Nelnet (NNI) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nelnet (United States)

Based on various researches at Oak Spring University , Nelnet is operating in a macro-environment that has been destablized by – increasing energy prices, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, technology disruption, wage bills are increasing, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, etc

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Introduction to SWOT Analysis of Nelnet

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nelnet can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nelnet, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nelnet 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Nelnet can be done for the following purposes –
1. Strategic planning of Nelnet
2. Improving business portfolio management of Nelnet
3. Assessing feasibility of the new initiative in United States
4. Making a Computer Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nelnet

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Strengths of Nelnet | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Nelnet are -

Low bargaining power of suppliers

– Suppliers of Nelnet in the Technology sector have low bargaining power. Nelnet has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nelnet to manage not only supply disruptions but also source products at highly competitive prices.

Organizational Resilience of Nelnet

– The covid-19 pandemic has put organizational resilience at the centre of everthing Nelnet does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Sustainable margins compare to other players in Computer Services industry

– Nelnet has clearly differentiated products in the market place. This has enabled Nelnet to fetch slight price premium compare to the competitors in the Computer Services industry. The sustainable margins have also helped Nelnet to invest into research and development (R&D) and innovation.

Successful track record of launching new products

– Nelnet has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nelnet 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.

Cross disciplinary teams

– Horizontal connected teams at the Nelnet 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.

Operational resilience

– The operational resilience strategy of Nelnet comprises – understanding the underlying the factors in the Computer 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.

Training and development

– Nelnet has one of the best training and development program in Technology 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.

Effective Research and Development (R&D)

– Nelnet has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nelnet staying ahead in the Computer Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Superior customer experience

– The customer experience strategy of Nelnet in Computer Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Digital Transformation in Computer Services industry

- digital transformation varies from industry to industry. For Nelnet digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nelnet 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.

Analytics focus

– Nelnet 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 Computer 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.

Strong track record of project management in the Computer Services industry

– Nelnet is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

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Weaknesses of Nelnet | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Nelnet are -

Employees’ less understanding of Nelnet strategy

– From the outside it seems that the employees of Nelnet 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.

Ability to respond to the competition

– As the decision making is very deliberative at Nelnet, in the dynamic environment of Computer Services industry it has struggled to respond to the nimble upstart competition. Nelnet has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Increasing silos among functional specialists

– The organizational structure of Nelnet is dominated by functional specialists. It is not different from other players in the Computer Services industry, but Nelnet needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nelnet to focus more on services in the Computer Services industry rather than just following the product oriented approach.

Interest costs

– Compare to the competition, Nelnet 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.

Lack of clear differentiation of Nelnet products

– To increase the profitability and margins on the products, Nelnet needs to provide more differentiated products than what it is currently offering in the marketplace.

Compensation and incentives

– The revenue per employee of Nelnet is just above the Computer 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.

Skills based hiring in Computer Services industry

– The stress on hiring functional specialists at Nelnet 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 cash cycle compare to competitors

Nelnet has a high cash cycle compare to other players in the Computer 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 Nelnet, it seems that company is thinking out the frontier risks that can impact Computer 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 Nelnet supply chain. Even after few cautionary changes, Nelnet is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nelnet vulnerable to further global disruptions in South East Asia.

Slow to strategic competitive environment developments

– As Nelnet is one of the leading players in the Computer Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Computer Services industry in last five years.

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Nelnet Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Nelnet are -

Creating value in data economy

– The success of analytics program of Nelnet has opened avenues for new revenue streams for the organization in Computer Services industry. This can help Nelnet to build a more holistic ecosystem for Nelnet products in the Computer Services industry by providing – data insight services, data privacy related products, data based consulting services, 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, Nelnet can use these opportunities to build new business models that can help the communities that Nelnet operates in. Secondly it can use opportunities from government spending in Computer Services sector.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Nelnet 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 Nelnet 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 Computer Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nelnet in the Computer Services industry. Now Nelnet can target international markets with far fewer capital restrictions requirements than the existing system.

Manufacturing automation

– Nelnet can use the latest technology developments to improve its manufacturing and designing process in Computer 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

– Nelnet has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Computer Services sector. This continuous investment in analytics has enabled Nelnet to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nelnet to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Building a culture of innovation

– managers at Nelnet 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 Computer Services industry.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nelnet 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 Nelnet to hire the very best people irrespective of their geographical location.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Nelnet is facing challenges because of the dominance of functional experts in the organization. Nelnet can utilize new technology in the field of Computer Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Computer Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nelnet 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. Nelnet 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.

Buying journey improvements

– Nelnet can improve the customer journey of consumers in the Computer 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Nelnet 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.

Better consumer reach

– The expansion of the 5G network will help Nelnet to increase its market reach. Nelnet 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.

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Threats Nelnet External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Nelnet are -

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 Nelnet.

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 Nelnet in the Computer Services sector and impact the bottomline of the organization.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Nelnet may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Computer Services sector.

Environmental challenges

– Nelnet 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. Nelnet can take advantage of this fund but it will also bring new competitors in the Computer Services industry.

Stagnating economy with rate increase

– Nelnet 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 Computer 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 Nelnet business can come under increasing regulations regarding data privacy, data security, etc.

Regulatory challenges

– Nelnet 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 Computer Services industry regulations.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Nelnet in Computer Services industry. The Computer 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.

Increasing wage structure of Nelnet

– 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 Nelnet.

Easy access to finance

– Easy access to finance in Computer Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nelnet can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Consumer confidence and its impact on Nelnet 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 Computer Services industry and other sectors.

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. Nelnet 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.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

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Weighted SWOT Analysis of Nelnet Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nelnet 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 Nelnet 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 Nelnet 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 Nelnet 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 Nelnet needs to make to build a sustainable competitive advantage.

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