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 – talent flight as more people leaving formal jobs, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, wage bills are increasing, increasing household debt because of falling income levels,
there is backlash against globalization, supply chains are disrupted by pandemic , 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 -
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.
Learning organization
- PagSeguro Digital is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at PagSeguro Digital is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at PagSeguro Digital emphasize – knowledge, initiative, and innovation.
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.
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.
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.
Training and development
– PagSeguro Digital 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.
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.
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.
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.
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.
Digital Transformation in Consumer Financial Services industry
- digital transformation varies from industry to industry. For PagSeguro Digital digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. PagSeguro Digital 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.
Innovation driven organization
– PagSeguro Digital is one of the most innovative firm in Consumer Financial Services sector.
Weaknesses of PagSeguro Digital | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PagSeguro Digital are -
Low market penetration in new markets
– Outside its home market of United States, PagSeguro Digital needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 cash cycle compare to competitors
PagSeguro Digital 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.
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.
Slow decision making process
– As mentioned earlier in the report, PagSeguro Digital has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Consumer Financial Services industry over the last five years. PagSeguro Digital 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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, PagSeguro Digital is slow explore the new channels of communication. These new channels of communication can help PagSeguro Digital to provide better information regarding Consumer Financial Services products and services. It can also build an online community to further reach out to potential customers.
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.
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.
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.
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.
PagSeguro Digital Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of PagSeguro Digital 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, PagSeguro Digital can use these opportunities to build new business models that can help the communities that PagSeguro Digital operates in. Secondly it can use opportunities from government spending in Consumer Financial Services sector.
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.
Developing new processes and practices
– PagSeguro Digital can develop new processes and procedures in Consumer 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.
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.
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. PagSeguro Digital can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for PagSeguro Digital 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 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.
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.
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. PagSeguro Digital can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
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. PagSeguro Digital 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. PagSeguro Digital 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.
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.
Threats PagSeguro Digital External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of PagSeguro Digital are -
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.
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.
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.
Consumer confidence and its impact on PagSeguro Digital 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, PagSeguro Digital 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.
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.
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.
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.
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. PagSeguro Digital needs to understand the core reasons impacting the Consumer Financial Services industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, PagSeguro Digital can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate PagSeguro Digital prominent markets.
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.