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 – increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, increasing energy prices, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, technology disruption, supply chains are disrupted by pandemic ,
increasing transportation and logistics costs, there is increasing trade war between United States & China, 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 -
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.
High brand equity
– Hercules Capital has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hercules Capital to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
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.
Superior customer experience
– The customer experience strategy of Hercules Capital in Misc. Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Hercules Capital has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hercules Capital staying ahead in the Misc. Financial Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Hercules Capital is one of the most innovative firm in Misc. Financial Services sector.
Digital Transformation in Misc. Financial Services industry
- digital transformation varies from industry to industry. For Hercules Capital digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hercules Capital 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 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.
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 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hercules Capital is slow explore the new channels of communication. These new channels of communication can help Hercules Capital to provide better information regarding Misc. Financial Services products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Hercules Capital is dominated by functional specialists. It is not different from other players in the Misc. Financial Services industry, but Hercules Capital needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hercules Capital to focus more on services in the Misc. Financial Services industry rather than just following the product oriented approach.
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.
High bargaining power of channel partners in Misc. Financial Services industry
– because of the regulatory requirements in United States, Hercules Capital 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 Misc. Financial Services industry.
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 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.
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.
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.
Slow decision making process
– As mentioned earlier in the report, Hercules Capital has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Misc. Financial Services industry over the last five years. Hercules Capital 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.
Aligning sales with marketing
– From the outside it seems that Hercules Capital needs to have more collaboration between its sales team and marketing team. Sales professionals in the Misc. Financial Services industry have deep experience in developing customer relationships. Marketing department at Hercules Capital can leverage the sales team experience to cultivate customer relationships as Hercules Capital is planning to shift buying processes online.
Hercules Capital Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hercules Capital are -
Use of Bitcoin and other crypto currencies for transactions in Misc. Financial Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hercules Capital in the Misc. Financial Services industry. Now Hercules Capital can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Learning at scale
– Online learning technologies has now opened space for Hercules Capital 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 Hercules Capital 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 Hercules Capital 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, 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.
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.
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.
Loyalty marketing
– Hercules Capital 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.
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.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Misc. Financial Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hercules Capital 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. Hercules Capital 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.
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.
Using analytics as competitive advantage
– Hercules Capital has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Misc. Financial Services sector. This continuous investment in analytics has enabled Hercules Capital to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hercules Capital to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hercules Capital in Misc. Financial Services industry. The Misc. Financial Services industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hercules Capital may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Misc. Financial Services sector.
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.
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.
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.
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.
Consumer confidence and its impact on Hercules Capital 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 Misc. Financial Services industry and other sectors.
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.
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.
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.
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.
High dependence on third party suppliers
– Hercules Capital 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 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.
