Prospect Capital (PSEC) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Prospect Capital (United States)
Based on various researches at Oak Spring University , Prospect Capital is operating in a macro-environment that has been destablized by – technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, there is backlash against globalization,
competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Prospect Capital can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Prospect Capital, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Prospect Capital 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 Prospect Capital can be done for the following purposes –
1. Strategic planning of Prospect Capital
2. Improving business portfolio management of Prospect Capital
3. Assessing feasibility of the new initiative in United States
4. Making a Misc. Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Prospect Capital
Strengths of Prospect Capital | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Prospect Capital are -
Learning organization
- Prospect Capital 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 Prospect Capital is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Prospect Capital emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Misc. Financial Services industry
– Prospect Capital has clearly differentiated products in the market place. This has enabled Prospect Capital to fetch slight price premium compare to the competitors in the Misc. Financial Services industry. The sustainable margins have also helped Prospect Capital to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Prospect Capital has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Misc. Financial Services industry. Secondly the value chain collaborators of Prospect Capital have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Prospect Capital is one of the leading players in the Misc. Financial Services industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– Prospect Capital is one of the most innovative firm in Misc. Financial Services sector.
Low bargaining power of suppliers
– Suppliers of Prospect Capital in the Financial sector have low bargaining power. Prospect Capital has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Prospect Capital to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Prospect Capital has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Prospect Capital staying ahead in the Misc. Financial Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Prospect Capital has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Prospect Capital 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.
Operational resilience
– The operational resilience strategy of Prospect Capital comprises – understanding the underlying the factors in the Misc. 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.
Digital Transformation in Misc. Financial Services industry
- digital transformation varies from industry to industry. For Prospect Capital digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Prospect Capital 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.
Ability to lead change in Misc. Financial Services
– Prospect Capital is one of the leading players in the Misc. Financial Services industry in United States. Over the years it has not only transformed the business landscape in the Misc. Financial Services industry in United States but also across the existing markets. The ability to lead change has enabled Prospect Capital in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Prospect Capital 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 Misc. 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.
Weaknesses of Prospect Capital | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Prospect Capital are -
Employees’ less understanding of Prospect Capital strategy
– From the outside it seems that the employees of Prospect Capital don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Prospect Capital supply chain. Even after few cautionary changes, Prospect Capital is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Prospect Capital vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners in Misc. Financial Services industry
– because of the regulatory requirements in United States, Prospect Capital 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 Misc. Financial Services industry.
Interest costs
– Compare to the competition, Prospect Capital 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.
Workers concerns about automation
– As automation is fast increasing in the Misc. Financial Services industry, Prospect Capital 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.
Slow decision making process
– As mentioned earlier in the report, Prospect Capital has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Misc. Financial Services industry over the last five years. Prospect Capital 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.
Need for greater diversity
– Prospect Capital 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.
Products dominated business model
– Even though Prospect Capital has some of the most successful models in the Misc. Financial Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Prospect Capital should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, Prospect Capital has high operating costs in the Misc. Financial Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Prospect Capital lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative at Prospect Capital, in the dynamic environment of Misc. Financial Services industry it has struggled to respond to the nimble upstart competition. Prospect Capital 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 Prospect Capital is dominated by functional specialists. It is not different from other players in the Misc. Financial Services industry, but Prospect Capital needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Prospect Capital to focus more on services in the Misc. Financial Services industry rather than just following the product oriented approach.
Prospect Capital Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Prospect Capital are -
Building a culture of innovation
– managers at Prospect Capital 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 Misc. Financial Services industry.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Prospect Capital is facing challenges because of the dominance of functional experts in the organization. Prospect Capital can utilize new technology in the field of Misc. Financial Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Prospect Capital can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Prospect Capital 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.
Creating value in data economy
– The success of analytics program of Prospect Capital has opened avenues for new revenue streams for the organization in Misc. Financial Services industry. This can help Prospect Capital to build a more holistic ecosystem for Prospect Capital products in the Misc. Financial Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Prospect Capital can develop new processes and procedures in Misc. 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Prospect Capital 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Misc. Financial Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Prospect Capital 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. Prospect Capital 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 Prospect Capital 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 Prospect Capital to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Prospect Capital 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
– Prospect Capital can improve the customer journey of consumers in the Misc. 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Prospect Capital 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 Prospect Capital to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Misc. Financial Services industry, but it has also influenced the consumer preferences. Prospect Capital can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Prospect Capital External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Prospect Capital are -
Easy access to finance
– Easy access to finance in Misc. Financial Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Prospect Capital can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Prospect Capital.
Shortening product life cycle
– it is one of the major threat that Prospect Capital is facing in Misc. Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Financial Services industry are lowering. It can presents Prospect Capital with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Misc. Financial Services sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Prospect Capital may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Misc. Financial Services sector.
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 Prospect Capital business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Prospect Capital 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.
Regulatory challenges
– Prospect Capital 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 Misc. Financial Services industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Prospect Capital 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 Prospect Capital prominent markets.
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.
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 Prospect Capital in the Misc. Financial Services sector and impact the bottomline of the organization.
Environmental challenges
– Prospect Capital 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. Prospect Capital can take advantage of this fund but it will also bring new competitors in the Misc. 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. Prospect Capital needs to understand the core reasons impacting the Misc. Financial Services industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Prospect Capital Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Prospect Capital 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 Prospect Capital 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 Prospect Capital 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 Prospect Capital 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 Prospect Capital needs to make to build a sustainable competitive advantage.