Wells Fargo and Norwest: "Merger of Equals" (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Organizational Development
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Wells Fargo and Norwest: "Merger of Equals" (A)
On June 8, 1998, California-based Wells Fargo and Minneapolis banking company Norwest announced a "merger of equals" in a stock deal valued at $34 billion and one that created the Western Hemisphere's most extensive and diversified financial services network. The Wells-Norwest combined company would have $191 billion in assets, more than 90,000 employees, approximately 20 million customers, and 5,777 financial services "stores" (mortgage, consumer finance, or banking stores) in 50 states, Canada, the Caribbean, Latin America, and internationally. The new combined company, Wells Fargo & Co., would be the sixth largest bank in the United States and have the largest supermarket branch network and the largest Internet bank of any U.S. bank. With the merger, Paul Hazen, chairman and CEO of Wells Fargo at the time, became chairman of the new organization. Richard Kovacevich, chairman and CEO of Norwest, became president and CEO of the new organization. Despite Kovacevich's and Hazen's enthusiasm for the merger, they had a series of potential barriers to overcome: First, Wells Fargo and Norwest had contrasting cultures--Norwest was known for customer service and a superior sales culture, whereas Wells Fargo was a leader in online banking and technology, with a focus on efficiency. Second, in 1998, Wells Fargo was still in the process of overcoming a merger with First Interstate that was widely considered a failure. Finally, many industry analysts viewed the Wells-Norwest merger with much caution. Given such barriers, Kovacevich and his team wondered how they could overcome such issues through an optimal integration strategy and effective execution toward that plan.
Authors :: Jeffrey Pfeffer, Victoria Chang, Charles A. O'Reilly
Swot Analysis of "Wells Fargo and Norwest: "Merger of Equals" (A)" written by Jeffrey Pfeffer, Victoria Chang, Charles A. O'Reilly includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Norwest Fargo facing as an external strategic factors. Some of the topics covered in Wells Fargo and Norwest: "Merger of Equals" (A) case study are - Strategic Management Strategies, Mergers & acquisitions, Organizational culture and Organizational Development.
Some of the macro environment factors that can be used to understand the Wells Fargo and Norwest: "Merger of Equals" (A) casestudy better are - – supply chains are disrupted by pandemic , technology disruption, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, there is backlash against globalization, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models,
increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, etc
Introduction to SWOT Analysis of Wells Fargo and Norwest: "Merger of Equals" (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Wells Fargo and Norwest: "Merger of Equals" (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Norwest Fargo, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Norwest Fargo operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Wells Fargo and Norwest: "Merger of Equals" (A) can be done for the following purposes –
1. Strategic planning using facts provided in Wells Fargo and Norwest: "Merger of Equals" (A) case study
2. Improving business portfolio management of Norwest Fargo
3. Assessing feasibility of the new initiative in Organizational Development field.
4. Making a Organizational Development topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Norwest Fargo
Strengths Wells Fargo and Norwest: "Merger of Equals" (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Norwest Fargo in Wells Fargo and Norwest: "Merger of Equals" (A) Harvard Business Review case study are -
High switching costs
– The high switching costs that Norwest Fargo has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Operational resilience
– The operational resilience strategy in the Wells Fargo and Norwest: "Merger of Equals" (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Superior customer experience
– The customer experience strategy of Norwest Fargo in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Organizational Development field
– Norwest Fargo is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Norwest Fargo in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Organizational Development industry
– Wells Fargo and Norwest: "Merger of Equals" (A) firm has clearly differentiated products in the market place. This has enabled Norwest Fargo to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Norwest Fargo to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Norwest Fargo has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Wells Fargo and Norwest: "Merger of Equals" (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Norwest Fargo has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Wells Fargo and Norwest: "Merger of Equals" (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Norwest Fargo is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Jeffrey Pfeffer, Victoria Chang, Charles A. O'Reilly can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to recruit top talent
– Norwest Fargo is one of the leading recruiters in the industry. Managers in the Wells Fargo and Norwest: "Merger of Equals" (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Norwest Fargo is present in almost all the verticals within the industry. This has provided firm in Wells Fargo and Norwest: "Merger of Equals" (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Training and development
– Norwest Fargo has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Wells Fargo and Norwest: "Merger of Equals" (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Norwest Fargo in the sector have low bargaining power. Wells Fargo and Norwest: "Merger of Equals" (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Norwest Fargo to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Wells Fargo and Norwest: "Merger of Equals" (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Wells Fargo and Norwest: "Merger of Equals" (A) are -
Increasing silos among functional specialists
– The organizational structure of Norwest Fargo is dominated by functional specialists. It is not different from other players in the Organizational Development segment. Norwest Fargo needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Norwest Fargo to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Norwest Fargo has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High cash cycle compare to competitors
Norwest Fargo has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Lack of clear differentiation of Norwest Fargo products
– To increase the profitability and margins on the products, Norwest Fargo needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study Wells Fargo and Norwest: "Merger of Equals" (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Wells Fargo and Norwest: "Merger of Equals" (A) can leverage the sales team experience to cultivate customer relationships as Norwest Fargo is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Wells Fargo and Norwest: "Merger of Equals" (A), in the dynamic environment Norwest Fargo has struggled to respond to the nimble upstart competition. Norwest Fargo has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Norwest Fargo has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Norwest Fargo is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Wells Fargo and Norwest: "Merger of Equals" (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Jeffrey Pfeffer, Victoria Chang, Charles A. O'Reilly suggests that, Norwest Fargo is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow decision making process
– As mentioned earlier in the report, Norwest Fargo has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Norwest Fargo even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Skills based hiring
– The stress on hiring functional specialists at Norwest Fargo has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Opportunities Wells Fargo and Norwest: "Merger of Equals" (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Wells Fargo and Norwest: "Merger of Equals" (A) are -
Developing new processes and practices
– Norwest Fargo can develop new processes and procedures in Organizational Development industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Leveraging digital technologies
– Norwest Fargo can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Better consumer reach
– The expansion of the 5G network will help Norwest Fargo to increase its market reach. Norwest Fargo will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Organizational Development industry, but it has also influenced the consumer preferences. Norwest Fargo can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Norwest Fargo in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Organizational Development segment, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Norwest Fargo is facing challenges because of the dominance of functional experts in the organization. Wells Fargo and Norwest: "Merger of Equals" (A) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Norwest Fargo can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Wells Fargo and Norwest: "Merger of Equals" (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Norwest Fargo to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Norwest Fargo to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Norwest Fargo can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Organizational Development segment.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Norwest Fargo to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Creating value in data economy
– The success of analytics program of Norwest Fargo has opened avenues for new revenue streams for the organization in the industry. This can help Norwest Fargo to build a more holistic ecosystem as suggested in the Wells Fargo and Norwest: "Merger of Equals" (A) case study. Norwest Fargo can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Norwest Fargo can use these opportunities to build new business models that can help the communities that Norwest Fargo operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Norwest Fargo can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Wells Fargo and Norwest: "Merger of Equals" (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Wells Fargo and Norwest: "Merger of Equals" (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Wells Fargo and Norwest: "Merger of Equals" (A) are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Norwest Fargo.
Environmental challenges
– Norwest Fargo needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Norwest Fargo can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
High dependence on third party suppliers
– Norwest Fargo high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Stagnating economy with rate increase
– Norwest Fargo can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Regulatory challenges
– Norwest Fargo needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Organizational Development industry regulations.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Norwest Fargo in the Organizational Development sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Norwest Fargo has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Norwest Fargo needs to keep up with the evolution of technology in the Organizational Development sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Norwest Fargo
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Norwest Fargo.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Norwest Fargo can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Wells Fargo and Norwest: "Merger of Equals" (A) .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Norwest Fargo needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Norwest Fargo in the Organizational Development industry. The Organizational Development industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of Wells Fargo and Norwest: "Merger of Equals" (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Wells Fargo and Norwest: "Merger of Equals" (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Wells Fargo and Norwest: "Merger of Equals" (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Wells Fargo and Norwest: "Merger of Equals" (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Wells Fargo and Norwest: "Merger of Equals" (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Norwest Fargo needs to make to build a sustainable competitive advantage.