Introduction
There are a wide range of tools that business enterprises deploy in an attempt to assess not only their competitive position, but also their performance. Some of the said tools are inclusive of, but they are not limited to; SWOT analysis and portfolio analysis. These tools are of great relevance to both large and small/medium enterprises. They can also be applied to mature businesses as well as businesses that are just starting out. This text concerns itself with Securitize, one of the startups in FinTech. Assuming the role of Securitizes CEO, I will assess the advantages and disadvantages of each of the two approaches identified above (i.e. SWOT analysis and portfolio analysis), and consider how each approach could be applied to the company.
Discussion
Company Background
Over the last few years, a number of startups have mushroomed in FinTech. These are inclusive of, but they are not limited to; Securitize, Coinbase, Opendoor, Paydiant, Spur, Chima, Ripple, etc. Having been founded in the year 2017, Securitize was born out of a mission to decrease friction and create liquidity in the private sector (Securitize, 2022). The founders of the company saw the need to ensure that limited partners had access to both liquidity and automation. In so doing, they sought to deploy blockchain technology. It is important to note that in the past, limited partners have been largely deemed illiquid. One of the stated goals of Securitize happens to be ensuring that all of the digital assets of the world are made digital (Securitize, 2022). Some of the companys key competitors at present are inclusive of, but they are not limited to; Wanchain, Quantstamp, Kadena, and TokenGet. The company is based in San Francisco, CA.
SWOT Analysis
SWOT, as Wheelen, Hunger, Hoffman, and Bamford (2018) indicate, happens to stand for Strengths, Weaknesses, Opportunities, and Threats. It is one of the most widely used tools in strategic management. In the case of Securitize, SWOT analysis would be instrumental in our efforts to assess the competitive position of the enterprise. An assessment of this nature would enable us to come up with, or formulate, a viable and effective strategic plan. The identification of the various Strengths and Weaknesses (highlighted elsewhere in this text) will be of great relevance in the evaluation of the firms internal environment. On the other hand, the identification of the various Opportunities and Threats (also highlighted elsewhere in this text) will be key in the evaluation of the external environment of Securitize.
Benefits
To begin with, and perhaps most obviously, SWOT analysis permits a multilevel analysis (Amason, 2011). This is to say that the tool does not have to be analyzed as a whole for its benefits to be realized. Thus, at Securitize, we could gather key insights about the company or the environment in which it operates by focusing of a specific category, i.e. strength, weakness, opportunity, or threat. However, for a comprehensive view of the competitive position of Securitize, there would be need to make use of all the category in combination.
Secondly, in comparison to other assessment tools such as portfolio analysis and financial ratio analysis, SWOT analysis happens to be a rather easy tool to apply. This is to say that it does not require complex analysis or computations. Thus, Securitizes SWOT analysis could be undertaken by any of the executives (or teams) that the organization already has in place i.e. with no need to hire an external consultant. All that would be required for successful SWOT analysis in the case of Securitize will be knowledge of the various business operations the company is presently engaged in, as well as knowledge of key industry trends. It should also be noted that as a results of the said simplicity, this particular approach is also cost effective. It does not require significant investment in terms of time, human resources, and money.
Third, it would also be prudent to note that SWOT analysis could be deployed on multiple fronts within the company. For instance, we could apply this particular tool to the entire organization or a certain organizational unit. Further, the versatile nature of the approach means that we could apply it to any of Securitizes key business processes with an intention of evaluating viability.
Downsides
In as much as SWOT analysis clearly has certain undeniable advantages, it should be noted that there are also a number of shortcomings that we should be aware of in the deployment of this particular tool. One such shortcoming is the fact that there would be no way of telling which of the elements captured or highlighted within the four categories is of greatest significance. This is to say that the approach would not provide us with clear cut weighing factors to more accurately guide or inform decision making. For this reason, we are likely to have a hard time ranking the various elements in the order of significance. This is more so the case given that for some reason or another, i.e. resource constrains, the company may not be able to address all the elements highlighted, i.e. as could be the case with elements under weaknesses and threats.
Next, it should also be noted that SWOT analysis, as Amason (2011) points out, could be somewhat ambiguous. This, according to the author, is more so the case given that the tool advances what could be referred to as a one-dimensional model that places each identified element under the four categories (152). Thus, in the case of Securitize, each factor would have to be identified as either a strength, weakness, opportunity, or threat. The problem with this is that there are some elements which might not firmly fit under a single category. For instance, the companys global footprint could be considered a strength (as has been indicated elsewhere in this text). However, to some extent, this could also be a threat in terms of high cost of operation.
Third, Amason (2011) also indicates that this particular strategic analysis tool is not immune to subjective analysis. This, according to the author, is especially the case given that the bias of persons participating in the exercise could be reflected in the elements selected. Further, Amason (2011) is convinced that SWOT analysis has a rather short expiry date. For instance, external factors could change rather quickly, rendering a just completed Opportunities and Threats assessment stale. For this reason, there is a risk that in the deployment of this tool, Securitize might end up relying on inaccurate data that for decision making.
Practical Application
A: Strengths
In the case of Securitize, these could be perceived as all those factors that would come in handy in the companys efforts to achieve its mission. Thus, it should be noted that it is on the basis of the various factors highlighted below that Securitizes success can be further enhanced going forward. Securitize ought to build on these strengths.
i. Innovative
There is no doubt that Securitize happens to be one of the most innovative companies in FinTech. As a matter of fact, the company has in the past been recognized as a leading innovator in the realm of blockchain. More specifically, in 2020, with its industry-leading primary issuance and compliance platform, Securitize was recognized by CB Insights as a top 50 global innovator leveraging the blockchain, their first-ever ranking of the most promising companies within the blockchain ecosystem (Securitize, 2022). It therefore follows that Securitize has the capability to boost its bottom line via the formulation and implementation of new services, ideas, as well as processes. As a consequence, the company is likely to stay ahead of the competition going forward via the introduction of new services and adaptation of processes to better meet or address customer needs.
ii. Global footprint
Securitize has presence in various regions and jurisdictions. The companys six principal offie locations at present are: San Francisco, New York, Madrid, Tel Aviv, Tokyo, and Buenos Aires. The company is, thus capable of advancing its agenda and better meeting the needs of its customers across the world.
iii. First Mover Advantage
Securitize also has a first mover advantage owing to the fact that it is a pioneer in the digitization of private market securities on the blockchain (Securitize, 2020). More specifically, it would be prudent to note that Securitize happens to have been the first and only platform to fully integrate compliance protocol with regulated marketplace ATS and to enable live trading security tokens with Securitize Markets (Securitize, 2020). As a consequence, the company has clear advantage over competitors in this arena in terms of: access and size, network effects, recognition, and learning.
B: Weaknesses
These are all the factors that could make it difficult Securitize to not only achieve its potential, but also accomplish its mission. For this reason, there would be need to ensure that the said weaknesses are minimized owing to their negative influence on the growth as well as overall success of the enterprise.
i. Lack of Diversity at the Executive Leadership Level
The company is yet to fully embrace diversity in as far as the composition of its top executives is concerned. For instance, there is only one woman in its top leadership team which comprises of 10 individuals. Further, the company does not have an African-American in this particular team. This essentially means that decision-making efforts could suffer from lack of critical insight, especially with regard to cultural competence.
ii. Not a Registered Breaker-Dealer
As Crunchbase (2022) indicates, Securitize does not make offerings endorsement because it is yet to be registered as a broker dealer.
C: Opportunities
In basic terms, these are the various openings or chances that the external environment offers, and that could be of benefit to Securitize. For this reason, there would be need for Securitize to recognize and exploit these unique chances as they may not be available for long periods of time.
i. Expanding Market
The cryptocurency market size is fast-growing and by some estimates, it is expected to grow from USD 1.6 billion in 2021 to USD 2.2 billion by 2026, at a CAGR of 7.1% (Markets and Markets, 2021). This presents a unique opportunity for Securitize to further expand its market share, and thus bottom-line going forward.
ii. Strategic Partnerships/Alliances
Securitize could partner with various other enterprises so as to acquire new capabilities or gain access to new markets. For instance, crypto assets happen to be rather popular in Russia. However, the company could find it difficult to gain access to this particular market due to existing regulations on the establishment and operation of foreign companies, and other barriers to entry. With this in mind, Securitize could partner with a Russian company or enterprise operating in the digital securities realm so as to gain seamless access to this key market.
D: Threats
Finally, when it comes to threats, these are inclusive of all the external environment conditions and scenarios that could get in the way of Securitizes ability to better its performance or accomplish certain business goals. They may not be within the control of Securitize.
i. Government Regulation
Securitize operates in a market that could witness increased government regulation going forward. This is more so the case with the recent growth of the said markets, i.e. cryptocurencies. Already, there have been concerns about the possible use or utilization of certain digital assets in the commission of criminal activities. Further, most of the assets could be perceived as new innovative financial instruments or technologies. It is for these and other reasons that they could attract increased scrutiny from governments and the various regulatory agencies going forward.
ii. Competitors
With new and innovative products being introduced on a daily basis in this particular market, it is likely that Securitize will continue facing increased competition. Some of the key competitors of the firm are: Wanchain, Quantstamp, Kadena, and TokenGet.
iii. Economic Conditions
It is important to note that digital assets routinely face major fluctuations as a consequence of a constellation of factors that affect their demand and supply. One such factor is macroeconomic events. For instance, in case of a downturn in economic activity, people would have less disposable income, and thus less to apportion to such alternative assets.
Portfolio Analysis
As Wheelen, Hunger, Hoffman, and Bamford (2018) indicate, the relevance of portfolio analysis cannot be understated in efforts to promote sound decision-making in enterprises that have several products and businesses. In the present case involving Securitize, there would be need to make a determination as to how corporate performance could be further enhanced or improved via the management of its various services. This is where portfolio analysis comes in. This is a task that would most effectively be performed at the managerial level. Indeed, Wheelen, Hunger, Hoffman, and Bamford (2018) are categorical that portfolio analysis puts corporate headquarters into the role of an internal banker (206). Just as is the case with SWOT analysis, there are advantages and disadvantages of portfolio analysis.
Advantages
One of the key advantages of portfolio analysis happens to be that it inspires the top executives of an enterprise to assess the various business units of an organization (Wheelen, Hunger, Hoffman, and Bamford, 2018). Following the said assessment, goals can be formulated and resources assigned for each of the said units. Thus, in the case of Securitize, portfolio analysis will be an important tool in efforts to ensure proper planning as well as allocation of resources across the various business units.
Secondly, portfolio analysis could also come in handy in efforts to promote Securitizes management decision-making abilities. This is more so the case given that in this case, managers can be able to forecast and thus come up with more accurate future expectations.
Third, portfolio analysis, as Wheelen, Hunger, Hoffman, and Bamford (2018) observe, promotes communication due to its ability to come up with the relevant graphical depictions. For instance, as has been indicated elsewhere in this text, the BCG growth share matrix with its four segments – presents the relevant information in a graphical and easy to understand or comprehend manner. Thus, this is a tool that could be used at Securitize as a way to communicate the relevant information about the companys business units to various stakeholders within and outside the firm.
Disadvantages
One of the key disadvantages of portfolio analysis happens to be the fact that defining the market/product segments could be an uphill task. For instance, in the case of Securitize, it would be difficult to appropriately categorize the said segments or products under the four categories, i.e. stars, question marks, cash cows, and dogs. This is more so the case given that to a large extent, the company does not have multiple clearly defined strategic business units.
Secondly, portfolio analysis is largely founded on future estimates. This is to say that in the case of Securitize, there would be need to forecast the future using the relevant data. The downside on this front is that the said data could be inaccurate for one reason or another resulting in erroneous forecasts. Indeed, as Wheelen, Hunger, Hoffman, and Bamford (2018) indicate, portfolio analysis provides an illusion of scientific rigor, when in reality positions are based on subjective judgments (209).
Lastly, portfolio analysis would essentially limit us to the products that Securitize presently offers. This effectively means that the management could end up eing oblivious of the various other alternative ventures that could contribute even more to the companys bottom-line.
Practical Application
According to Wilkinson and Kannan (2013), there are a number of portfolio analysis approaches that have been proposed in the past. These are inclusive of Arthur D. little portfolio matrix, Anosoffs product-market growth matrix, market life cycle-competitive strength matrix, the BCG growth share matrix, etc. In the context of Securitize, the most ideal approach to make use of would be the BCG growth share matrix. This, as Wheelen, Hunger, Hoffman, and Bamford (2018) indicate, happens to be one of the most popular portfolio analysis approaches. There are four categories under which products could be placed on this front. These have been identified by Wheelen, Hunger, Hoffman, and Bamford (2018) as question marks, stars, cash cows, and dogs.
To begin with, dogs are representative of low market share and as Wilkinson and Kannan (2013) indicate, the probability of a product in this category to contribute significantly to the bottom line happens to be rather low. Cash cows, on the other hand rake in significant amounts of money with the profits earned in this case being significantly higher than costs incurred in the maintenance of market share. When it comes to stars, Wheelen, Hunger, Hoffman, and Bamford (2018) describe these as products that could be considered market leaders and whose contribution to the bottom line is still significant. However, products in this category are almost near their peak. Lastly, question marks, according to Wheelen, Hunger, Hoffman, and Bamford (2018), are new products with the potential for success, but needing a lot of cash for development (207).
At present, Securitize has two strategic business units: the primary market, and the secondary market. While the primary market largely involves institutional investors funding businesses that are just starting out, the secondary market comprises of digital asset securities trading. Both would be categorized appropriately following further assessment.
Conclusion
In the final analysis, I feel that SWOT analysis would be more beneficial than portfolio analysis. My assertion is on this front founded on the ease of application of this method and the fact that it provides a more accurate picture of crucial factors that could influence the success of the company going forward. In the case of Securitize, portfolio analysis would be an ineffective approach owing to the challenges likely to be involved in the assignment of products to the various categories.
References
Amason, A. (2011). Strategic Management: From Theory to Practice. Routledge.
Crunchbase (2022). Securitize. https://www.crunchbase.com/organization/securitize-inc
Markets and Markets (2021). Cryptocurrency Market. https://www.marketsandmarkets.com/Market-Reports/cryptocurrency-market-158061641.html
Securitize (2022). About Us. https://securitize.io/about-us#our-story
Wheelen, T., Hunger, J.D., Hoffman, A.N. & Bamford, C.E. (2018). Concepts in Strategic Management and Business Policy. Pearson Education
Wilkinson, T.J. & Kannan, V.R. (2013). Strategic Management in the 21st Century. ABC-CLIO.
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