Mastercard (MA) SWOT Analysis / TOWS Matrix / MBA Resources
Consumer Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Mastercard (Germany)
Based on various researches at Oak Spring University , Mastercard 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 , wage bills are increasing, challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, increasing household debt because of falling income levels,
cloud computing is disrupting traditional business models, 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 Mastercard can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mastercard, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mastercard 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 Mastercard can be done for the following purposes –
1. Strategic planning of Mastercard
2. Improving business portfolio management of Mastercard
3. Assessing feasibility of the new initiative in Germany
4. Making a Consumer Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Mastercard
Strengths of Mastercard | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mastercard are -
High switching costs
– The high switching costs that Mastercard 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 Mastercard digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Mastercard 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.
Organizational Resilience of Mastercard
– The covid-19 pandemic has put organizational resilience at the centre of everthing Mastercard does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Mastercard 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 Mastercard have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Mastercard 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.
Diverse revenue streams
– Mastercard is present in almost all the verticals within the Consumer Financial Services industry. This has provided Mastercard 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.
Learning organization
- Mastercard 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 Mastercard is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Mastercard emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Mastercard in the Financial sector have low bargaining power. Mastercard has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Mastercard to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Mastercard has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Mastercard 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 brand equity
– Mastercard has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Mastercard to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Mastercard has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Mastercard 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.
Ability to recruit top talent
– Mastercard is one of the leading players in the Consumer Financial Services industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of Mastercard | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Mastercard are -
Slow decision making process
– As mentioned earlier in the report, Mastercard 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. Mastercard 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.
High operating costs
– Compare to the competitors, Mastercard 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 Mastercard lucrative customers.
High dependence on Mastercard ‘s star products
– The top 2 products and services of Mastercard still accounts for major business revenue. This dependence on star products in Consumer Financial Services industry has resulted into insufficient focus on developing new products, even though Mastercard has relatively successful track record of launching new products.
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 Mastercard supply chain. Even after few cautionary changes, Mastercard is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Mastercard vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in Germany, Mastercard 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.
Ability to respond to the competition
– As the decision making is very deliberative at Mastercard, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. Mastercard has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– From the 10K / annual statement of Mastercard, 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.
Interest costs
– Compare to the competition, Mastercard 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, Mastercard is slow explore the new channels of communication. These new channels of communication can help Mastercard 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.
Need for greater diversity
– Mastercard 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.
Low market penetration in new markets
– Outside its home market of Germany, Mastercard needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Mastercard Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Mastercard are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Mastercard 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Mastercard 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.
Buying journey improvements
– Mastercard 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.
Manufacturing automation
– Mastercard 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 Mastercard 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.
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. Mastercard can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Mastercard is facing challenges because of the dominance of functional experts in the organization. Mastercard 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.
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. Mastercard 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. Mastercard 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 Mastercard in the Consumer Financial Services industry. Now Mastercard can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Mastercard 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Mastercard can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Mastercard 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 Mastercard to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Mastercard 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.
Threats Mastercard External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Mastercard are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Mastercard 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Mastercard 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Consumer Financial Services industry are lowering. It can presents Mastercard 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.
Environmental challenges
– Mastercard 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. Mastercard 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 Mastercard 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.
Regulatory challenges
– Mastercard 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.
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. Mastercard 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.
High dependence on third party suppliers
– Mastercard 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 acceleration in Forth Industrial Revolution
– Mastercard has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, Mastercard 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.
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 Mastercard in the Consumer Financial Services sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Mastercard 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 Mastercard 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.
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.
Weighted SWOT Analysis of Mastercard Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Mastercard 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 Mastercard 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 Mastercard 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 Mastercard 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 Mastercard needs to make to build a sustainable competitive advantage.