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 – increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, technology disruption, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs,
wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, 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 -
High switching costs
– The high switching costs that Prospect Capital 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.
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.
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.
Organizational Resilience of Prospect Capital
– The covid-19 pandemic has put organizational resilience at the centre of everthing Prospect Capital does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
Innovation driven organization
– Prospect Capital is one of the most innovative firm in Misc. Financial Services sector.
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.
Superior customer experience
– The customer experience strategy of Prospect Capital in Misc. Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
Training and development
– Prospect Capital 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.
Weaknesses of Prospect Capital | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Prospect Capital are -
Lack of clear differentiation of Prospect Capital products
– To increase the profitability and margins on the products, Prospect Capital needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of United States, Prospect Capital needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on Prospect Capital ‘s star products
– The top 2 products and services of Prospect Capital still accounts for major business revenue. This dependence on star products in Misc. Financial Services industry has resulted into insufficient focus on developing new products, even though Prospect Capital has relatively successful track record of launching new products.
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.
High cash cycle compare to competitors
Prospect Capital has a high cash cycle compare to other players in the Misc. 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.
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.
Skills based hiring in Misc. Financial Services industry
– The stress on hiring functional specialists at Prospect Capital 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.
Slow to strategic competitive environment developments
– As Prospect Capital is one of the leading players in the Misc. 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 Misc. Financial Services industry in last five years.
No frontier risks strategy
– From the 10K / annual statement of Prospect Capital, it seems that company is thinking out the frontier risks that can impact Misc. Financial Services industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
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.
Prospect Capital Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Prospect Capital are -
Using analytics as competitive advantage
– Prospect Capital has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Misc. Financial Services sector. This continuous investment in analytics has enabled Prospect Capital to build a competitive advantage using analytics. The analytics driven competitive advantage can help Prospect Capital to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
Loyalty marketing
– Prospect Capital 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.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Prospect Capital to increase its market reach. Prospect Capital 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Prospect Capital can use these opportunities to build new business models that can help the communities that Prospect Capital operates in. Secondly it can use opportunities from government spending in Misc. Financial Services sector.
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.
Manufacturing automation
– Prospect Capital can use the latest technology developments to improve its manufacturing and designing process in Misc. 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.
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. Prospect Capital 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 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.
Threats Prospect Capital External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Prospect Capital are -
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. Prospect Capital 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.
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.
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.
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.
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.
Stagnating economy with rate increase
– Prospect Capital 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 Misc. Financial Services industry.
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.
Consumer confidence and its impact on Prospect Capital 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 Misc. Financial Services industry and other sectors.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Prospect Capital in Misc. Financial Services industry. The Misc. 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.
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.
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.
Increasing wage structure of Prospect Capital
– 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 Prospect Capital.
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.