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 - – cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , increasing energy prices, increasing government debt because of Covid-19 spendings, there is backlash against globalization, geopolitical disruptions,
competitive advantages are harder to sustain because of technology dispersion, technology disruption, 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 -
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.
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.
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.
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.
Diverse revenue streams
– Merchants Card is present in almost all the verticals within the industry. This has provided firm in China Merchants Bank in Transition 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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
Lack of clear differentiation of Merchants Card products
– To increase the profitability and margins on the products, Merchants Card needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Merchants Card has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
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.
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.
Need for greater diversity
– Merchants Card 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.
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.
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.
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 -
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.
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.
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.
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.
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.
Loyalty marketing
– Merchants Card 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.
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.
Learning at scale
– Online learning technologies has now opened space for Merchants Card 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Merchants Card 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 Merchants Card to hire the very best people irrespective of their geographical location.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Merchants Card can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Merchants Card 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, China Merchants Bank in Transition, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 -
High dependence on third party suppliers
– Merchants Card high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study 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 .
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.
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 .
Shortening product life cycle
– it is one of the major threat that Merchants Card is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
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.
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.
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.
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.
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.
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.