Introduction
MasterCard Incorporated is a multinational financial services provider listed on the New York Stock Exchange. MasterCard provides electronic payment cards and other financial services for banks in the United States and around the world. This report will focus on the business environment within which MasterCard operates and how its internal and external environments interact to define its current status as financial service provider. This will include the company analysis which will be an inquest into the internal elements of MasterCard and its activities. The competitors and competition processes faced by MasterCard will be considered. Then the research will provide recommendations on how MasterCard can improve its operations and offerings.
Company Analysis
MasterCard was incorporated in 2001as a technology company which was to connect consumers, financial institutions, merchants governments and businesses across the globe. MasterCard is a major brand that is known throughout the world. It is a system that integrates well with financial intermediaries and helps them to provide a mobile system for transferring and using funds.
Company Resources
MasterCard fundamentally allows users to make payments with various payment solutions branded under their logo. They provide credit and debit cards that are linked to the accounts of various entities. This includes three main card systems attached to banks – MasterCard, Maestro and Cirrus.
Core Competency
The core competency of MasterCard includes the following:
Connect strategic partners including consumers, merchants and financial institutions;
Maintain high technology and innovative systems meant to enable people to connect and attain their goals;
Conduct research to improve safety and security amongst users;
Promote financial inclusion and attain legal and regulatory goals or ends across the globe and enable international transactions to be completed
Capabilities
MasterCard has a leverage across the globe. It is a brand that is known throughout the world and there are many nations where it is represented. Due to its flexible nature, the company’s cards can be used in many different jurisdictions with many different languages without issues. This makes the MasterCard brand a strong brand that is known all over the world.
MasterCard is an agglomeration of extremely intelligent and successful professionals. These are experts who have devoted most of their lives to the attainment of a better framework for the conduct of international business and the transfer of legally accepted amounts of money across different jurisdictions.
MasterCard is also known for having the systems and methods for detecting fraud and error. This is an almost foolproof system that works in ways that ensures that all transactions involving MasterCard is of a sufficiently high quality and no kinds of theft and interbank inconsistencies would occur. This makes MasterCard a better and more viable option than its competitors and other local options.
MasterCard is a well-capitalized company. It had a revenue of almost $9.5 billion in the 2014 financial year. The company has a net profit of about $3.8 billion and it had an asset base of over $16 billion. This makes it one of the most successful tech companies in the world. MasterCard therefore has the propensity to expand into other jurisdictions and pursue various expansionist projects for the attainment of higher and better results.
Value Chain of MasterCard
Value Chain refers to the process through which a company combines primary and secondary functions in order to provide services for the market. MasterCard creates value from the following primary and secondary activities.
Primary Activities
Inbound Logistics: This includes the card processing system and elements that are collected through a network of plants that produces the basic elements of their cards which are distributed to various financial institutions around the world.
Operations: MasterCard’s core operations include the central data processing system that enables MasterCard to link data and information from various servers. This is a process through which MasterCard operates as an intermediary between consumers and merchants/financial institutions.
Outbound Logistics: This is a process through which MasterCard delivers its cards to various financial intermediaries and processes. This helps them to give a point of contact to their consumers.
Marketing and Sales: MasterCard continuously seeks new partnerships and maintains its partnerships. This unit of the financial intermediary is fundamentally positioned to provide various forms of connection with suppliers and this include direct contacts, company representation and after-sales services.
Service: This company’s activities include various brands that are in the form of services including the Maestro card, Master card and several other cards. These are services that link clients with their financial institutions when they make purchases with merchants.
Support Activities
Research and Development: As a tech company, R&D is the most important aspect of MasterCard’s operations and activities. R&D allows the company to stay ahead of its competitors and also control fraud and error.
Human Resource Management: MasterCard has a staff base that is responsible for HR and administration of workers’ activities.
Legal and Compliance: These are the units that deal with the lawsuits and the adherence to local and international law.
Finance and Accounting: This is in charge of analysis and other financial elements necessary for budgeting and financial and economic matters.
Strategic Management: This is the top level management unit that is responsible for the evaluation of various matters in the market that relates to the company and provides solutions that are meant to improve and enhance affairs.
Company Segmentation
MasterCard’s Organizational Chart shows that there are three main segments in the company based on function:
Decision-makers: Marketing Department & Senior HR unit;
Influencers: Human Resource Management & Technology Unit;
Recommenders: Sales & Procurement Unit
The decision-markers are the most important unit of the company. This is because MasterCard uses an emergent management system and approach. This include a system of positioning the company on the basis of what consumers on the market want. Thus, the marketing unit of the company is the most important and most vital unit of MasterCard and their operations. As part of the HR unit’s function, they have to provide recommendations. This involves a small part of the HR function (10%) that is responsible for taking consumers’ inputs and observations from the markets in order to gain data for empirical decision-making in order to influence choices.
Thus, the HR and Marketing units are the most important segments of MasterCard and its organizational system. However, the HR and Technology unit also influences decisions and choices of the company. This makes them an equally vital and important unit. Procurement is an important aspect of the company’s function that make recommendations alongside sales.
Competitor Analysis
Competitor analysis is done by examining Porter’s Five Forces. This includes the examination of four key players:
Threat of New Entrants: This is the possibility of new players entering the industry. In the case of MasterCard, this is quite easy, but in order to succeed and become a great competitor against MasterCard, a tech intermediary will need to raise a lot of capital and seek international leverage. This is not something that will come easily to the average organization. As such, it is a Moderate threat and MasterCard has options to neutralize and supersede such new entrants.
Threat of Substitution: This is the possibility that consumers might turn to alternatives. These alternatives on the market include Bitcoin and Perfect Money. These are digital currencies that people could use to make payments. The threat from these entities are Moderate.
Bargaining Power of Suppliers: This is the possibility that financial intermediaries and other merchants could come together to provide alternatives to MasterCard’s electronic money. This is quite Low because it is very difficult for these companies and their related entities to set up their processes in order to gain the level of scope and scale as MasterCard.
Bargaining Power of Buyers: This is the possibility that buyers or cardholders could come together to form something that will control the market. This risk is low since the ability of buyers to control the market is almost close to zero.
Competitive Rivalry: This is about rivalry amongst entities within a given market. In this case, MasterCard is directly threatened by VISA, American Express, JCB, UnionPay, PayPal and Amazon. These are large corporations that provide financial intermediary services to consumers around the world. The competition in this area is High because these companies have the same scope and scale as MasterCard and can fund major expansionist drives and seek to control large chunks of market share.
The two major forces include competitive rivalry and the possibility of substitutes. MasterCard was lagging behind its primary competitive rival – VISA until 5 years ago when they made some changes. MasterCard liberalized its systems and sought to expand into emerging markets. MasterCard promoted flexibility and marketed their brand through third-party merchants. This made their cards popular around the world.
External Environment Analysis
The external environmental analysis include a number of things that can be defined from the PEST Analysis which include the Political, Economic, Social and Technology.
Political: This is a period of uncertainty as the US President, Donald Trump is seen as a generally unpredictable person. As such, his policies are unfolding. Thus, MasterCard will need to be cautious. It is apparent that the US is going to move towards a supply-side system of macroeconomics. As such, it is necessary for MasterCard to wait a bit and study the environment. If it is supply side, they will have to invest in working with strong merchants and financial intermediaries rather than targeting mass consumers.
Economic: The global economy is set to move towards a supply-side system. Trump has promised to reduce taxes on businesses. As such, it is likely that MasterCard can consider asset expansions and infrastructure in the coming years.
Socially: The world is moving towards individualism. As such, it is necessary for MasterCard to target people and promote privacy amongst consumers and target individuals.
Technologically: Fraud remains a major issue and people seek security. Thus, it is necessary for MasterCard to pursue a system of fraud detection and customer safety measures.
SWOT Analysis
The table below shows the level of strengths and weaknesses of MasterCard. This is a major balance that cusps into opportunities and threats that could create various circumstances and situations.
The greatest strength of MasterCard is its strong brand name which is known all over the world. Many banks and financial institutions use it. The spread and leverage around the world makes MasterCard a major asset. Also, the technological superiority of MasterCard makes it a major preferred brand for financial activities. Consumers prefer it because it is convenient and powerful in dealing with their needs and requirements.
The most significant weakness is the fact that it operates only online and is opened to major security breaches. Also, the fact that MasterCard is opened to activities, there are many possibilities for legal disputes for the brand and its products.
Strategic Recommendations
The following strategic recommendations are appropriate to MasterCard:
Diversification of the portfolio by purchasing other digital currency and financial institutions. This will help them to compete and balance their risks.
MasterCard must expand strategically into emerging economies and nations like India and in Africa where the use of digital currency is growing. This will help them to gain more benefits and grow with the emerging economies who have higher populations.
MasterCard will have to invest in research and development in order to consistently stay ahead of the competition. This way, they can find better security measures and improved methods of serving their clients.
They should consider a system of vertical integration where they will acquire other similar entities in the industry and work with them to attain the best of results in everything they do.
References
Johnson, G., Scholes, K., & Whittington, R. (2014). Exploring Corporate Strategy. New York: Prentice Hall.
OrgChartCity. (2015, November 6). MasterCard Org Charts video by OrgChartCity. Retrieved from https://www.youtube.com/watch?v=PmV6dqsyrWc
Porter, M. E., & Kramer, M. R. (2006). Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review, 1-15.
Reuters . (2017, January 26). Masercard Inc (MA.N) . Retrieved from Reuters: http://www.reuters.com/finance/stocks/companyProfile?symbol=MA.N
SEC Edgar. (2015, December 4). MasterCard Incorporated. Retrieved from SEC: https://www.sec.gov/Archives/edgar/data/1141391/000114139115000011/ma12312014-10xk.htm
