Fannie Mae (FNMA) SWOT Analysis / TOWS Matrix / MBA Resources
Consumer Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Fannie Mae (United States)
Based on various researches at Oak Spring University , Fannie Mae is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, technology disruption, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing energy prices,
increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Fannie Mae can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fannie Mae, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fannie Mae 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 Fannie Mae can be done for the following purposes –
1. Strategic planning of Fannie Mae
2. Improving business portfolio management of Fannie Mae
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 Fannie Mae
Strengths of Fannie Mae | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fannie Mae are -
High brand equity
– Fannie Mae has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Fannie Mae to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Fannie Mae 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 Fannie Mae have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Consumer Financial Services industry
– Fannie Mae has clearly differentiated products in the market place. This has enabled Fannie Mae to fetch slight price premium compare to the competitors in the Consumer Financial Services industry. The sustainable margins have also helped Fannie Mae to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Fannie Mae in Consumer Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Fannie Mae 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 Fannie Mae is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Fannie Mae emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Fannie Mae 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.
Organizational Resilience of Fannie Mae
– The covid-19 pandemic has put organizational resilience at the centre of everthing Fannie Mae does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Fannie Mae has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fannie Mae 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.
Ability to recruit top talent
– Fannie Mae 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.
Ability to lead change in Consumer Financial Services
– Fannie Mae 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 Fannie Mae in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy of Fannie Mae 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.
Analytics focus
– Fannie Mae 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.
Weaknesses of Fannie Mae | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fannie Mae are -
Employees’ less understanding of Fannie Mae strategy
– From the outside it seems that the employees of Fannie Mae 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.
High bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in United States, Fannie Mae is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Consumer Financial Services industry.
High dependence on Fannie Mae ‘s star products
– The top 2 products and services of Fannie Mae 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 Fannie Mae has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of United States, Fannie Mae needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Fannie Mae products
– To increase the profitability and margins on the products, Fannie Mae needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Fannie Mae 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.
Capital Spending Reduction
– Even during the low interest decade, Fannie Mae 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.
Aligning sales with marketing
– From the outside it seems that Fannie Mae 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 Fannie Mae can leverage the sales team experience to cultivate customer relationships as Fannie Mae is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Fannie Mae 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. Fannie Mae 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.
High operating costs
– Compare to the competitors, Fannie Mae 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 Fannie Mae lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Fannie Mae is dominated by functional specialists. It is not different from other players in the Consumer Financial Services industry, but Fannie Mae needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fannie Mae to focus more on services in the Consumer Financial Services industry rather than just following the product oriented approach.
Fannie Mae Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Fannie Mae are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fannie Mae 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.
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. Fannie Mae can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Fannie Mae 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Fannie Mae is facing challenges because of the dominance of functional experts in the organization. Fannie Mae 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.
Developing new processes and practices
– Fannie Mae 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fannie Mae 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 Fannie Mae to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fannie Mae 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 Fannie Mae to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Fannie Mae in the Consumer Financial Services industry. Now Fannie Mae can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Fannie Mae 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.
Using analytics as competitive advantage
– Fannie Mae 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 Fannie Mae to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fannie Mae to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Fannie Mae can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Fannie Mae can use these opportunities to build new business models that can help the communities that Fannie Mae operates in. Secondly it can use opportunities from government spending in Consumer Financial Services sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Fannie Mae can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Fannie Mae External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Fannie Mae are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Fannie Mae 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. Fannie Mae needs to understand the core reasons impacting the Consumer Financial Services industry. This will help it in building a better workplace.
Consumer confidence and its impact on Fannie Mae 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.
Increasing wage structure of Fannie Mae
– 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 Fannie Mae.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fannie Mae 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 Fannie Mae prominent markets.
Shortening product life cycle
– it is one of the major threat that Fannie Mae is facing in Consumer Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Regulatory challenges
– Fannie Mae 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.
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 Fannie Mae.
Stagnating economy with rate increase
– Fannie Mae 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.
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. Fannie Mae can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Fannie Mae has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, Fannie Mae 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.
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 Fannie Mae in the Consumer Financial Services sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Fannie Mae Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Fannie Mae 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 Fannie Mae 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 Fannie Mae 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 Fannie Mae 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 Fannie Mae needs to make to build a sustainable competitive advantage.