Fifth Street Finance (OCSL) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Fifth Street Finance (United States)
Based on various researches at Oak Spring University , Fifth Street Finance is operating in a macro-environment that has been destablized by – there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, increasing energy prices, geopolitical disruptions,
there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Fifth Street Finance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Fifth Street Finance can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fifth Street Finance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fifth Street Finance 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 Fifth Street Finance can be done for the following purposes –
1. Strategic planning of Fifth Street Finance
2. Improving business portfolio management of Fifth Street Finance
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 Fifth Street Finance
Strengths of Fifth Street Finance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fifth Street Finance are -
Low bargaining power of suppliers
– Suppliers of Fifth Street Finance in the Financial sector have low bargaining power. Fifth Street Finance has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fifth Street Finance to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Fifth Street Finance is present in almost all the verticals within the Misc. Financial Services industry. This has provided Fifth Street Finance 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.
Cross disciplinary teams
– Horizontal connected teams at the Fifth Street Finance 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.
Digital Transformation in Misc. Financial Services industry
- digital transformation varies from industry to industry. For Fifth Street Finance digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fifth Street Finance 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.
High brand equity
– Fifth Street Finance has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Fifth Street Finance to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Fifth Street Finance 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 Fifth Street Finance 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.
Organizational Resilience of Fifth Street Finance
– The covid-19 pandemic has put organizational resilience at the centre of everthing Fifth Street Finance does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Fifth Street Finance in Misc. Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Fifth Street Finance 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.
Sustainable margins compare to other players in Misc. Financial Services industry
– Fifth Street Finance has clearly differentiated products in the market place. This has enabled Fifth Street Finance to fetch slight price premium compare to the competitors in the Misc. Financial Services industry. The sustainable margins have also helped Fifth Street Finance to invest into research and development (R&D) and innovation.
Innovation driven organization
– Fifth Street Finance is one of the most innovative firm in Misc. Financial Services sector.
Weaknesses of Fifth Street Finance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fifth Street Finance are -
Ability to respond to the competition
– As the decision making is very deliberative at Fifth Street Finance, in the dynamic environment of Misc. Financial Services industry it has struggled to respond to the nimble upstart competition. Fifth Street Finance has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– From the outside it seems that Fifth Street Finance 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 Fifth Street Finance can leverage the sales team experience to cultivate customer relationships as Fifth Street Finance is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Fifth Street Finance 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.
High operating costs
– Compare to the competitors, Fifth Street Finance 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 Fifth Street Finance lucrative customers.
No frontier risks strategy
– From the 10K / annual statement of Fifth Street Finance, 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, Fifth Street Finance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Fifth Street Finance is dominated by functional specialists. It is not different from other players in the Misc. Financial Services industry, but Fifth Street Finance needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fifth Street Finance to focus more on services in the Misc. Financial Services industry rather than just following the product oriented approach.
Need for greater diversity
– Fifth Street Finance 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.
Employees’ less understanding of Fifth Street Finance strategy
– From the outside it seems that the employees of Fifth Street Finance 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Fifth Street Finance is slow explore the new channels of communication. These new channels of communication can help Fifth Street Finance 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.
High dependence on Fifth Street Finance ‘s star products
– The top 2 products and services of Fifth Street Finance 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 Fifth Street Finance has relatively successful track record of launching new products.
Fifth Street Finance Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Fifth Street Finance are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fifth Street Finance 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 Fifth Street Finance to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Fifth Street Finance can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fifth Street Finance 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.
Creating value in data economy
– The success of analytics program of Fifth Street Finance has opened avenues for new revenue streams for the organization in Misc. Financial Services industry. This can help Fifth Street Finance to build a more holistic ecosystem for Fifth Street Finance products in the Misc. Financial Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Fifth Street Finance 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.
Developing new processes and practices
– Fifth Street Finance 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. Fifth Street Finance 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. Fifth Street Finance 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
– Fifth Street Finance 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.
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 Fifth Street Finance in the Misc. Financial Services industry. Now Fifth Street Finance can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Misc. Financial Services industry, but it has also influenced the consumer preferences. Fifth Street Finance can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Fifth Street Finance to increase its market reach. Fifth Street Finance 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Fifth Street Finance is facing challenges because of the dominance of functional experts in the organization. Fifth Street Finance 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Fifth Street Finance can use these opportunities to build new business models that can help the communities that Fifth Street Finance operates in. Secondly it can use opportunities from government spending in Misc. Financial Services sector.
Threats Fifth Street Finance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Fifth Street Finance are -
Stagnating economy with rate increase
– Fifth Street Finance 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.
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. Fifth Street Finance can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Fifth Street Finance 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.
Regulatory challenges
– Fifth Street Finance 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.
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 Fifth Street Finance.
Environmental challenges
– Fifth Street Finance 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. Fifth Street Finance can take advantage of this fund but it will also bring new competitors in the Misc. Financial Services industry.
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 Fifth Street Finance in the Misc. Financial Services sector and impact the bottomline of the organization.
Increasing wage structure of Fifth Street Finance
– 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 Fifth Street Finance.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fifth Street Finance 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Financial Services industry are lowering. It can presents Fifth Street Finance 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.
Shortening product life cycle
– it is one of the major threat that Fifth Street Finance is facing in Misc. 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.
Weighted SWOT Analysis of Fifth Street Finance Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Fifth Street Finance 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 Fifth Street Finance 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 Fifth Street Finance 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 Fifth Street Finance 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 Fifth Street Finance needs to make to build a sustainable competitive advantage.
