Wells Fargo and Norwest: "Merger of Equals" (B) 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" (B)
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 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" (B)" 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" (B) 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" (B) casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, geopolitical disruptions, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, there is backlash against globalization,
central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Wells Fargo and Norwest: "Merger of Equals" (B)
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" (B) 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" (B) can be done for the following purposes –
1. Strategic planning using facts provided in Wells Fargo and Norwest: "Merger of Equals" (B) 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" (B) | 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" (B) Harvard Business Review case study are -
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.
Sustainable margins compare to other players in Organizational Development industry
– Wells Fargo and Norwest: "Merger of Equals" (B) 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.
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" (B) Harvard Business Review case study emphasize – knowledge, initiative, 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" (B) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Innovation driven organization
– Norwest Fargo is one of the most innovative firm in sector. Manager in Wells Fargo and Norwest: "Merger of Equals" (B) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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" (B) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Successful track record of launching new products
– Norwest Fargo has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Norwest Fargo has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses Wells Fargo and Norwest: "Merger of Equals" (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Wells Fargo and Norwest: "Merger of Equals" (B) are -
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Wells Fargo and Norwest: "Merger of Equals" (B) 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.
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" (B) should strive to include more intangible value offerings along with its core products and services.
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.
No frontier risks strategy
– After analyzing the HBR case study Wells Fargo and Norwest: "Merger of Equals" (B), it seems that company is thinking about the frontier risks that can impact Organizational Development strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
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.
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" (B), 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Wells Fargo and Norwest: "Merger of Equals" (B), 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.
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.
Slow to strategic competitive environment developments
– As Wells Fargo and Norwest: "Merger of Equals" (B) 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.
Opportunities Wells Fargo and Norwest: "Merger of Equals" (B) | 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" (B) 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Norwest Fargo can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Norwest Fargo has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Wells Fargo and Norwest: "Merger of Equals" (B) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Norwest Fargo to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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" (B) 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.
Threats Wells Fargo and Norwest: "Merger of Equals" (B) 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" (B) are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 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" (B) .
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.
Weighted SWOT Analysis of Wells Fargo and Norwest: "Merger of Equals" (B) 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" (B) 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" (B) 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" (B) 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" (B) 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.
