Group needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– From the outside it seems that Home Capital Group 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 Home Capital Group can leverage the sales team experience to cultivate customer relationships as Home Capital Group is planning to shift buying processes online.
High operating costs
– Compare to the competitors, Home Capital Group 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 Home Capital Group lucrative customers.
High cash cycle compare to competitors
Home Capital Group 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.
Home Capital Group Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Home Capital Group are -
Building a culture of innovation
– managers at Home Capital Group 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.
Using analytics as competitive advantage
– Home Capital Group 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 Home Capital Group to build a competitive advantage using analytics. The analytics driven competitive advantage can help Home Capital Group to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Home Capital Group can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Home Capital Group in the Consumer Financial Services industry. Now Home Capital Group can target international markets with far fewer capital restrictions requirements than the existing system.
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. Home Capital Group 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. Home Capital Group 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.
Learning at scale
– Online learning technologies has now opened space for Home Capital Group 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Home Capital Group 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 Home Capital Group to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Home Capital Group 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.
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 Home Capital Group 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Home Capital Group can use these opportunities to build new business models that can help the communities that Home Capital Group operates in. Secondly it can use opportunities from government spending in Consumer Financial Services sector.
Developing new processes and practices
– Home Capital Group 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.
Better consumer reach
– The expansion of the 5G network will help Home Capital Group to increase its market reach. Home Capital Group 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.
Manufacturing automation
– Home Capital Group 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.
Threats Home Capital Group External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Home Capital Group are -
High dependence on third party suppliers
– Home Capital Group high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Home Capital Group business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Home Capital Group has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, Home Capital Group 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.
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. Home Capital Group can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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. Home Capital Group needs to understand the core reasons impacting the Consumer Financial Services industry. This will help it in building a better workplace.
Increasing wage structure of Home Capital Group
– 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 Home Capital Group.
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 Home Capital Group.
Shortening product life cycle
– it is one of the major threat that Home Capital Group is facing in Consumer Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Home Capital Group 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Consumer Financial Services industry are lowering. It can presents Home Capital Group 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Home Capital Group 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 Home Capital Group prominent markets.
Weighted SWOT Analysis of Home Capital Group Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Home Capital Group 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 Home Capital Group 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 Home Capital Group 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 Home Capital Group 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 Home Capital Group needs to make to build a sustainable competitive advantage.