Does IT Payoff? Strategies of Two Banking Giants SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Technology & Operations
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Does IT Payoff? Strategies of Two Banking Giants
The IT productivity paradox debate has been going on for more than two decades, but the controversy has been exacerbated by a 2003 Harvard Business Review article by Nicolas Carr, who argues that IT doesn't matter. This case sheds light on the major drivers of IT investment: those investments targeted at improving operational efficiencies and those focused on entrenching a firm's strategic position. It does this by looking at the IT investment strategies of two of the world's largest financial institutions, HSBC and Citigroup. Of particular interest are how HSBC and Citigroup spend on IT projects, what drives their investments and the viability of measuring the efficacy of their investments in terms of improving operational efficiency or strategic position. By comparing the IT investments strategies of both banks, students will learn about the IT valuation process, the role of IT as a strategic necessity and IT's potential role in sustaining a firm's competitive advantage. Nominee for best paper award, International Conference on Information Systems (ICIS2007)
Swot Analysis of "Does IT Payoff? Strategies of Two Banking Giants" written by Ali Farhoomand, Minyi Huang includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Investments Hsbc facing as an external strategic factors. Some of the topics covered in Does IT Payoff? Strategies of Two Banking Giants case study are - Strategic Management Strategies, Competitive strategy, International business, IT and Technology & Operations.
Some of the macro environment factors that can be used to understand the Does IT Payoff? Strategies of Two Banking Giants casestudy better are - – increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , geopolitical disruptions,
wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Does IT Payoff? Strategies of Two Banking Giants
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Does IT Payoff? Strategies of Two Banking Giants case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Investments Hsbc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Investments Hsbc 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 Does IT Payoff? Strategies of Two Banking Giants can be done for the following purposes –
1. Strategic planning using facts provided in Does IT Payoff? Strategies of Two Banking Giants case study
2. Improving business portfolio management of Investments Hsbc
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 Investments Hsbc
Strengths Does IT Payoff? Strategies of Two Banking Giants | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Investments Hsbc in Does IT Payoff? Strategies of Two Banking Giants Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Investments Hsbc in the sector have low bargaining power. Does IT Payoff? Strategies of Two Banking Giants has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Investments Hsbc to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Investments Hsbc is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Investments Hsbc 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 Does IT Payoff? Strategies of Two Banking Giants HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Investments Hsbc 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.
Learning organization
- Investments Hsbc 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 Investments Hsbc is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Does IT Payoff? Strategies of Two Banking Giants Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Investments Hsbc
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Investments Hsbc does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Does IT Payoff? Strategies of Two Banking Giants 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.
Diverse revenue streams
– Investments Hsbc is present in almost all the verticals within the industry. This has provided firm in Does IT Payoff? Strategies of Two Banking Giants 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.
Analytics focus
– Investments Hsbc 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 Ali Farhoomand, Minyi Huang 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.
Effective Research and Development (R&D)
– Investments Hsbc 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 Does IT Payoff? Strategies of Two Banking Giants - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Investments Hsbc has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Does IT Payoff? Strategies of Two Banking Giants 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.
High switching costs
– The high switching costs that Investments Hsbc 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.
Weaknesses Does IT Payoff? Strategies of Two Banking Giants | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Does IT Payoff? Strategies of Two Banking Giants are -
Skills based hiring
– The stress on hiring functional specialists at Investments Hsbc 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Does IT Payoff? Strategies of Two Banking Giants 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 Investments Hsbc 's lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Does IT Payoff? Strategies of Two Banking Giants, in the dynamic environment Investments Hsbc has struggled to respond to the nimble upstart competition. Investments Hsbc has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Does IT Payoff? Strategies of Two Banking Giants 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 Investments Hsbc has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Investments Hsbc is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Does IT Payoff? Strategies of Two Banking Giants can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Investments Hsbc needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Need for greater diversity
– Investments Hsbc 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 bargaining power of channel partners
– Because of the regulatory requirements, Ali Farhoomand, Minyi Huang suggests that, Investments Hsbc 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, Investments Hsbc 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 Investments Hsbc supply chain. Even after few cautionary changes mentioned in the HBR case study - Does IT Payoff? Strategies of Two Banking Giants, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Investments Hsbc vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Investments Hsbc, firm in the HBR case study Does IT Payoff? Strategies of Two Banking Giants needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Does IT Payoff? Strategies of Two Banking Giants | 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 Does IT Payoff? Strategies of Two Banking Giants are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Investments Hsbc 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 Investments Hsbc to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Investments Hsbc 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, Does IT Payoff? Strategies of Two Banking Giants, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Investments Hsbc 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 Does IT Payoff? Strategies of Two Banking Giants - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Investments Hsbc to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Investments Hsbc 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 Technology & Operations segment.
Buying journey improvements
– Investments Hsbc can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Does IT Payoff? Strategies of Two Banking Giants 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
– Investments Hsbc can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations 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.
Leveraging digital technologies
– Investments Hsbc 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.
Creating value in data economy
– The success of analytics program of Investments Hsbc has opened avenues for new revenue streams for the organization in the industry. This can help Investments Hsbc to build a more holistic ecosystem as suggested in the Does IT Payoff? Strategies of Two Banking Giants case study. Investments Hsbc can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Investments Hsbc 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.
Loyalty marketing
– Investments Hsbc 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 Technology & Operations industry, but it has also influenced the consumer preferences. Investments Hsbc can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Investments Hsbc 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.
Better consumer reach
– The expansion of the 5G network will help Investments Hsbc to increase its market reach. Investments Hsbc 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.
Threats Does IT Payoff? Strategies of Two Banking Giants External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Does IT Payoff? Strategies of Two Banking Giants are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Investments Hsbc 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 Does IT Payoff? Strategies of Two Banking Giants .
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. Investments Hsbc needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Investments Hsbc has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Investments Hsbc 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Investments Hsbc in the Technology & Operations industry. The Technology & Operations 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.
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.
Stagnating economy with rate increase
– Investments Hsbc 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.
Consumer confidence and its impact on Investments Hsbc 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.
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. Investments Hsbc can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Investments Hsbc is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Investments Hsbc 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. Investments Hsbc can take advantage of this fund but it will also bring new competitors in the Technology & Operations 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 Investments Hsbc.
Increasing wage structure of Investments Hsbc
– 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 Investments Hsbc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Investments Hsbc with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Does IT Payoff? Strategies of Two Banking Giants 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 Does IT Payoff? Strategies of Two Banking Giants 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 Does IT Payoff? Strategies of Two Banking Giants 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 Does IT Payoff? Strategies of Two Banking Giants 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 Does IT Payoff? Strategies of Two Banking Giants 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 Investments Hsbc needs to make to build a sustainable competitive advantage.
