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, wage bills are increasing, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy,
technology disruption, challanges to central banks by blockchain based private currencies, 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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
Low market penetration in new markets
– Outside its home market of Norwest Fargo, firm in the HBR case study Wells Fargo and Norwest: "Merger of Equals" (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
Products dominated business model
– Even though Norwest Fargo has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Wells Fargo and Norwest: "Merger of Equals" (A) should strive to include more intangible value offerings along with its core products and services.
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.
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.
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.
Slow to strategic competitive environment developments
– As Wells Fargo and Norwest: "Merger of Equals" (A) HBR case study mentions - Norwest Fargo takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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.
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.
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.
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 -
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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Norwest Fargo in the consumer business. Now Norwest Fargo can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
Shortening product life cycle
– it is one of the major threat that Norwest Fargo is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 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.
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.
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.
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.
Easy access to finance
– Easy access to finance in Organizational Development field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Norwest Fargo can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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.