Mastercard Case
To-do list:
1. Strategic Position
1.1 Context
1.2 Capability
1.3 Culture
1.4 Purpose
2. In Between
2.1 SWOT Analysis
2.2 McKinsey 7s
3. Strategic Choices
3.1 Corporate and Business Strategies
3.2 Internationalization
3.3 Innovation
3.4 Merges and Acquisitions
1.1 Context
PESTEL (1st tool)
Political:
Government intervention and political instability in many markets may impact
business
Office of Foreign Assets Control (“OFAC”), who administers and enforces economic
and trade sanctions based on US (Mastercard’s origin country) foreign policy , sanctions
restrict operations in many countries
Real time, Account-based Payment Systems upheld as critical national
infrastructure invites stringent government oversight
Economical:
Volatility in the currency markets
Increased regulatory, legislative and litigation activity with respect to interchange
rates
Cross Border Payment solutions getting a fillip due to the induced lockdown and
travel bans because of COVID-19
Social:
Global shift towards usage of digital payments
Empowering people through inclusive growth
Revolutionize mobile payments through deepening ties with technology titans
Technological:
Digital payments and analytics to be critical growth drivers
Acquisitions to enhance technology competency
Environmental:
Managing environmental footprint by focusing on energy conservation, recycling
and pollution control
Mastercard Carbon Emissions Reporting program
Mastercard Doconomy to enable carbon footprint tracking of purchases
Legal:
Dynamic and rapidly evolving legal and regulatory environment
Data localization norms, transfer, and storage
Anti-money laundering, counter terrorist financing, economic sanctions and anti-
corruption
VUCAs (2nd tool)
Companies need to be Reliable, Trustworthy, Simple/Direct and
Clean/Understandable to be successful!
V – Volatility – Reliable
The rate of change in society, consumers and technology is growing and changing
apace. This is, of course, impacting brands and shaping the marketing agenda. 46
brands increased their value by more than $1bn in 2019 compared with 71 the
year before, while 26 brands declined in value by more than $1bn this year
compared with just 12 in 2018.
In 2019 Mastercard growed by 30%, which indicates us that it’s a company
valorised by their clients. Mastercard is accepted almost everywhere where credit
cards are used, and it’s a multinational company, so we can understand that is a
reliable company. In addition, Mastercard uses the latest payment technologies,
which greatly reduces potential theft. Thy are linked to sports and travel to create
empathy with costumers.
U – Uncertainty – Trustworthy
As we said before, it is an multinational company which makes us think that
Mastercard will be from the outset trustworthy. For any type of payment,
Mastercard provides payment security for consumers due to the variety of tools
they have for detecting and combating fraud.
C – Complexity - Simple/ Direct
The brand simplifies a process that could be very complicated. It makes any kind
of payment accessible anywhere
A – Ambiguity - Clear/ Understandable
The fact that MasterCard is present in both the credit card and transaction market,
as well as the great lack of literacy in these areas, means that their products are
not always clear to all customers.
Through advertising campaigns, they try to simplify everything and clearly show a
complex system
PORTER+ matrix (3rd tool)
Threats of new entrants:
New entrants in Credit Services bring innovation, new ways of doing things,
through, for example, the use of digital cards, such as PayPal. It also put pressure
on Mastercard through lower pricing strategy, reducing costs and new value
solutions to consumers.
Barriers to enter:
Licensure laws, capital requirements and security concerns. For example, all
Mastercard solutions must be compliant with Mastercard Compliance Assessment
& Security Testing.
Substitutes:
More and more. It used to be only Visa, but now it is beginning to be, as well,
PayPal, Capital One, Revolut…
Mastercard can diminish their substitutes, by being service oriented rather than just
product oriented, by increasing switching costs for the customers…
Bargaining Power of Suppliers and Consumers:
The number of suppliers in the industry is a lot compared to the buyers, which
means they have less control over prices and their products are fairly standardised,
easier to switch suppliers. This makes the bargaining power of suppliers a weaker
force.
Although they have more now, the buyers continue to have only a few firms to
choose from and do not have much control over prices. However, as it says on the
case, consumers are indifferent to their card, basing their selection on factors such
as functional benefits, so they easily replace the buyer, giving them a more
bargaining power.
Competition Analysis (4th tool)
C1 – Visa (as Mastercard is the unique that tries to make co-branded relationships;
they do partner to offer the broadest array of products encompassing credit, debit,
and prepaid card options; Visa and Mastercard do not issue cards directly to the
public, as Discover and American Express do, but rather through member financial
institutions.
C2 – PayPal (only payment solutions, by PayPal account), Capital one (credit
cards) American Express (credit cards) and Discover (credit cards)
C3 – Pay in money, checks…
C4 – What we are buying, we can try to produce ourselves, or we can make and
exchange of things that we have.
1.2 Capabilities
Distinctive capabilities, critical assets, and privileged relationships (1 st tool)
Capabilities:
Branding and promotion
Critical asset:
Huge brand. Known for extra reliability and security.
Privileged relationships:
Mastercard provides governments with solutions that help them reduce costs,
curtail fraud and corruption. Consequently, it is “well-treated” by them.
VRIN Analysis (2nd tool)
Valuable:
Mastercard is associated with social responsibility and regularly engages in
activities from this perspective. Mastercard also has an image of security that has
been created over time and is well recognised, for all the marketing done over the
years; it has a distinctive distribution system, due to its great partnerships with
other top brands in the sector. The company is very large and has great capacity
to raise capital, which is important so that the company can take advantage of
potential opportunities in the market, such as expansion, mergers and acquisitions.
Rare:
Mastercard has a presence in a large number of countries, and can adapt to
different cultures with ease, whether it be different laws and lifestyles, or with
different marketing campaigns; Moreover, it is present in the culture of MasterCard
that their employees are able to solve customers' problems, which facilitates the
whole process of market advantage.
Inimitability:
Mastercard offers products of great quality and consistency, and since it operates
in several countries, it allows its users to use its services almost anywhere in the
world. Through the technological evolution of their payment system and the
constant demand and expansion that the company has, they are always able to
have more competitive prices. Finally, all the marketing they have done in recent
years, adapting to the passing of time and places is also something inimitable.
Non substitutable:
The company offers a wide range of payment opportunities to customers which
makes them want to shop again and again.
1.3 Culture
Internal culture (1st tool):
Encourage openness
Work as one team to the benefit of all
Act with a sense of urgency and deliver value through innovation and execution
Empowered to take bold and thoughtful action
External culture (2nd tool):
Do not apply to this case, directly, since it is not a country’s case. However, as we
can see on the case, we live in an increasingly digital and innovative world, with
rapid consumption and extinction of products.
1.4 Purpose
Mission:
“Every day, everywhere, we use our technology and expertise to make payments
safe, simple and smart”.
Values:
“Trust: We act with integrity and respect; we encourage openness
Partnership: We work as one team to the benefit of all — consumers, merchants,
business partners, governments and the communities we serve
Agility: We act with a sense of urgency and deliver value through our innovation
and execution
Initiative: We are empowered to take bold and thoughtful action, and we hold
ourselves accountable for delivering results”
2.1 SWOT Analysis
Strengths:
Consistently strong financials with healthy balance sheet; Second highest market
share in payment cards segment; Implementation of latest payment technology;
value added service adds diversity, besides giving it a competitive edge
Weaknesses:
Involvement in multiple claims and legal proceedings; Security issues due to data
breach
Opportunities:
Surge in Digital Payments as E-commerce reaches new heights around the world;
employing AI to curb fraud and reduce false declines; Betting big on B2B
payments, which has lot of volume of transactions; Strategic acquisitions propelling
growth and adding transformational payments technology; Introduce in China’s
massive payments program
Threats:
Losses due to card frauds; Competition entry of new players; Continued intense
pricing pressure; Rapid and substantial technological advancements can facilitate
competitors to use the same technologies; Foreign exchange and market risk.
2.2 McKinsey 7s
Strategy:
Takes into constant consideration the changing consumer trends and demands, so
it is now oriented through a more virtual and digital approach, making it easier to
do multiple payments.
Structure:
MasterCard has a flatter organizational hierarchy that is supported by learning and
progressive organizations.
MasterCard has high coordination between different departments. The company’s
departments often form interdepartmental teams for projects and tasks that require
multiple expertise.
MasterCard has a developed and intricate system for ensuring communication
between employees, and different managerial levels.
Systems:
MasterCard has defined and well-demarcated systems in place to ensure that the
business operations are managed effectively and that there are no conflicts or
disputes. The systems at MasterCard are largely departmental in nature, and
include, for example:
- Human resource management
- Finance
- Marketing
- Operations
- Sales
- Supply chain management
- Public Relation Management
- Strategic leadership
Shared values:
- Creativity
- Honesty
- Transparency
- Accountability
- Trust
- Quality
- Heritage
Style:
MasterCard has a participative leadership style. Through a participative leadership
style, MasterCard is able to engage and involve its employees in decision-making
processes and managerial decisions.
The participative leadership style is highly effective in achieving the business goals
and vision of the organization.
Staff:
MasterCard has a sufficient number of employees employed across its global
operations.
The number of employees varies from country to country as per the requirements
and needs of the business and operations.
The human resource function of the business has a systematic process that aligns
all other departments to identify potential vacancies or skill gaps.
Skills:
MasterCard has a commendable workforce, with high skills and capacities. All
employees are recruited based on their merit and qualifications.
MasterCard has defined tasks and job roles and hires and trains employees for
skill levels accordingly with respect to those. The human resource is one of the
core competitive advantages of the company.
3.1 Corporate and Business Strategies
Ansoff Matrix:
Market Penetration:
Mastercard has made use of Ansoff's matrix consistently over time. At the market
penetration level they can try to improve their attractiveness and increase sales. To do
this, they can increase their transaction capacity and act on marketing. This was
Mastercard's initial strategy. In addition, having lower operating costs, they can price
more competitively than competitors.
Market Development:
Mastercard can invest in R&D to discover possible new market segments for its
products. They can also study new market trends to understand the differences in the
market. Finally, on the level of customer education, they can try to hold "events" so that
customers can understand their products and benefits as well as their usage.
Product Management:
At this level Mastercard can leverage technological improvements to improve its
existing products; it can also develop products in the area of e-commerce, or even
establish new partnerships that allow Mastercard to be connected to new markets, e-
commerce for example.
Diversification:
They can start a new business associated with this brand name which gave them
power in the beginning; They can also associate some of their product developments to
some existing products.
3.2 Internationalization
Why?
Internationalization drivers:
To get more clients and a leadership position; To allow clients to make transactions in
other countries when they travel. To utilize all the technology improvement in other
countries.
Cost drivers:
All the laws that they will need to study.
Market drivers:
Market to be global
3.3 Innovation
3.4 Mergers and Acquisitions
MasterCard has acquired 26 companies, including 15 in the last 5 years. A total of 7
acquisitions came from private equity firms.
MasterCard’s largest acquisition to date was in 2019, when it acquired Nets Denmark
AS - Corporate Services Businesses for $3.2B. MasterCard has acquired in 10 different
US states, and 8 countries. The Company’s most targeted sectors include information
technology (32%) and internet software and services (28%).
