SWOT Analysis / TOWS Matrix for PennyMac Mortgage (United States)
Based on various researches at Oak Spring University , PennyMac Mortgage is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, wage bills are increasing, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, increasing transportation and logistics costs,
increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of PennyMac Mortgage
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that PennyMac Mortgage can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the PennyMac Mortgage, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which PennyMac Mortgage 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 PennyMac Mortgage can be done for the following purposes –
1. Strategic planning of PennyMac Mortgage
2. Improving business portfolio management of PennyMac Mortgage
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 PennyMac Mortgage
Strengths of PennyMac Mortgage | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of PennyMac Mortgage are -
Organizational Resilience of PennyMac Mortgage
– The covid-19 pandemic has put organizational resilience at the centre of everthing PennyMac Mortgage 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 PennyMac Mortgage in Consumer Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- PennyMac Mortgage 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 PennyMac Mortgage is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at PennyMac Mortgage emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of PennyMac Mortgage in the Financial sector have low bargaining power. PennyMac Mortgage has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps PennyMac Mortgage to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Consumer Financial Services industry
– PennyMac Mortgage has clearly differentiated products in the market place. This has enabled PennyMac Mortgage to fetch slight price premium compare to the competitors in the Consumer Financial Services industry. The sustainable margins have also helped PennyMac Mortgage to invest into research and development (R&D) and innovation.
High brand equity
– PennyMac Mortgage has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled PennyMac Mortgage to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– PennyMac Mortgage is present in almost all the verticals within the Consumer Financial Services industry. This has provided PennyMac Mortgage 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.
Analytics focus
– PennyMac Mortgage 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.
Highly skilled collaborators
– PennyMac Mortgage 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 PennyMac Mortgage have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of PennyMac Mortgage 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.
Successful track record of launching new products
– PennyMac Mortgage has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. PennyMac Mortgage 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.
Strong track record of project management in the Consumer Financial Services industry
– PennyMac Mortgage is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of PennyMac Mortgage | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PennyMac Mortgage are -
Low market penetration in new markets
– Outside its home market of United States, PennyMac Mortgage needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the Consumer Financial Services industry, PennyMac Mortgage needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Aligning sales with marketing
– From the outside it seems that PennyMac Mortgage 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 PennyMac Mortgage can leverage the sales team experience to cultivate customer relationships as PennyMac Mortgage is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, PennyMac Mortgage is slow explore the new channels of communication. These new channels of communication can help PennyMac Mortgage 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.
Compensation and incentives
– The revenue per employee of PennyMac Mortgage 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.
Ability to respond to the competition
– As the decision making is very deliberative at PennyMac Mortgage, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. PennyMac Mortgage 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 PennyMac Mortgage is dominated by functional specialists. It is not different from other players in the Consumer Financial Services industry, but PennyMac Mortgage needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help PennyMac Mortgage to focus more on services in the Consumer Financial Services industry rather than just following the product oriented approach.
High bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in United States, PennyMac Mortgage 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.
Interest costs
– Compare to the competition, PennyMac Mortgage 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.
Skills based hiring in Consumer Financial Services industry
– The stress on hiring functional specialists at PennyMac Mortgage 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.
Need for greater diversity
– PennyMac Mortgage 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.
PennyMac Mortgage Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of PennyMac Mortgage are -
Creating value in data economy
– The success of analytics program of PennyMac Mortgage has opened avenues for new revenue streams for the organization in Consumer Financial Services industry. This can help PennyMac Mortgage to build a more holistic ecosystem for PennyMac Mortgage products in the Consumer Financial Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for PennyMac Mortgage 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 PennyMac Mortgage to hire the very best people irrespective of their geographical location.
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 PennyMac Mortgage 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects PennyMac Mortgage can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, PennyMac Mortgage 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 PennyMac Mortgage to increase its market reach. PennyMac Mortgage 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. PennyMac Mortgage can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– PennyMac Mortgage 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.
Learning at scale
– Online learning technologies has now opened space for PennyMac Mortgage 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for PennyMac Mortgage 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.
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. PennyMac Mortgage can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– PennyMac Mortgage 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.
Using analytics as competitive advantage
– PennyMac Mortgage 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 PennyMac Mortgage to build a competitive advantage using analytics. The analytics driven competitive advantage can help PennyMac Mortgage to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats PennyMac Mortgage External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of PennyMac Mortgage are -
Stagnating economy with rate increase
– PennyMac Mortgage 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.
Shortening product life cycle
– it is one of the major threat that PennyMac Mortgage 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
– PennyMac Mortgage 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. PennyMac Mortgage can take advantage of this fund but it will also bring new competitors in the Consumer Financial Services industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Consumer Financial Services industry are lowering. It can presents PennyMac Mortgage 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.
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 PennyMac Mortgage 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 PennyMac Mortgage business can come under increasing regulations regarding data privacy, data security, etc.
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. PennyMac Mortgage 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.
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 PennyMac Mortgage.
Technology acceleration in Forth Industrial Revolution
– PennyMac Mortgage has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, PennyMac Mortgage 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, PennyMac Mortgage 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 PennyMac Mortgage prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, PennyMac Mortgage 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.
Weighted SWOT Analysis of PennyMac Mortgage Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at PennyMac Mortgage 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 PennyMac Mortgage 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 PennyMac Mortgage 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 PennyMac Mortgage 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 PennyMac Mortgage needs to make to build a sustainable competitive advantage.
