Santander Consumer Finance Harvard Case Solution & Analysis

Santander Consumer Finance Case Study Solution

Weaknesses

High reliance of SCF over dealers and retailers for bringing new clients is one of the major weaknesses of SCA. The huge reliability increase the rate of commission and results in low profit margins. Another major weakness is the low control over internal operations due to vast geographical spread.

Opportunities

Along with several problems faced by the bank, there are numerous opportunities which can be exploited to improve current financial performance. The opportunities lies in expanding towards those countries which have low average number of cars per inhabitants including China, Brazil and India.Another opportunity lies in the shift of US financial market towards non-auto consumer lending market. The market segment if captured effectively would benefit by increasing revenues.

Threats

Increase in more regulatory practices and expansion of car manufacturing captives are two major threats for SCF. Increased regulations regarding data transfer, interest rate caps etc. would impact the SCF operations inside and outside Europe. Along with it, increase in captives of car manufacturers which allow lower rate finance to dealers, could also result in declining SCF clients.

PEST Analysis

Overall external forces affecting SCA’s performance can be analyzed by conducting PEST analysis. The analysis can also be used to analyze that why there are low cross border lending?

Political

Political forces for SCF include the regulations about the data transfer, interest rates, tax rates, process standards etc. As SCA runs in various countries with different political background, therefore it faces huge political forces, which pose several challenges and threats to the profitability of SCA.

Economic

Economic forces affecting the policies of SCA include overall economic conditions of the country where SCA is located, the saving and spending patterns of the people and the GDP per capita. Prosper economic conditions with high spending patterns and GDP per capita in developed countries enable SCA to attract more consumers.

Social

Social forces affecting the performance of SCA includes the population, cultural values and living standards of people. The bank focus on areas with high population having high income levels. The large the population the more the spending of consumer would be. People often prefer local financial companies with similar language and other cultural values forcing SCF to staff the local employees in its national affiliates.(David Gaulia, 2015)

Technological

Technological Forces are quite favorable with increase in data processing methods and technology, shift towards online transactions etc. enabling the company to conduct its operations more smoothly and manage its geographical presence effectively with high integration technologies.

Alternatives

Alternative 1: Go Further Expansion

SCA can further expand by acquiring various organizations and establishing joint ventures. The expansion could be towards emerging markets of Brazil, India and China as well as towards non-auto consumer lending market sector in US. (Brigham, 2016)

Pros:

• Higher Returns
• More number of Clients
• Risk Diversification
• Exposure to new markets
• Knowledge about potential financial practices.

Cons:

• More regulations
• Increased complexity in operations
• Risk of failures
• No improvement in internal operations

Alternative 2: Focus on Consolidation

The company can focus on consolidation rather than expansion to increase internal efficiency.

Pros:

• Improved internal operations
• Improved financial Performance
• Decline in reliance over Dealers
• Cost effectiveness
• Product development
• Better consumer experience
• Building brand

Cons:

• Depriving emerging market returns
• High focus on low return lending strategy

Alternative 3: Centralize Functions

Centralize majority of functions including funding, product development, data centers etc.

Pros:

• More efficiency in operations
• Performance Evaluation of each branch
• Standardized Process

Cons:

• Consumer dissatisfaction
• Low product improvement Chances
• Low flexibility

Alternative 4: Decentralize Functions

Provide autonomy to national affiliates.

Pros:

• Consumer Satisfaction
• More diversified products
• Flexibility

Cons:

• Complex Operations
• Low Standardization
• Low operational efficiency

Alternative 5: Standardize Process

Standardize policies and practices for all of the national affiliates.

Pros:

• Operational efficiency
• Low complexity
• Easy performance evaluation

Cons:

• Consumer Dissatisfaction
• Low Product improvement
• Low flexibility

Conclusion and Recommendations

With the deep analysis of SCF internal and external environment and evaluation of above alternatives, SCF is recommended to focus more on expansion rather than consolidation, as consolidation would provide a less benefit to SCA due to its presence in highly differentiated areas. Along with the company should centralize its functions regarding funding and performance evaluations and should decentralize its operations regarding data collection and product development to enable its non-European affiliates to access to potential data even after higher regulations about data transfer.The company should partially standardize its process by setting various standards to be followed by all the affiliates to bring somehow uniformity as well as allow some flexibility.

Exhibits

Exhibit A: SWOT Analysis

Exhibit B: PEST Analysis

This is just a sample partical work. Please place the order on the website to get your own originally done case solution.

Related Case Solutions & Analyses:

Estimating Demand for a New Regional Transport Aircraft (A) Event Arbitrage 10b5-1 Plans: Mortgaging a Defense against Insider Trading eSurg (B): Second Round Financing Learning with Cases Semprae Laboratories PHAR-MOR SCANDAL Case Analysis: DuPont Corporation Sale of Performance Coatings Hearts ‘R Us Preferred Stock Classification It Goverenance At Worthington