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 household debt because of falling income levels, increasing transportation and logistics costs, technology disruption, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google,
competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, 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 -
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
Products dominated business model
– Even though PennyMac Mortgage 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. PennyMac Mortgage should strive to include more intangible value offerings along with its core products and services.
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 operating costs
– Compare to the competitors, PennyMac Mortgage 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 PennyMac Mortgage lucrative customers.
Slow to strategic competitive environment developments
– As PennyMac Mortgage is one of the leading players in the Consumer Financial Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Consumer Financial Services industry in last five years.
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.
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.
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.
Lack of clear differentiation of PennyMac Mortgage products
– To increase the profitability and margins on the products, PennyMac Mortgage needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
PennyMac Mortgage Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of PennyMac Mortgage are -
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, PennyMac Mortgage can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help PennyMac Mortgage to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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.
Loyalty marketing
– PennyMac Mortgage 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.
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. PennyMac Mortgage 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. PennyMac Mortgage 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.
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 PennyMac Mortgage in the Consumer Financial Services industry. Now PennyMac Mortgage can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
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.
Consumer confidence and its impact on PennyMac Mortgage 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.
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.