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 - – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, there is backlash against globalization, central banks are concerned over increasing inflation,
competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, 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 -
Highly skilled collaborators
– Merchants Card 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 China Merchants Bank in Transition HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Merchants Card has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Merchants Card to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Analytics focus
– Merchants Card 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 F. Warren McFarlan, Guoqing Chen, Ziqian Zhao 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.
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.
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.
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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Merchants Card digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Merchants Card 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.
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.
Organizational Resilience of Merchants Card
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Merchants Card does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Merchants Card 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 China Merchants Bank in Transition - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Merchants Card 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 Merchants Card is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in China Merchants Bank in Transition Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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 -
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.
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.
High cash cycle compare to competitors
Merchants Card 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.
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.
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.
Products dominated business model
– Even though Merchants Card 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 - China Merchants Bank in Transition should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Merchants Card is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study China Merchants Bank in Transition can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study China Merchants Bank in Transition, it seems that company is thinking about the frontier risks that can impact Strategy & Execution 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.
Capital Spending Reduction
– Even during the low interest decade, Merchants Card 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 China Merchants Bank in Transition 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 Merchants Card has relatively successful track record of launching new products.
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.
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 -
Low interest rates
– Even though inflation is raising its head in most developed economies, Merchants Card 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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Merchants Card 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 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.
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.
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.
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.
Developing new processes and practices
– Merchants Card can develop new processes and procedures in Strategy & Execution 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.
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.
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.
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.
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.
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.
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 -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Merchants Card 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 China Merchants Bank in Transition .
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.
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.
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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Merchants Card needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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 .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Merchants Card
– 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 Merchants Card.
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.
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 Merchants Card.
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.
Stagnating economy with rate increase
– Merchants Card 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.
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.
