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 – wage bills are increasing, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, increasing commodity prices, geopolitical disruptions, cloud computing is disrupting traditional business models, there is backlash against globalization,
technology disruption, digital marketing is dominated by two big players Facebook and Google, 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.
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
Strengths of Nelnet | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nelnet are -
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.
– 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.
Diverse revenue streams
– Nelnet is present in almost all the verticals within the Computer Services industry. This has provided Nelnet 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.
Highly skilled collaborators
– Nelnet has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Computer Services industry. Secondly the value chain collaborators of Nelnet have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Nelnet is one of the leading players in the Computer 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.
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.
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.
Innovation driven organization
– Nelnet is one of the most innovative firm in Computer Services sector.
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.
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.
High switching costs
– The high switching costs that Nelnet 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.
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.
Weaknesses of Nelnet | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nelnet are -
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.
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.
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.
Slow decision making process
– As mentioned earlier in the report, Nelnet has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Computer Services industry over the last five years. Nelnet 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.
High operating costs
– Compare to the competitors, Nelnet has high operating costs in the Computer Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nelnet lucrative customers.
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.
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.
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.
Need for greater diversity
– Nelnet 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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nelnet is slow explore the new channels of communication. These new channels of communication can help Nelnet to provide better information regarding Computer Services products and services. It can also build an online community to further reach out to potential customers.
Nelnet Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nelnet are -
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.
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.
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.
Leveraging digital technologies
– Nelnet 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, 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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Computer Services industry, but it has also influenced the consumer preferences. Nelnet can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Nelnet can develop new processes and procedures in Computer 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.
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.
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.
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. Nelnet can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nelnet in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Computer Services industry, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nelnet can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Nelnet External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nelnet are -
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.
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.
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.
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.
High dependence on third party suppliers
– Nelnet 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.
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.
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.
– 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.
– 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.
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.
Technology acceleration in Forth Industrial Revolution
– Nelnet has witnessed rapid integration of technology during Covid-19 in the Computer Services industry. As one of the leading players in the industry, Nelnet needs to keep up with the evolution of technology in the Computer 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 Computer Services industry are lowering. It can presents Nelnet with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Computer Services sector.
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.
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.