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 – there is backlash against globalization, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, geopolitical disruptions, technology disruption, talent flight as more people leaving formal jobs,
increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , 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 -
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.
Training and development
– PennyMac Mortgage 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.
High switching costs
– The high switching costs that PennyMac Mortgage 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.
Digital Transformation in Consumer Financial Services industry
- digital transformation varies from industry to industry. For PennyMac Mortgage digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. PennyMac Mortgage 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.
Cross disciplinary teams
– Horizontal connected teams at the PennyMac Mortgage 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.
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.
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.
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.
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.
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.
Ability to lead change in Consumer Financial Services
– PennyMac Mortgage 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 PennyMac Mortgage in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Weaknesses of PennyMac Mortgage | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PennyMac Mortgage are -
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.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, PennyMac Mortgage 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 Consumer Financial Services industry using digital technology.
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.
Slow decision making process
– As mentioned earlier in the report, PennyMac Mortgage 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. PennyMac Mortgage even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High dependence on PennyMac Mortgage ‘s star products
– The top 2 products and services of PennyMac Mortgage still accounts for major business revenue. This dependence on star products in Consumer Financial Services industry has resulted into insufficient focus on developing new products, even though PennyMac Mortgage has relatively successful track record of launching new products.
High cash cycle compare to competitors
PennyMac Mortgage 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.
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.
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.
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.
PennyMac Mortgage Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of PennyMac Mortgage are -
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, PennyMac Mortgage can use these opportunities to build new business models that can help the communities that PennyMac Mortgage operates in. Secondly it can use opportunities from government spending in Consumer Financial Services sector.
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.
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.
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.
Building a culture of innovation
– managers at PennyMac Mortgage 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.
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.
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.
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.
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.
Leveraging digital technologies
– PennyMac Mortgage 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.
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.
Manufacturing automation
– PennyMac Mortgage 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.
Threats PennyMac Mortgage External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of PennyMac Mortgage are -
Regulatory challenges
– PennyMac Mortgage 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.
Increasing wage structure of PennyMac Mortgage
– 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 PennyMac Mortgage.
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.
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. PennyMac Mortgage needs to understand the core reasons impacting the Consumer Financial Services industry. This will help it in building a better workplace.
High dependence on third party suppliers
– PennyMac Mortgage high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
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.
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.
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.
Easy access to finance
– Easy access to finance in Consumer Financial Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. PennyMac Mortgage can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for PennyMac Mortgage 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.
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.
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.
