First Direct (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Technology & Operations
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of First Direct (A)
Describes the operations and strategy of the world's largest, fastest growing branchless bank. Using a person-to-person interface over conventional phone lines, First Direct provides standard banking and related financial products to nearly 700,000 customers throughout the United Kingdom. By employing a sophisticated customer information system and a highly educated workforce on the frontline, the bank has achieved customer satisfaction and retention levels that are roughly twice those of its nearest competitor in either direct or traditional retail banking services. This outcome was achieved through the use of information infrastructure to personalize services, model preference profiles, and cross-sell relevant products in the course of over-the-phone banking interactions. This breakthrough service model has demonstrated that banks may deliver greater quality of service at significantly lower costs by exploiting virtual or "marketspace" channels for service delivery and customer relationship management. The question facing the bank, a unit of Midland plc (which was, in turn, owned by HSBC), was how fast, in what manner, and in what market segments the organization should grow.
Swot Analysis of "First Direct (A)" written by Jeffrey Rayport, Dickson L. Louie includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Banking Direct facing as an external strategic factors. Some of the topics covered in First Direct (A) case study are - Strategic Management Strategies, IT, Marketing, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the First Direct (A) casestudy better are - – wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation,
there is backlash against globalization, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in First Direct (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Banking Direct, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Banking Direct 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 First Direct (A) can be done for the following purposes –
1. Strategic planning using facts provided in First Direct (A) case study
2. Improving business portfolio management of Banking Direct
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 Banking Direct
Strengths First Direct (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Banking Direct in First Direct (A) Harvard Business Review case study are -
Successful track record of launching new products
– Banking Direct has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Banking Direct 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.
Operational resilience
– The operational resilience strategy in the First Direct (A) 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.
Superior customer experience
– The customer experience strategy of Banking Direct in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Banking Direct 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 First Direct (A) - 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
– Banking Direct has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Banking Direct to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Banking Direct is present in almost all the verticals within the industry. This has provided firm in First Direct (A) 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.
Highly skilled collaborators
– Banking Direct 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 First Direct (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Banking Direct is one of the most innovative firm in sector. Manager in First Direct (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Banking Direct 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 Banking Direct is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in First Direct (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Banking Direct in the sector have low bargaining power. First Direct (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Banking Direct to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Technology & Operations industry
– First Direct (A) firm has clearly differentiated products in the market place. This has enabled Banking Direct to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Banking Direct to invest into research and development (R&D) and innovation.
Organizational Resilience of Banking Direct
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Banking Direct does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses First Direct (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of First Direct (A) are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study First Direct (A), is just above the industry average. Banking Direct 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.
Aligning sales with marketing
– It come across in the case study First Direct (A) 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 First Direct (A) can leverage the sales team experience to cultivate customer relationships as Banking Direct is planning to shift buying processes online.
High bargaining power of channel partners
– Because of the regulatory requirements, Jeffrey Rayport, Dickson L. Louie suggests that, Banking Direct 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Banking Direct is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study First Direct (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study First Direct (A), it seems that the employees of Banking Direct 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the First Direct (A) 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 Banking Direct has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Banking Direct 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.
Low market penetration in new markets
– Outside its home market of Banking Direct, firm in the HBR case study First Direct (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Banking Direct 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.
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 Banking Direct supply chain. Even after few cautionary changes mentioned in the HBR case study - First Direct (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Banking Direct vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study First Direct (A) 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 Banking Direct 's lucrative customers.
Opportunities First Direct (A) | 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 First Direct (A) are -
Learning at scale
– Online learning technologies has now opened space for Banking Direct 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.
Using analytics as competitive advantage
– Banking Direct 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 First Direct (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Banking Direct to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Banking Direct 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. Banking Direct 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Banking Direct can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Banking Direct to increase its market reach. Banking Direct 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Banking Direct in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Banking Direct has opened avenues for new revenue streams for the organization in the industry. This can help Banking Direct to build a more holistic ecosystem as suggested in the First Direct (A) case study. Banking Direct can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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 Banking Direct 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.
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. Banking Direct can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Banking Direct 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Banking Direct 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 Banking Direct to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Banking Direct 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Banking Direct is facing challenges because of the dominance of functional experts in the organization. First Direct (A) 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.
Threats First Direct (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study First Direct (A) are -
Shortening product life cycle
– it is one of the major threat that Banking Direct is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Banking Direct business can come under increasing regulations regarding data privacy, data security, etc.
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. Banking Direct needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
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.
High dependence on third party suppliers
– Banking Direct 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.
Stagnating economy with rate increase
– Banking Direct 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.
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.
Consumer confidence and its impact on Banking Direct demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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 Banking Direct in the Technology & Operations sector and impact the bottomline of the organization.
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. Banking Direct 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.
Regulatory challenges
– Banking Direct 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 Technology & Operations industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Banking Direct 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 First Direct (A) .
Technology acceleration in Forth Industrial Revolution
– Banking Direct has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Banking Direct 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.
Weighted SWOT Analysis of First Direct (A) 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 First Direct (A) 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 First Direct (A) 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 First Direct (A) 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 First Direct (A) 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 Banking Direct needs to make to build a sustainable competitive advantage.
