Note on How to Analyze a Bank SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Note on How to Analyze a Bank
This note discusses how to analyze a bank from the point of view of an equity analyst or investor. The note begins by reviewing the evolution of North American banks from narrow to diversified financial institutions and then describes the financial ratios used to evaluate a bank's operating and financial performance. The final section provides examples of these ratios applied to a North American bank, and a set of Canadian and U.S. banks.
Swot Analysis of "Note on How to Analyze a Bank" written by Michael R King includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ratios Bank facing as an external strategic factors. Some of the topics covered in Note on How to Analyze a Bank case study are - Strategic Management Strategies, Financial management, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Note on How to Analyze a Bank casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, increasing commodity prices,
challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Note on How to Analyze a Bank
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Note on How to Analyze a Bank case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ratios Bank, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ratios Bank 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 Note on How to Analyze a Bank can be done for the following purposes –
1. Strategic planning using facts provided in Note on How to Analyze a Bank case study
2. Improving business portfolio management of Ratios Bank
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ratios Bank
Strengths Note on How to Analyze a Bank | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ratios Bank in Note on How to Analyze a Bank Harvard Business Review case study are -
Strong track record of project management
– Ratios Bank is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Ratios Bank 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 Michael R King 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.
Ability to recruit top talent
– Ratios Bank is one of the leading recruiters in the industry. Managers in the Note on How to Analyze a Bank are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the Note on How to Analyze a 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.
Learning organization
- Ratios Bank 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 Ratios Bank is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Note on How to Analyze a Bank Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Ratios Bank is present in almost all the verticals within the industry. This has provided firm in Note on How to Analyze a Bank case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Low bargaining power of suppliers
– Suppliers of Ratios Bank in the sector have low bargaining power. Note on How to Analyze a Bank has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ratios Bank to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Ratios Bank has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Note on How to Analyze a 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.
High brand equity
– Ratios Bank has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ratios Bank to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Finance & Accounting field
– Ratios Bank 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 Ratios Bank in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Ratios Bank has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ratios Bank 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Note on How to Analyze a Bank firm has clearly differentiated products in the market place. This has enabled Ratios Bank to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Ratios Bank to invest into research and development (R&D) and innovation.
Weaknesses Note on How to Analyze a Bank | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Note on How to Analyze a Bank are -
Interest costs
– Compare to the competition, Ratios Bank 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 operating costs
– Compare to the competitors, firm in the HBR case study Note on How to Analyze a Bank 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 Ratios Bank 's lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Ratios Bank is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Ratios Bank needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ratios Bank to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Note on How to Analyze a Bank HBR case study mentions - Ratios Bank 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Michael R King suggests that, Ratios Bank 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.
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 Ratios Bank supply chain. Even after few cautionary changes mentioned in the HBR case study - Note on How to Analyze a Bank, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ratios Bank vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Ratios Bank 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.
Products dominated business model
– Even though Ratios Bank 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 - Note on How to Analyze a Bank should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ratios Bank is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Note on How to Analyze a Bank can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Ratios Bank has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Lack of clear differentiation of Ratios Bank products
– To increase the profitability and margins on the products, Ratios Bank needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Note on How to Analyze a 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 Note on How to Analyze a Bank are -
Learning at scale
– Online learning technologies has now opened space for Ratios Bank to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ratios Bank 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 Ratios Bank to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Ratios Bank is facing challenges because of the dominance of functional experts in the organization. Note on How to Analyze a Bank 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.
Better consumer reach
– The expansion of the 5G network will help Ratios Bank to increase its market reach. Ratios Bank 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, Ratios Bank 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
– Ratios Bank 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 Ratios Bank has opened avenues for new revenue streams for the organization in the industry. This can help Ratios Bank to build a more holistic ecosystem as suggested in the Note on How to Analyze a Bank case study. Ratios Bank can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Ratios Bank 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 Note on How to Analyze a Bank - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ratios Bank to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ratios Bank can use these opportunities to build new business models that can help the communities that Ratios Bank operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Ratios Bank can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ratios Bank in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Loyalty marketing
– Ratios Bank 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.
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. Ratios Bank can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Note on How to Analyze a Bank External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Note on How to Analyze a Bank are -
Shortening product life cycle
– it is one of the major threat that Ratios Bank is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Ratios Bank.
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 Ratios Bank business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ratios Bank in the Finance & Accounting industry. The Finance & Accounting 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ratios Bank can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Ratios Bank in the Finance & Accounting sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ratios Bank 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 Note on How to Analyze a Bank .
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. Ratios Bank 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.
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.
Regulatory challenges
– Ratios Bank 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 Finance & Accounting industry regulations.
Environmental challenges
– Ratios Bank 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. Ratios Bank can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Stagnating economy with rate increase
– Ratios Bank 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 Ratios Bank
– 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 Ratios Bank.
Weighted SWOT Analysis of Note on How to Analyze a 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 Note on How to Analyze a 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 Note on How to Analyze a 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 Note on How to Analyze a 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 Note on How to Analyze a 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 Ratios Bank needs to make to build a sustainable competitive advantage.