Business environment analysis is important for keeping the track on constant changes happening in the industry as well as in some external environment of an organization. This study will analyze micro and macro environment of Visa Inc in two parts named as external analysis and internal analysis. All the necessary results will be discussed in this report afterward.
An American multinational financial services corporation, Visa Inc facilitates ‘electronic funds transfer’ around the world and headquartered in California, U.S.A. Electronic funds transfer operated through debit cards, credit and gift cards across the globe. According to the current results of the last financial year, the organizational revenue is around US$18.358 billion and net organizational income is around US$6.699 billion (usa.visa.com, 2018). This large multinational organization has near about 15,000 employees in their offices.
This payments technology corporation communicates consumers, economic institutes, strategic planners, government entities through electronic payments. The ‘transaction processing network’ of Visa Inc helps settlement of payments transactions, clearing, and authentication. This organization is also facilitating its merchantclients and economic institutions different value-added services and awide range of products. A retail electronic payment network giant, this corporation mostly deals with core products like commercial, debit, credit, prepaid and others types of gift cards. Recently, Visa Inc is found to be developing a partnership with clients associated with customer experience, customer segmentation, product designs and so on (reuters.com, 2018). This organization connects, businesses, banks, consumers and government entities in approximately 200 countries including the emerging ones worldwide (usa.visa.com, 2018).
Visa Inc. falls under the financial services industry that encompasses a wide range of operations, which manage money consisting of banks, insurance organizations, credit card organizations, customer-finance businesses, investment funds, electronic payment organizations and others. The concise size of global financial services industry growth is difficult to measure as the calculation and collection of the World Bank data includes only 149 countries. However, it has been found out that financial services sector generally generate 20-30% of the total service market revenue and around 20% of gross domestic good in developed countries (Erhardt, 2018).
The supplier industries of financial services industries are banks, life insurance industries, causality and property insurance industry, government initiatives and others can be counted here. These supplier industry jointly helps in gaining around 60%of total financial services industry sales (Cummins and Weiss, 2016).
Organizations in the financial services industries are processed mainly for managing money. Across the world, the financial services industry leads the market in terms of equity market capitalization and earnings. Main pillar of the financial services industry is the commercial banks that provide services or processes like insurance of debit and credit cards, safeguarding services of deposits and others (Spring, 2018). There are investment banks that deal with the high-net-worth customers. On the other hand, the private equity funds supply different investment schemes or capital to organizations in exchange for the ownership stakes.
The demand industries is also increasing keeping pace with the rapid recovering rate of economy countries from the current economic downtown. The well-known demand industries of financial services industry are tourism industry, banks, retail industries, life insurance industries, hospitality industry and others (Pigou, 2016).
The financial services industry lifecycle also includes stages such as ‘emerging phrase’ where the debit card growth and banking development jointly facilitate in financials services growth. The two later phrases are ‘Growth phrase’ and ‘Mature phrase’ in which profit margins are calculated and growth of this industry in the market is established (richmondfed.org, 2018). The ‘declining phrase’ in the financial services industry is calculated through the downfall of profit margin and the demand in markets.
Figure 1: Life cycle stages of financial services industry.
(Source:richmondfed.org, 2018)
Development in digital technology has drastically change the landscape of financial services industry. Since the year 2011, the number of start-up businesses has developed more than 50%. According to the global financial services outlook, it could be said that well-known banks and insurance companies included in this industry will see moderate changes in their creditworthiness as well as performance in upcoming years (spratings.com, 2012). On the other hand, according to the current United States government report the financial services industry and insurance reflected around 7.5% of total US gross domestic products (selectusa.gov, 2018).
Figure 2: S&P global ratings analyst’s predictions for 2018
(Source: selectusa.gov, 2018)
The Asia specific was one of the largest entity in the financial services market, accounting for near about 41% of the market share (Sassen, 2018). North America, the second largest one possesses of around 34% of the market shares. Africa on the other hand, accounting for around 1% of the market share, is the seventh largest region in the financial services industry. According to the report on market size, the international volume of non-cash payments has mounted around $380 billion in 2014 (prnewswire.com, 2018).
Figure 3: The state of financial services industry
(Source: oliverwyman.com, 2018)
According to the pictured attached above, it can be noticed that the five year profit market and change in the value is changing and increasing.
Main risks in the current financial industry is the profitability loss from low international interest rates, cyber threats and the fundamental banking model from new market entries. Economic downfall also can be counted as one of the effective factors for the financial services industry across the globe (Hugeneet al., 2018).
One of the dominant market trends in this industry is the inclusion of digital technology, which has risen the growth of businesses around 50%(Hugeneet al., 2018). Banks provide trading applications and economic plans with the help of social media and smartphones. This is the reason there is a higher premium on the market performance of financial services institutions and IT teams.
Figure 4: Financial trends in 2017
(Source:Hugeneet al., 2018)
Apart from this digitalization and digital thinking, there are other trends that are also valuable for assuring growth in the financial services industry. The real-time risk decision will help in developing the enterprise-wide risk analysis process. Communicating with third-party suppliers for boosting consumer centrality is another major trend in this industry.
Major political and legal factors that Visa Inc. need to be careful of is military invasion as in the United States, military budget is calculated to be near about as much as the rest of the world’s defence spending together. This may affect on the profit margin of Visa Inc. legal framework for contract enforcement is another political concern here. The rules and regulations on minimum wage and overtime in U.S.A need to be maintained by this company. The anti-trust law in credit services industry, data protection laws are the vital ones that needs directly influence policy-making process of financial services organizations (Newman and Posner, 2018).
Despite confronting challenges in the internal market along with constantly changing international economic landscape, the United States economy is still standing as the largest and important across the globe (Gilpin, 2018). The global output rate is around 20% and still larger than China. These factors are effective for the growth of Visa Inc in near future.
In United States and around the world sociocultural behaviours of customers are changing, which caused larger investments and use of financial plans in personal and enterprise level. This development in use of finance in the daily businesses is helpful for Visa Inc in future organizational growth.
With increasing population, educational skills and working population in U.S.A, the outlook for credit services industry is also changing rapidly (Rosenberg, 2018). This may have an effect on the organizational culture and workforce division in Visa Inc.
Major technological advancement that can have an impact on the organizational processes and operations is the development of social media marketing and digitalization.
Global factors included all the external factors discussed previously in the report and their influence on the performance of Visa Inc. in the global market. The changing political scenario in theUK, U.S.A,andthe other Asia Pacific regions may have a serious impact on the operations of this company (Hirst et al., 2015). On the other hand, the current global recession is another key factor that has a negative impact on the profitability margin of Visa Inc.
Major driving contextual forces for the future are economic conditions and technological growth. These two external forces can prove to be a ban or boon for the future development of Visa Inc if not taken into consideration now and act according to the changing environment involve in these two driving forces.
Threats of new entrance in this industry are high. New entrants in credit services industry bring forth innovation, new ways of doing business and eventually pressure on Visa Inc increased.
The bargaining power of suppliers in credit services industry is sometimes moderate to high and sometimes high. Suppliers in the leading position can reduce the margins Visa Inc. can earn in their domestic market (Bashir et al., 2016).
The bargaining power of suppliers in this industry is high and this put pressure of Visa Inc. by affecting the profitability in long run.
The threat of substitutes in this industry could be high when it provides a value proposition, which is different in an unique way from current services of the industry (Bashir et al., 2016).
The credit service industry in U.S.A is high, which can effect on the price value and overall profitability of Visa Inc.
Current industry competition in the credit services industry is high, which influences down prices and reduction in the entire profitability of the industry in U.S.A.
As per the respective market share ratio, it could be said that major competitors of Visa Inc in the credit services industry are Discover, which holds market share around 8.1%. The other major competitor of Visa Inc. is MasterCard that holds market share around 31.6% (Owler, 2018).
Number of minor competitors of the company is not broad. Under this category falls Capital one, which has total revenue of $29.1B and on the other hand, US bank that has earned organizational revenue of around $21.6B (Owler, 2018).
Figure 5: Strategic road map
(Source: usa.visa.com, 2018)
Figure 6: Strategic roadmap
(Source:usa.visa.com, 2018)
The anticipated strategic move of Visa Inc. could be modifying their existing products by discounts and offers on credit cards and should take initiatives on card penetration and digitalization so that the competitive advantage could increase (sec.gov, 2018).These operations falls under the new entry category in the domestic market.
Organizational Analysis
The corporate mission statement is listed below;
“We are a global payments technology company working to enable consumers, businesses, banks and governments to use digital currency” (usa.visa.com, 2018).
The corporate vision statement is listed below;
“to create the world’s best way to pay and be paid for everyone, everywhere. Today, this idea is as relevant and purposeful as it has ever been” (usa.visa.com, 2018).
Leadership at visa combines professionalism and team working spirit to boost its business towards brand management, innovative network, operational activities and sales growth (Investor.visa.com, 2018). The corporate culture at Visa shows respect for each individual and providing significant career opportunities to people.
The corporate structure in Visa is regionally decentralized. According to legal terms, it has been made up of four nonstock, individually incorporated organizations recruiting around 6000 employees across the globe.
The tangible resources or assets list of Visa Inc include their branches all over the world and the total current liability is $10,934, which includes the recent position of long-term debt, Accounts payable and others (usa.visa.com, 2018).
Apart from brand recognition and goodwill of the company, Visa obtained intangible assets through fair value acquisition. Other intangible resources consist of relationship with consumers, supplier relationship and others (annualreports.com, 2018).
The capabilities of this organization can bed understood by their service capabilities in detail that are international payment technology organization, leading transaction-processing network and capabilities in offering operational and processing systems in banks (usa.visa.com, 2018).
Profitability of last three years of Visa Inc. is listed below;
2015: was $6.328B, a 16.37% upsurge from 2014.
2016: was $5.991B, a 5.33% decrease from 2015.
2017:was $6.699B, an 11.82% growth from 2016 (annualreports.com, 2018).
Figure 7: Management effective ratio of Visa Inc.
(Source:Editorial, 2018)
Changes in working capital arelisted below.
Figure 8: The changes in working capital
(Source: Editorial, 2018)
Figure 9: Liquidity ratio of Visa Inc.
(Source: quotes.wsj.com. 2018)
From the above financial information, it has been noticed that Visa Inc has been experiencing effective organizational growth from the financial year 2016, which is around 11.82%. on the other hand, the market value of the last three years is listed below.
The annual market value of Visa Inc “improved from Sep. 2015 ($169,225 Mil) to Sep. 2016 ($198,966 Mil) and increased from Sep. 2016 ($198,966 Mil) to Sep. 2017 ($245,933 Mil)”.The quarterly market value“developed from Dec. 2017 ($264,513 Mil) to Mar. 2018 ($276,959 Mil) and increased from Mar. 2018 ($276,959 Mil) to Jun. 2018 ($303,692 Mil)” (annualreports.com, 2018).
Changing in the current market performance and keeping this growth scale could help this company to achieve new profitability records and eventually increase in market share.
Visa is trying to make a suite of skills so that the consumers can embrace the disruption of payments as well as deliver payment experiences that are innovative.
The value chain model adopted by Visa starts with inbound logistics analysis and ends with market analysis and service providence. This organization is trying to moderate their products through innovations across various service platforms and committed to making the network-based payments(annualreports.com, 2018). These processes will prove to be adding effectiveness and value to the future operations of this organization.
Precisely, this organization should make a rationale for providing scale, infrastructure and expertise for the payment eco-system clients.
The current strategy of Visa Inc is to provide customer facilities and incorporate product innovation to strengthen brand equity (usa.visa.com, 2018).
The strategic goal of this company is “making sure that Visa is the best way to pay and be paid, for everyone everywhere” (usa.visa.com, 2018).
Objectives of this company are;
Financial objectivesare listed below.
Financial goal of this company is “From advancing financial inclusion to helping in times of crisis, we’re using our products, know-how and philanthropy to bring about positive change” (usa.visa.com, 2018).
Swot analysis is listed below;
Strengths: This organization has the largest market share around the globe. Currently, the international network of this company has processed more than 62 billion transactions (usa.visa.com, 2018).
Weaknesses: This organization has still litigation risks and high exposure to cybersecurity risks along with frauds.
Opportunities: Visa could launch a cashless economy to emerging countries and economies.
Threats: Dwells in the high competitive market environment and stringent financial policies worldwide is another threat of this company (usa.visa.com, 2018).
From the above description of the strategic position, it could be understood that except from the effective organizational and market scenarios, this organization needs to be little more concern about the changing business atmosphere to avail achievement of objectives and avoid interruptions or downfall in business profitability.
In TWOS analysis of Visa Inc. here the SO (strength and opportunity strategy), WO( weakness and opportunity strategy), ST (strength and threat strategy) and WT (weakness and threatstrategy) will be proposed.
|
SO (strength and opportunity strategy) · Should invest in emerging countries with cashless payment objective. |
WO( weakness and opportunity strategy) · Modify the security channels when entering a new market. |
|
ST (strength and threat strategy) · Invest in new startups to achieve competitive advantage |
WT (weakness and threat strategy) · Upgradation of the financial policies with modification of security channels. |
Table 1:TWOS analysis
(Source: Created by the learner)
The first recommendation is to move to digitalization.
Rationale
Due to increase in the digitalization, the financial services industry is thriving for more internet usersin the processes of credit card organization. In this time Visa Inc. should think about investing in this sector.
Objectives
By achieving this objective, Visa Inc. could avail competitive advantage and reduce competitive rivalry in the long run.
This organization should process towards merger and acquisition or strategic alliances with promising organizations.
Rationale
As described above, it is necessary to focus on developing business channels and increase market share as the domestic market is highly competitive.
Objectives
Long-Term Strategic Benefits
This achievement will bring profit to the organization in long-run.
The last recommendsssation should be change productivity management and recruiting more professionals with financial knowledge.
References
Annualreports.com (2018). [online] Annualreports.com. Available at: https://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_V_2017.pdf [Accessed 8 Oct. 2018].
Bashir, M., Yousaf, A. and Verma, R., 2016. Disruptive business model innovation: How a tech firm is changing the traditional taxi service industry. Indian Journal of Marketing, 46(4), pp.49-59.
Cummins, J.D. and Weiss, M.A., 2016. Equity capital, internal capital markets, and optimal capital structure in the US property-casualty insurance industry. Annual Review of Financial Economics, 8, pp.121-153.
Editorial, R. (2018). ${Instrument_CompanyName} ${Instrument_Ric} Company Profile | Reuters.com. [online] U.S. Available at: https://www.reuters.com/finance/stocks/company-profile/V.N [Accessed 8 Oct. 2018].
Editorial, R. (2018). ${Instrument_CompanyName} ${Instrument_Ric} Financials | Reuters.com. [online] U.S. Available at: https://www.reuters.com/finance/stocks/financial-highlights/V.N [Accessed 8 Oct. 2018].
Erhardt, E.C., 2018. Firm performance after high growth: A comparison of absolute and relative growth measures.
Gilpin, R., 2018. The challenge of global capitalism: The world economy in the 21st century. Princeton University Press.
Hirst, P., Thompson, G. and Bromley, S., 2015. Globalization in question. John Wiley & Sons.
Hugener, C., Courbe, J. and Mavros, K. (2018). 2017 Financial Services Trends. [online] Strategyand.pwc.com. Available at: https://www.strategyand.pwc.com/trend/2017-financial-services-trends [Accessed 8 Oct. 2018].
Investor.visa.com. (2018). Visa Inc. – Corporate Governance – Management Team. [online] Available at: https://investor.visa.com/corporate-governance/management-team/default.aspx [Accessed 8 Oct. 2018].
Newman, A.L. and Posner, E., 2018. Voluntary Disruptions: International Soft Law, Finance, and Power. Oxford University Press.
Oliverwyman.com (2018). [online] Oliverwyman.com. Available at: https://www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2017/jan/The%20State%20of%20the%20Financial%20Services%20Industry%202017.pdf [Accessed 8 Oct. 2018].
Owler. (2018). Visa Competitors, Revenue and Employees – Owler Company Profile. [online] Available at: https://www.owler.com/company/visa [Accessed 8 Oct. 2018].
Pigou, A.C., 2016. Industrial fluctuations. Routledge.
Prnewswire.com. (2018). Financial Services Global Market Report 2018. [online] Available at: https://www.prnewswire.com/news-releases/financial-services-global-market-report-2018-300600616.html [Accessed 8 Oct. 2018].
Quotes.wsj.com. (2018). V Financial Statements – VISA Inc. Cl A – Wall Street Journal. [online] Available at: https://quotes.wsj.com/V/financials [Accessed 8 Oct. 2018].
Richmondfed.org (2018). [online] Richmondfed.org. Available at: https://www.richmondfed.org/-/media/richmondfedorg/publications/research/working_papers/2015/pdf/wp15-08.pdf [Accessed 8 Oct. 2018].
Rosenberg, D., 2018. Introduction. In Israel’s Technology Economy (pp. 1-16). Palgrave Macmillan, Cham.
Sassen, S., 2018. Cities in a world economy. Sage Publications.
Sec.gov. (2018). Visa Inc. Presentation. [online] Available at: https://www.sec.gov/Archives/edgar/data/1403161/000119312511135221/dex992.htm [Accessed 8 Oct. 2018].
Selectusa.gov. (2018). Financial Services Industry Spotlight | SelectUSA.gov. [online] Available at: https://www.selectusa.gov/financial-services-industry-united-states [Accessed 8 Oct. 2018].
spratings.com (2012). [online] Spratings.com. Available at: https://www.spratings.com/documents/20184/86957/Global+FS+Outlook+2018/e41d7363-1ef0-4682-8a38-0789da9581ea [Accessed 8 Oct. 2018].
Spring, J.H., 2018. In service to the state: The political context of higher education in the United States. In The Academy in Crisis (pp. 45-68). Routledge.
Usa.visa.com. (2018). Access Denied. [online] Available at: https://usa.visa.com/about-visa.html [Accessed 8 Oct. 2018].
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download