StoneCo (STNE) SWOT Analysis / TOWS Matrix / MBA Resources
Software & Programming
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for StoneCo (United States)
Based on various researches at Oak Spring University , StoneCo is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, technology disruption,
there is backlash against globalization, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that StoneCo can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the StoneCo, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which StoneCo 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 StoneCo can be done for the following purposes –
1. Strategic planning of StoneCo
2. Improving business portfolio management of StoneCo
3. Assessing feasibility of the new initiative in United States
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of StoneCo
Strengths of StoneCo | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of StoneCo are -
Strong track record of project management in the Software & Programming industry
– StoneCo is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– StoneCo 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 Software & Programming 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.
Ability to lead change in Software & Programming
– StoneCo is one of the leading players in the Software & Programming industry in United States. Over the years it has not only transformed the business landscape in the Software & Programming industry in United States but also across the existing markets. The ability to lead change has enabled StoneCo in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of StoneCo in the Technology sector have low bargaining power. StoneCo has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps StoneCo to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of StoneCo
– The covid-19 pandemic has put organizational resilience at the centre of everthing StoneCo does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– StoneCo has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled StoneCo to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that StoneCo 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 Software & Programming industry
- digital transformation varies from industry to industry. For StoneCo digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. StoneCo 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.
Successful track record of launching new products
– StoneCo has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. StoneCo 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.
Effective Research and Development (R&D)
– StoneCo has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – StoneCo staying ahead in the Software & Programming industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the StoneCo 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.
Highly skilled collaborators
– StoneCo has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Software & Programming industry. Secondly the value chain collaborators of StoneCo have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of StoneCo | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of StoneCo are -
Increasing silos among functional specialists
– The organizational structure of StoneCo is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but StoneCo needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help StoneCo to focus more on services in the Software & Programming industry rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, StoneCo 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 Software & Programming industry using digital technology.
High dependence on StoneCo ‘s star products
– The top 2 products and services of StoneCo still accounts for major business revenue. This dependence on star products in Software & Programming industry has resulted into insufficient focus on developing new products, even though StoneCo has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of StoneCo, it seems that company is thinking out the frontier risks that can impact Software & Programming 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.
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 StoneCo supply chain. Even after few cautionary changes, StoneCo is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left StoneCo vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at StoneCo, in the dynamic environment of Software & Programming industry it has struggled to respond to the nimble upstart competition. StoneCo has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, StoneCo is slow explore the new channels of communication. These new channels of communication can help StoneCo to provide better information regarding Software & Programming products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring in Software & Programming industry
– The stress on hiring functional specialists at StoneCo 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.
Compensation and incentives
– The revenue per employee of StoneCo is just above the Software & Programming 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.
High cash cycle compare to competitors
StoneCo has a high cash cycle compare to other players in the Software & Programming industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– From the outside it seems that StoneCo needs to have more collaboration between its sales team and marketing team. Sales professionals in the Software & Programming industry have deep experience in developing customer relationships. Marketing department at StoneCo can leverage the sales team experience to cultivate customer relationships as StoneCo is planning to shift buying processes online.
StoneCo Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of StoneCo are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects StoneCo can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help StoneCo to increase its market reach. StoneCo 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.
Creating value in data economy
– The success of analytics program of StoneCo has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help StoneCo to build a more holistic ecosystem for StoneCo products in the Software & Programming industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– StoneCo can develop new processes and procedures in Software & Programming 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, StoneCo 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 StoneCo to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at StoneCo 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 Software & Programming industry.
Redefining models of collaboration and team work
– As explained in the weaknesses section, StoneCo is facing challenges because of the dominance of functional experts in the organization. StoneCo can utilize new technology in the field of Software & Programming industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for StoneCo 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Software & Programming industry, but it has also influenced the consumer preferences. StoneCo can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions in Software & Programming industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for StoneCo in the Software & Programming industry. Now StoneCo can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– StoneCo can improve the customer journey of consumers in the Software & Programming 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for StoneCo in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Software & Programming industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– StoneCo 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.
Threats StoneCo External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of StoneCo are -
Increasing wage structure of StoneCo
– 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 StoneCo.
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 StoneCo in Software & Programming industry. The Software & Programming 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, StoneCo may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Software & Programming sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, StoneCo 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 StoneCo prominent markets.
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 StoneCo.
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 StoneCo in the Software & Programming sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– StoneCo 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 Software & Programming 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. StoneCo needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.
Regulatory challenges
– StoneCo 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 Software & Programming industry regulations.
Environmental challenges
– StoneCo 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. StoneCo can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.
Easy access to finance
– Easy access to finance in Software & Programming industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. StoneCo can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. StoneCo 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.
Weighted SWOT Analysis of StoneCo Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at StoneCo 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 StoneCo 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 StoneCo 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 StoneCo 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 StoneCo needs to make to build a sustainable competitive advantage.