Mastercard (MA) SWOT Analysis / TOWS Matrix / MBA Resources
Consumer Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Mastercard (United States)
Based on various researches at Oak Spring University , Mastercard 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, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings,
technology disruption, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Mastercard can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mastercard, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mastercard 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 Mastercard can be done for the following purposes –
1. Strategic planning of Mastercard
2. Improving business portfolio management of Mastercard
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 Mastercard
Strengths of Mastercard | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mastercard are -
High brand equity
– Mastercard has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Mastercard to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Consumer Financial Services industry
– Mastercard has clearly differentiated products in the market place. This has enabled Mastercard to fetch slight price premium compare to the competitors in the Consumer Financial Services industry. The sustainable margins have also helped Mastercard to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Mastercard has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Mastercard 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.
Ability to lead change in Consumer Financial Services
– Mastercard 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 Mastercard in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Mastercard is present in almost all the verticals within the Consumer Financial Services industry. This has provided Mastercard 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.
Analytics focus
– Mastercard 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.
Training and development
– Mastercard 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.
Low bargaining power of suppliers
– Suppliers of Mastercard in the Financial sector have low bargaining power. Mastercard has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Mastercard to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Mastercard has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Mastercard 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.
Highly skilled collaborators
– Mastercard 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 Mastercard have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Mastercard 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.
Innovation driven organization
– Mastercard is one of the most innovative firm in Consumer Financial Services sector.
Weaknesses of Mastercard | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Mastercard are -
No frontier risks strategy
– From the 10K / annual statement of Mastercard, it seems that company is thinking out the frontier risks that can impact Consumer 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.
Aligning sales with marketing
– From the outside it seems that Mastercard 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 Mastercard can leverage the sales team experience to cultivate customer relationships as Mastercard is planning to shift buying processes online.
Interest costs
– Compare to the competition, Mastercard 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 cash cycle compare to competitors
Mastercard 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.
Increasing silos among functional specialists
– The organizational structure of Mastercard is dominated by functional specialists. It is not different from other players in the Consumer Financial Services industry, but Mastercard needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Mastercard to focus more on services in the Consumer Financial Services industry rather than just following the product oriented approach.
Skills based hiring in Consumer Financial Services industry
– The stress on hiring functional specialists at Mastercard 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.
High bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in United States, Mastercard 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.
Products dominated business model
– Even though Mastercard 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. Mastercard should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Mastercard 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.
Ability to respond to the competition
– As the decision making is very deliberative at Mastercard, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. Mastercard has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee of Mastercard 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.
Mastercard Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Mastercard are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Mastercard 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.
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 Mastercard in the Consumer Financial Services industry. Now Mastercard can target international markets with far fewer capital restrictions requirements than the existing system.
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. Mastercard can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Mastercard 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.
Learning at scale
– Online learning technologies has now opened space for Mastercard 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.
Leveraging digital technologies
– Mastercard 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Mastercard 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 Mastercard to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Mastercard can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Mastercard 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. Mastercard 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Mastercard is facing challenges because of the dominance of functional experts in the organization. Mastercard 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.
Building a culture of innovation
– managers at Mastercard 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.
Loyalty marketing
– Mastercard 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Mastercard 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 Mastercard to hire the very best people irrespective of their geographical location.
Threats Mastercard External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Mastercard are -
Shortening product life cycle
– it is one of the major threat that Mastercard 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.
Consumer confidence and its impact on Mastercard 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Mastercard in Consumer Financial Services industry. The Consumer 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.
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 Mastercard in the Consumer Financial Services sector and impact the bottomline 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. Mastercard needs to understand the core reasons impacting the Consumer Financial Services industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Mastercard has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, Mastercard 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.
Stagnating economy with rate increase
– Mastercard 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. Mastercard can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Mastercard business can come under increasing regulations regarding data privacy, data security, 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. Mastercard 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.
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 Mastercard.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Mastercard 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.
Weighted SWOT Analysis of Mastercard Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Mastercard 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 Mastercard 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 Mastercard 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 Mastercard 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 Mastercard needs to make to build a sustainable competitive advantage.
