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 - – increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings,
increasing energy prices, increasing commodity prices, 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
High bargaining power of channel partners
– Because of the regulatory requirements, F. Warren McFarlan, Guoqing Chen, Ziqian Zhao suggests that, Merchants Card 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.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
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 .
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.
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.
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.
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.
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.