Hercules Capital (HTGC) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Hercules Capital (United States)
Based on various researches at Oak Spring University , Hercules Capital is operating in a macro-environment that has been destablized by – technology disruption, there is backlash against globalization, challanges to central banks by blockchain based private currencies, increasing commodity prices, there is increasing trade war between United States & China, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing transportation and logistics costs, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hercules Capital can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hercules Capital, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hercules 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 Hercules Capital can be done for the following purposes –
1. Strategic planning of Hercules Capital
2. Improving business portfolio management of Hercules 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 Hercules Capital
Strengths of Hercules Capital | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hercules Capital are -
Analytics focus
– Hercules Capital 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 Misc. 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.
Low bargaining power of suppliers
– Suppliers of Hercules Capital in the Financial sector have low bargaining power. Hercules Capital has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hercules Capital to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Misc. Financial Services industry
– Hercules Capital is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Misc. Financial Services industry
– Hercules Capital has clearly differentiated products in the market place. This has enabled Hercules Capital to fetch slight price premium compare to the competitors in the Misc. Financial Services industry. The sustainable margins have also helped Hercules Capital to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Hercules 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.
Learning organization
- Hercules Capital 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 Hercules Capital is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hercules Capital emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Hercules 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 Hercules Capital have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Hercules 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.
Operational resilience
– The operational resilience strategy of Hercules 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.
Ability to lead change in Misc. Financial Services
– Hercules 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 Hercules Capital in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Hercules Capital has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hercules Capital 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.
Organizational Resilience of Hercules Capital
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hercules Capital does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of Hercules Capital | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hercules Capital are -
High cash cycle compare to competitors
Hercules 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.
Interest costs
– Compare to the competition, Hercules 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.
High operating costs
– Compare to the competitors, Hercules Capital has high operating costs in the Misc. Financial Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hercules Capital lucrative customers.
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 Hercules Capital supply chain. Even after few cautionary changes, Hercules Capital is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hercules Capital vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at Hercules Capital, in the dynamic environment of Misc. Financial Services industry it has struggled to respond to the nimble upstart competition. Hercules Capital has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on Hercules Capital ‘s star products
– The top 2 products and services of Hercules 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 Hercules Capital has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Hercules 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.
No frontier risks strategy
– From the 10K / annual statement of Hercules 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.
Low market penetration in new markets
– Outside its home market of United States, Hercules Capital needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the Misc. Financial Services industry, Hercules 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.
Need for greater diversity
– Hercules Capital 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.
Hercules Capital Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hercules Capital are -
Creating value in data economy
– The success of analytics program of Hercules Capital has opened avenues for new revenue streams for the organization in Misc. Financial Services industry. This can help Hercules Capital to build a more holistic ecosystem for Hercules Capital products in the Misc. Financial Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hercules Capital 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.
Developing new processes and practices
– Hercules Capital can develop new processes and procedures in Misc. 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.
Manufacturing automation
– Hercules 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.
Building a culture of innovation
– managers at Hercules Capital 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 Misc. Financial Services industry.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hercules Capital is facing challenges because of the dominance of functional experts in the organization. Hercules 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.
Better consumer reach
– The expansion of the 5G network will help Hercules Capital to increase its market reach. Hercules 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hercules Capital 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 Hercules Capital 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 Hercules 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.
Buying journey improvements
– Hercules Capital can improve the customer journey of consumers in the Misc. 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.
Leveraging digital technologies
– Hercules 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hercules Capital can use these opportunities to build new business models that can help the communities that Hercules Capital operates in. Secondly it can use opportunities from government spending in Misc. Financial Services sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hercules 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.
Threats Hercules Capital External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hercules 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. Hercules Capital can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Hercules 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 Hercules Capital.
Environmental challenges
– Hercules Capital 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. Hercules Capital can take advantage of this fund but it will also bring new competitors in the Misc. Financial Services industry.
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 Hercules Capital business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Hercules 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, Hercules 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Financial Services industry are lowering. It can presents Hercules 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hercules 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 Hercules Capital prominent markets.
Stagnating economy with rate increase
– Hercules Capital 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 Misc. Financial Services industry.
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.
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 Hercules Capital.
Shortening product life cycle
– it is one of the major threat that Hercules Capital is facing in Misc. Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Hercules 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.
Regulatory challenges
– Hercules 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 Hercules Capital Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hercules 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 Hercules 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 Hercules 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 Hercules 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 Hercules Capital needs to make to build a sustainable competitive advantage.