Taught in the second module of a course on Managing Service Operations, which addresses the design of sustainable service models (606-031).Commerce Bank has become one of the fastest growing banks in the country, despite having defied conventional wisdom about how to grow deposits. Banks historically have grown either by competing on deposit rates or through acquisitions that expand their deposit base. Commerce has the lowest deposit rates in each of the local markets it serves and has acquired no other banks, yet its growth rate is unparalleled. Its secret? Commerce differentiates itself on service. Explores the highly refined service model that guides the design of its operations and service features and considers the trade-offs involved in competing on service.
Swot Analysis of "Commerce Bank" written by Frances X. Frei, Corey Hajim includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Deposit Commerce facing as an external strategic factors. Some of the topics covered in Commerce Bank case study are - Strategic Management Strategies, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Commerce Bank casestudy better are - – increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, there is backlash against globalization, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion,
supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Commerce Bank case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Deposit Commerce, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Deposit Commerce 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 Commerce Bank can be done for the following purposes –
1. Strategic planning using facts provided in Commerce Bank case study
2. Improving business portfolio management of Deposit Commerce
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Deposit Commerce
Strengths Commerce Bank | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Deposit Commerce in Commerce Bank Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Deposit Commerce in the sector have low bargaining power. Commerce Bank has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Deposit Commerce to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Deposit Commerce is one of the most innovative firm in sector. Manager in Commerce Bank Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Deposit Commerce has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Deposit Commerce 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.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Deposit Commerce digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Deposit Commerce 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.
Effective Research and Development (R&D)
– Deposit Commerce 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 Commerce Bank - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Technology & Operations industry
– Commerce Bank firm has clearly differentiated products in the market place. This has enabled Deposit Commerce to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Deposit Commerce to invest into research and development (R&D) and innovation.
Training and development
– Deposit Commerce has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Commerce Bank 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.
Operational resilience
– The operational resilience strategy in the Commerce Bank 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.
Highly skilled collaborators
– Deposit Commerce 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 Commerce Bank HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Deposit Commerce 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 Deposit Commerce is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Commerce Bank Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Deposit Commerce in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Technology & Operations field
– Deposit Commerce 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 Deposit Commerce in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Commerce Bank | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Commerce Bank are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Commerce Bank, in the dynamic environment Deposit Commerce has struggled to respond to the nimble upstart competition. Deposit Commerce 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 Commerce Bank, is just above the industry average. Deposit Commerce 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.
Skills based hiring
– The stress on hiring functional specialists at Deposit Commerce 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.
No frontier risks strategy
– After analyzing the HBR case study Commerce Bank, it seems that company is thinking about the frontier risks that can impact Technology & Operations 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.
Slow decision making process
– As mentioned earlier in the report, Deposit Commerce has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Deposit Commerce even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Products dominated business model
– Even though Deposit Commerce 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 - Commerce Bank should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Deposit Commerce 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 bargaining power of channel partners
– Because of the regulatory requirements, Frances X. Frei, Corey Hajim suggests that, Deposit Commerce 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.
Interest costs
– Compare to the competition, Deposit Commerce 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 star products
– The top 2 products and services of the firm as mentioned in the Commerce Bank 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 Deposit Commerce has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Commerce Bank, it seems that the employees of Deposit Commerce 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 Commerce Bank | 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 Commerce Bank are -
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 Deposit Commerce 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Deposit Commerce can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Deposit Commerce can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Deposit Commerce in the consumer business. Now Deposit Commerce can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Deposit Commerce to increase its market reach. Deposit Commerce 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Deposit Commerce 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, Commerce Bank, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Deposit Commerce can use these opportunities to build new business models that can help the communities that Deposit Commerce operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
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. Deposit Commerce can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Deposit Commerce 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.
Loyalty marketing
– Deposit Commerce 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.
Leveraging digital technologies
– Deposit Commerce 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Deposit Commerce can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Deposit Commerce can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Low interest rates
– Even though inflation is raising its head in most developed economies, Deposit Commerce 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.
Threats Commerce Bank External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Commerce Bank are -
Technology acceleration in Forth Industrial Revolution
– Deposit Commerce has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Deposit Commerce needs to keep up with the evolution of technology in the Technology & Operations 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.
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.
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 Deposit Commerce in the Technology & Operations sector and impact the bottomline of the organization.
Increasing wage structure of Deposit Commerce
– 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 Deposit Commerce.
Stagnating economy with rate increase
– Deposit Commerce 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Commerce Bank, Deposit Commerce may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
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 Deposit Commerce business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Deposit Commerce with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Deposit Commerce.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Deposit Commerce can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 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. Deposit Commerce needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Deposit Commerce is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Commerce Bank 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 Commerce Bank 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 Commerce Bank 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 Commerce Bank 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 Commerce Bank 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 Deposit Commerce needs to make to build a sustainable competitive advantage.
