Zip (Z1P) SWOT Analysis / TOWS Matrix / MBA Resources
Consumer Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Zip (Australia)
Based on various researches at Oak Spring University , Zip is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, there is backlash against globalization, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%,
increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Zip can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Zip, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Zip 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 Zip can be done for the following purposes –
1. Strategic planning of Zip
2. Improving business portfolio management of Zip
3. Assessing feasibility of the new initiative in Australia
4. Making a Consumer Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Zip
Strengths of Zip | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Zip are -
Low bargaining power of suppliers
– Suppliers of Zip in the Financial sector have low bargaining power. Zip has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Zip to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Zip has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Zip staying ahead in the Consumer Financial Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Zip 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 Zip is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Zip emphasize – knowledge, initiative, and innovation.
Ability to lead change in Consumer Financial Services
– Zip is one of the leading players in the Consumer Financial Services industry in Australia. Over the years it has not only transformed the business landscape in the Consumer Financial Services industry in Australia but also across the existing markets. The ability to lead change has enabled Zip in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Zip is present in almost all the verticals within the Consumer Financial Services industry. This has provided Zip 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.
High brand equity
– Zip has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Zip to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Zip has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Zip 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.
High switching costs
– The high switching costs that Zip has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Digital Transformation in Consumer Financial Services industry
- digital transformation varies from industry to industry. For Zip digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Zip 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.
Superior customer experience
– The customer experience strategy of Zip in Consumer Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Zip 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 Zip have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of Zip comprises – understanding the underlying the factors in the Consumer Financial Services industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses of Zip | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Zip are -
Slow decision making process
– As mentioned earlier in the report, Zip has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Consumer Financial Services industry over the last five years. Zip 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.
Ability to respond to the competition
– As the decision making is very deliberative at Zip, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. Zip has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Zip 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.
Increasing silos among functional specialists
– The organizational structure of Zip is dominated by functional specialists. It is not different from other players in the Consumer Financial Services industry, but Zip needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Zip to focus more on services in the Consumer Financial Services industry rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Zip 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.
No frontier risks strategy
– From the 10K / annual statement of Zip, it seems that company is thinking out the frontier risks that can impact Consumer 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.
Skills based hiring in Consumer Financial Services industry
– The stress on hiring functional specialists at Zip 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 Zip 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Zip is slow explore the new channels of communication. These new channels of communication can help Zip 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.
Capital Spending Reduction
– Even during the low interest decade, Zip has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Consumer Financial Services industry using digital technology.
High bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in Australia, Zip is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Consumer Financial Services industry.
Zip Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Zip are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Zip is facing challenges because of the dominance of functional experts in the organization. Zip can utilize new technology in the field of Consumer Financial Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Zip 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Zip can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Zip in the Consumer Financial Services industry. Now Zip can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Zip can use the latest technology developments to improve its manufacturing and designing process in Consumer Financial Services sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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 Zip 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.
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. Zip can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Zip in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Consumer Financial Services industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– Zip 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.
Building a culture of innovation
– managers at Zip can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Consumer Financial Services industry.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Zip 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 Zip 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
– Zip 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Zip 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.
Threats Zip External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Zip are -
Stagnating economy with rate increase
– Zip 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.
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 Zip.
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 Zip in the Consumer Financial Services sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Zip in Consumer Financial Services industry. The Consumer Financial Services industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Consumer confidence and its impact on Zip 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.
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.
High dependence on third party suppliers
– Zip high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Consumer Financial Services industry are lowering. It can presents Zip 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.
Easy access to finance
– Easy access to finance in Consumer Financial Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Zip can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Zip has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, Zip 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.
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. Zip 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.
Increasing wage structure of Zip
– 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 Zip.
Weighted SWOT Analysis of Zip Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Zip 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 Zip 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 Zip 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 Zip 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 Zip needs to make to build a sustainable competitive advantage.