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 – challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, technology disruption, increasing government debt because of Covid-19 spendings,
central banks are concerned over increasing inflation, wage bills are increasing, 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 -
Effective Research and Development (R&D)
– Fannie Mae has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Fannie Mae 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.
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.
Innovation driven organization
– Fannie Mae is one of the most innovative firm in Consumer Financial Services sector.
Digital Transformation in Consumer Financial Services industry
- digital transformation varies from industry to industry. For Fannie Mae digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fannie Mae 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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Fannie Mae 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 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.
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.
Low bargaining power of suppliers
– Suppliers of Fannie Mae in the Financial sector have low bargaining power. Fannie Mae has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fannie Mae to manage not only supply disruptions but also source products at highly competitive prices.
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.
Training and development
– Fannie Mae 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.
Weaknesses of Fannie Mae | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fannie Mae are -
Need for greater diversity
– Fannie Mae has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
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.
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.
Interest costs
– Compare to the competition, Fannie Mae 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.
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.
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.
Products dominated business model
– Even though Fannie Mae 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. Fannie Mae should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee of Fannie Mae 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Fannie Mae is slow explore the new channels of communication. These new channels of communication can help Fannie Mae 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.
Ability to respond to the competition
– As the decision making is very deliberative at Fannie Mae, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. Fannie Mae has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Fannie Mae Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Fannie Mae 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 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.
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.
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.
Loyalty marketing
– Fannie Mae has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
Creating value in data economy
– The success of analytics program of Fannie Mae has opened avenues for new revenue streams for the organization in Consumer Financial Services industry. This can help Fannie Mae to build a more holistic ecosystem for Fannie Mae products in the Consumer Financial Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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. Fannie Mae 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. Fannie Mae 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.
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.
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.
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.
Building a culture of innovation
– managers at Fannie Mae 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.
Learning at scale
– Online learning technologies has now opened space for Fannie Mae 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.
Threats Fannie Mae External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Fannie Mae are -
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.
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.
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.
Environmental challenges
– Fannie Mae 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. Fannie Mae can take advantage of this fund but it will also bring new competitors in the Consumer Financial Services industry.
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. Fannie Mae 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, 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.
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.
High dependence on third party suppliers
– Fannie Mae 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.
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.
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.
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.
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 Fannie Mae business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Consumer Financial Services industry are lowering. It can presents Fannie Mae 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.
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.
