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 - – cloud computing is disrupting traditional business models, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing,
competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, 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 brand equity
– Norwest Fargo has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Norwest Fargo to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Innovation driven organization
– Norwest Fargo is one of the most innovative firm in sector. Manager in Wells Fargo and Norwest: "Merger of Equals" (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
Strong track record of project management
– Norwest Fargo is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Norwest Fargo is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Norwest Fargo is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Wells Fargo and Norwest: "Merger of Equals" (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
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.
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.
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Norwest Fargo digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Norwest Fargo has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Organizational Resilience of Norwest Fargo
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Norwest Fargo does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Norwest Fargo are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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 -
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Norwest Fargo supply chain. Even after few cautionary changes mentioned in the HBR case study - Wells Fargo and Norwest: "Merger of Equals" (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Norwest Fargo vulnerable to further global disruptions in South East Asia.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Wells Fargo and Norwest: "Merger of Equals" (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Norwest Fargo has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Wells Fargo and Norwest: "Merger of Equals" (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Norwest Fargo 's lucrative customers.
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.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Wells Fargo and Norwest: "Merger of Equals" (A), it seems that the employees of Norwest Fargo don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Norwest Fargo needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Wells Fargo and Norwest: "Merger of Equals" (A), is just above the industry average. Norwest Fargo needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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.
Loyalty marketing
– Norwest Fargo has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Learning at scale
– Online learning technologies has now opened space for Norwest Fargo to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Norwest Fargo can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Norwest Fargo can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
Manufacturing automation
– Norwest Fargo can use the latest technology developments to improve its manufacturing and designing process in Organizational Development segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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 -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Norwest Fargo business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Norwest Fargo with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Wells Fargo and Norwest: "Merger of Equals" (A), Norwest Fargo may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Organizational Development .
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.
Consumer confidence and its impact on Norwest Fargo demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Norwest Fargo will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
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.
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.
