China Merchants Bank in Transition SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of China Merchants Bank in Transition
This case depicts China Merchants Bank's second strategic transformation. In the 90's, China Merchants bank creatively introduced an all-in-one-card and an all-in-one-net based on IT systems and network, enabling itself to expand nationwide. By successfully entering the emerging credit card industry, the bank confirmed its retail banking strategy in 2004, followed by its great success in occupying 1/3 credit card market share. The market share-driven strategy didn't last forever. Recognizing business environment changes, the company changed its strategy focus to profit-driven in 2009. It's the second time that information technology enables business success.
Authors :: F. Warren McFarlan, Guoqing Chen, Ziqian Zhao
Swot Analysis of "China Merchants Bank in Transition" written by F. Warren McFarlan, Guoqing Chen, Ziqian Zhao includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Merchants Card facing as an external strategic factors. Some of the topics covered in China Merchants Bank in Transition case study are - Strategic Management Strategies, IT, Strategy and Strategy & Execution.
Some of the macro environment factors that can be used to understand the China Merchants Bank in Transition casestudy better are - – supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation,
customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of China Merchants Bank in Transition
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in China Merchants Bank in Transition case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Merchants Card, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Merchants Card 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 China Merchants Bank in Transition can be done for the following purposes –
1. Strategic planning using facts provided in China Merchants Bank in Transition case study
2. Improving business portfolio management of Merchants Card
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Merchants Card
Strengths China Merchants Bank in Transition | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Merchants Card in China Merchants Bank in Transition Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Merchants Card in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Merchants Card 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.
Ability to recruit top talent
– Merchants Card is one of the leading recruiters in the industry. Managers in the China Merchants Bank in Transition are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Merchants Card has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Merchants Card 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.
Ability to lead change in Strategy & Execution field
– Merchants Card 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 Merchants Card in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Merchants Card 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 China Merchants Bank in Transition 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.
Sustainable margins compare to other players in Strategy & Execution industry
– China Merchants Bank in Transition firm has clearly differentiated products in the market place. This has enabled Merchants Card to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Merchants Card to invest into research and development (R&D) and innovation.
Training and development
– Merchants Card has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in China Merchants Bank in Transition 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 Merchants Card in the sector have low bargaining power. China Merchants Bank in Transition has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Merchants Card to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Merchants Card is one of the most innovative firm in sector. Manager in China Merchants Bank in Transition Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Merchants Card is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses China Merchants Bank in Transition | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China Merchants Bank in Transition are -
Increasing silos among functional specialists
– The organizational structure of Merchants Card is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Merchants Card needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Merchants Card to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As China Merchants Bank in Transition HBR case study mentions - Merchants Card 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study China Merchants Bank in Transition, in the dynamic environment Merchants Card has struggled to respond to the nimble upstart competition. Merchants Card has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study China Merchants Bank in Transition, is just above the industry average. Merchants Card 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study China Merchants Bank in Transition, it seems that the employees of Merchants Card 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Merchants Card 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.
High operating costs
– Compare to the competitors, firm in the HBR case study China Merchants Bank in Transition 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 Merchants Card 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Merchants Card, firm in the HBR case study China Merchants Bank in Transition needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Merchants Card supply chain. Even after few cautionary changes mentioned in the HBR case study - China Merchants Bank in Transition, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Merchants Card vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study China Merchants Bank in Transition 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 China Merchants Bank in Transition can leverage the sales team experience to cultivate customer relationships as Merchants Card is planning to shift buying processes online.
Skills based hiring
– The stress on hiring functional specialists at Merchants Card 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 China Merchants Bank in Transition | 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 China Merchants Bank in Transition are -
Leveraging digital technologies
– Merchants Card 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.
Using analytics as competitive advantage
– Merchants Card 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 China Merchants Bank in Transition - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Merchants Card to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Merchants Card can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
Better consumer reach
– The expansion of the 5G network will help Merchants Card to increase its market reach. Merchants Card 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Merchants Card is facing challenges because of the dominance of functional experts in the organization. China Merchants Bank in Transition 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Merchants Card in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
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 Merchants Card 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.
Building a culture of innovation
– managers at Merchants Card 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 Strategy & Execution segment.
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. Merchants Card can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Merchants Card can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. China Merchants Bank in Transition 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.
Creating value in data economy
– The success of analytics program of Merchants Card has opened avenues for new revenue streams for the organization in the industry. This can help Merchants Card to build a more holistic ecosystem as suggested in the China Merchants Bank in Transition case study. Merchants Card can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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 Merchants Card in the consumer business. Now Merchants Card 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, Merchants Card can use these opportunities to build new business models that can help the communities that Merchants Card operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Threats China Merchants Bank in Transition External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study China Merchants Bank in Transition are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study China Merchants Bank in Transition, Merchants Card may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
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. Merchants Card 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.
Environmental challenges
– Merchants Card 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. Merchants Card can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Merchants Card in the Strategy & Execution industry. The Strategy & Execution 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.
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.
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.
Consumer confidence and its impact on Merchants Card 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.
Technology acceleration in Forth Industrial Revolution
– Merchants Card has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Merchants Card needs to keep up with the evolution of technology in the Strategy & Execution 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Merchants Card with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Merchants Card in the Strategy & Execution sector and impact the bottomline of the organization.
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 Merchants Card business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Merchants Card can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Merchants Card 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 Strategy & Execution industry regulations.
Weighted SWOT Analysis of China Merchants Bank in Transition 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 China Merchants Bank in Transition 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 China Merchants Bank in Transition 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 China Merchants Bank in Transition 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 China Merchants Bank in Transition 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 Merchants Card needs to make to build a sustainable competitive advantage.
