Square Value Chain Analysis

By John Dudovskiy
September 30, 2021

Value chain analysis is a strategic analytical tool that can be used to identify business activities that create the most value. The framework divides business activities into two categories – primary and support. The figure below illustrates the essence of Square value chain analysis.

Square Value Chain Analysis

Square Value Chain Analysis

 

Square Primary Activities

Square Inbound logistics

Inbound logistics refers to receiving and storing raw materials for their consequent usage in producing products and providing services. Along with a wide range of financial services, Square offers related hardware products such as card readers, stands, terminals, registers, hardware kits and accessories. The majority of hardware products are produced in China. Accordingly, cost-effectiveness of producing hardware products is the main source of value creation in inbound logistics for Square.

 

 Square Operations

Square operations are divided into the following two segments:

1. Seller ecosystem. An expanding ecosystem of products and services that are designed to assist sellers to start, run and grow their businesses. In 2019 this segment processed USD106.2 billion of Gross Payment Volume (GPV), which was generated by nearly 2.3 billion card payments from 407 million payment cards.[1]

2. Cash ecosystem. This segment centred on Cash App integrates financial products and services that help individuals manage their money. As of December 2019, Cash App had approximately 24 million monthly active customers who had at least one transaction in any given month.[2]

The main source of value creation in operations primary activity for Square refers to high level of speed and convenience of products and services enabled by technology. The finance sector disruptor spotted demand in both segments and developed products and services to satisfy demand with the use of the latest technology.

 

Square Outbound Logistics

Outbound logistics involve warehousing and distribution of products.  Square uses the following distribution channels to distribute its products and services:

  1. Online store in official website of the company
  2. Direct sales and account management teams to acquire large sellers
  3. Third-party developers and partners who offer Square solutions to their own customers.

Online nature of the business is the main source of value creation in distribution activity for the payments company. Specifically, the company generates the good part of its revenues from its wide range of financial services and its hardware products are only developed to assist in the consumption of services. 

 

Square Marketing and Sales

Square marketing strategy is based on effective use of freebies, highly efficient utilisation of referrals and attractive design of products. Moreover, content marketing through social media plays in instrumental role in spreading marketing communication message to the target customer segment. This is the main point of value creation in marketing for Square because it comes for a little cost. Nevertheless, the financial services and mobile payments company is consistently increasing its sales and marketing expenses to fuel the global expansion of the business.  Sales and marketing expenses for the year ended December 31, 2019, increased by USD213.7 million, or 52%, compared to the year ended December 31, 2018.[3]

 

Square Service

Service primary activities within value chain analysis refer to the quality of support companies provide to customers after the sale. Square has a dedicated support centre in its website where customers can find information related to usage of its products and services. Moreover, there is a Square Support Assistant feature in the website that is designed customers with their questions and inquiries through automated text chat.

Currently, advanced post-sale customers services is not a competitive advantage for Square. In fact, Square customer services can be assessed as poor. Apart from the most basic customers services features described above, the payments company does not offer any support to customers. Furthermore, on Customer Affairs platform Square customer services has been rated on average 2,6 out of total 5 on the basis of total 938 ratings as of August 2021.[4]

Square Inc. Report contains a full version of Square value chain analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Ansoff Matrix and McKinsey 7S Model on Square. Moreover, the report contains analyses of Square leadership, business strategy, organizational structure and organizational culture. The report also comprises discussions of Square marketing strategy, ecosystem and addresses issues of corporate social responsibility.

Square Inc. Report 2021.

[1] Annual Report (2020) Square Inc.

[2] Annual Report (2020) Square Inc.

[3] Annual Report (2020) Square Inc.

[4] Consumer Affairs (2021) Available at: https://www.consumeraffairs.com/business/square.html



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