PagSeguro Digital (PAGS) SWOT Analysis / TOWS Matrix / MBA Resources
Consumer Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for PagSeguro Digital (United States)
Based on various researches at Oak Spring University , PagSeguro Digital is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, wage bills are increasing, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs,
talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of PagSeguro Digital
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that PagSeguro Digital can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the PagSeguro Digital, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which PagSeguro Digital 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 PagSeguro Digital can be done for the following purposes –
1. Strategic planning of PagSeguro Digital
2. Improving business portfolio management of PagSeguro Digital
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 PagSeguro Digital
Strengths of PagSeguro Digital | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of PagSeguro Digital are -
Innovation driven organization
– PagSeguro Digital is one of the most innovative firm in Consumer Financial Services sector.
Successful track record of launching new products
– PagSeguro Digital has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. PagSeguro Digital 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 PagSeguro Digital
– The covid-19 pandemic has put organizational resilience at the centre of everthing PagSeguro Digital does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– PagSeguro Digital 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.
High brand equity
– PagSeguro Digital has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled PagSeguro Digital to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that PagSeguro Digital 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.
Ability to lead change in Consumer Financial Services
– PagSeguro Digital 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 PagSeguro Digital in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management in the Consumer Financial Services industry
– PagSeguro Digital is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– PagSeguro Digital is present in almost all the verticals within the Consumer Financial Services industry. This has provided PagSeguro Digital 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.
Sustainable margins compare to other players in Consumer Financial Services industry
– PagSeguro Digital has clearly differentiated products in the market place. This has enabled PagSeguro Digital to fetch slight price premium compare to the competitors in the Consumer Financial Services industry. The sustainable margins have also helped PagSeguro Digital to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy of PagSeguro Digital comprises – understanding the underlying the factors in the Consumer 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.
Highly skilled collaborators
– PagSeguro Digital 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 PagSeguro Digital have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of PagSeguro Digital | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PagSeguro Digital are -
Increasing silos among functional specialists
– The organizational structure of PagSeguro Digital is dominated by functional specialists. It is not different from other players in the Consumer Financial Services industry, but PagSeguro Digital needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help PagSeguro Digital to focus more on services in the Consumer Financial Services industry rather than just following the product oriented approach.
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 PagSeguro Digital supply chain. Even after few cautionary changes, PagSeguro Digital is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left PagSeguro Digital vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at PagSeguro Digital, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. PagSeguro Digital 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 PagSeguro Digital 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 PagSeguro Digital can leverage the sales team experience to cultivate customer relationships as PagSeguro Digital is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of PagSeguro Digital 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.
High bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in United States, PagSeguro Digital 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.
Lack of clear differentiation of PagSeguro Digital products
– To increase the profitability and margins on the products, PagSeguro Digital needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though PagSeguro Digital 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. PagSeguro Digital should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, PagSeguro Digital 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.
Need for greater diversity
– PagSeguro Digital 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 operating costs
– Compare to the competitors, PagSeguro Digital has high operating costs in the Consumer Financial Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract PagSeguro Digital lucrative customers.
PagSeguro Digital Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of PagSeguro Digital are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for PagSeguro Digital 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 PagSeguro Digital to hire the very best people irrespective of their geographical location.
Loyalty marketing
– PagSeguro Digital 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.
Manufacturing automation
– PagSeguro Digital can use the latest technology developments to improve its manufacturing and designing process in Consumer 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, PagSeguro Digital 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.
Building a culture of innovation
– managers at PagSeguro Digital 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, PagSeguro Digital is facing challenges because of the dominance of functional experts in the organization. PagSeguro Digital 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.
Using analytics as competitive advantage
– PagSeguro Digital has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Consumer Financial Services sector. This continuous investment in analytics has enabled PagSeguro Digital to build a competitive advantage using analytics. The analytics driven competitive advantage can help PagSeguro Digital to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help PagSeguro Digital to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Buying journey improvements
– PagSeguro Digital can improve the customer journey of consumers in the Consumer 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 Consumer Financial Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for PagSeguro Digital in the Consumer Financial Services industry. Now PagSeguro Digital can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– PagSeguro Digital 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.
Better consumer reach
– The expansion of the 5G network will help PagSeguro Digital to increase its market reach. PagSeguro Digital 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.
Learning at scale
– Online learning technologies has now opened space for PagSeguro Digital 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.
Threats PagSeguro Digital External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of PagSeguro Digital are -
Stagnating economy with rate increase
– PagSeguro Digital 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Consumer Financial Services industry are lowering. It can presents PagSeguro Digital with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Consumer Financial Services sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for PagSeguro Digital 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 PagSeguro Digital in the Consumer Financial Services sector and impact the bottomline of the organization.
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 PagSeguro Digital business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– PagSeguro Digital 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 Consumer Financial Services industry regulations.
Technology acceleration in Forth Industrial Revolution
– PagSeguro Digital has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, PagSeguro Digital 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.
Shortening product life cycle
– it is one of the major threat that PagSeguro Digital is facing in Consumer Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– PagSeguro Digital 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. PagSeguro Digital can take advantage of this fund but it will also bring new competitors in the Consumer Financial Services industry.
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.
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. PagSeguro Digital 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.
Increasing wage structure of PagSeguro Digital
– 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 PagSeguro Digital.
Weighted SWOT Analysis of PagSeguro Digital Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at PagSeguro Digital 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 PagSeguro Digital 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 PagSeguro Digital 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 PagSeguro Digital 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 PagSeguro Digital needs to make to build a sustainable competitive advantage.
