Bandhan Microfinance: Is Transformation to Bank Status Required? SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Bandhan Microfinance: Is Transformation to Bank Status Required?
Bandhan, the largest microfinance institution in India, has 13,000 staff members and 2,016 branches in 22 states and union territories, 5.2 million borrowers and loans outstanding of INR 57.04 billion. However, its overdependence on external sources of funds along with recent steps by the country's banking regulator have started worrying Bandhan's management, from a profitability and sustainability perspective. The banking licence policy declared by India's central bank in February 2013 came as an opportunity for Bandhan to resolve the predicament it had met. The founder chairman and managing director is now trying to address the question of transforming Bandhan into a bank. Does the present business require any change? As a bank, the cost of funds for Bandhan would come down, as it would be able to raise funds by drawing deposits from clients. But is Bandhan ready to become a bank? How will it meet the various challenges in achieving business transformation?
Swot Analysis of "Bandhan Microfinance: Is Transformation to Bank Status Required?" written by Sujit Jagadale, Debasish Maitra includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Bandhan Bank facing as an external strategic factors. Some of the topics covered in Bandhan Microfinance: Is Transformation to Bank Status Required? case study are - Strategic Management Strategies, Entrepreneurial finance and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Bandhan Microfinance: Is Transformation to Bank Status Required? casestudy better are - – central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, increasing energy prices, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, increasing commodity prices,
increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Bandhan Microfinance: Is Transformation to Bank Status Required?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Bandhan Microfinance: Is Transformation to Bank Status Required? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Bandhan Bank, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Bandhan 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 Bandhan Microfinance: Is Transformation to Bank Status Required? can be done for the following purposes –
1. Strategic planning using facts provided in Bandhan Microfinance: Is Transformation to Bank Status Required? case study
2. Improving business portfolio management of Bandhan 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 Bandhan Bank
Strengths Bandhan Microfinance: Is Transformation to Bank Status Required? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Bandhan Bank in Bandhan Microfinance: Is Transformation to Bank Status Required? Harvard Business Review case study are -
Organizational Resilience of Bandhan Bank
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Bandhan Bank does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Bandhan Bank is one of the leading recruiters in the industry. Managers in the Bandhan Microfinance: Is Transformation to Bank Status Required? are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Bandhan Bank 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 Bandhan Microfinance: Is Transformation to Bank Status Required? HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Bandhan 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 Sujit Jagadale, Debasish Maitra 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.
Diverse revenue streams
– Bandhan Bank is present in almost all the verticals within the industry. This has provided firm in Bandhan Microfinance: Is Transformation to Bank Status Required? 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Bandhan Microfinance: Is Transformation to Bank Status Required? firm has clearly differentiated products in the market place. This has enabled Bandhan Bank to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Bandhan Bank to invest into research and development (R&D) and innovation.
Ability to lead change in Finance & Accounting field
– Bandhan 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 Bandhan Bank in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Bandhan Bank in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management
– Bandhan 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.
Learning organization
- Bandhan 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 Bandhan Bank is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Bandhan Microfinance: Is Transformation to Bank Status Required? Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Bandhan Bank has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Bandhan 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Bandhan Bank digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Bandhan Bank 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.
Weaknesses Bandhan Microfinance: Is Transformation to Bank Status Required? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Bandhan Microfinance: Is Transformation to Bank Status Required? are -
Products dominated business model
– Even though Bandhan 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 - Bandhan Microfinance: Is Transformation to Bank Status Required? should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Bandhan Microfinance: Is Transformation to Bank Status Required?, is just above the industry average. Bandhan Bank 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.
Low market penetration in new markets
– Outside its home market of Bandhan Bank, firm in the HBR case study Bandhan Microfinance: Is Transformation to Bank Status Required? needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Bandhan 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 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 Bandhan Bank supply chain. Even after few cautionary changes mentioned in the HBR case study - Bandhan Microfinance: Is Transformation to Bank Status Required?, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Bandhan Bank vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Bandhan 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Bandhan Microfinance: Is Transformation to Bank Status Required? 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 Bandhan Bank has relatively successful track record of launching new products.
No frontier risks strategy
– After analyzing the HBR case study Bandhan Microfinance: Is Transformation to Bank Status Required?, it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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, Bandhan Bank 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. Bandhan Bank 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.
Lack of clear differentiation of Bandhan Bank products
– To increase the profitability and margins on the products, Bandhan Bank needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study Bandhan Microfinance: Is Transformation to Bank Status Required? 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 Bandhan Microfinance: Is Transformation to Bank Status Required? can leverage the sales team experience to cultivate customer relationships as Bandhan Bank is planning to shift buying processes online.
Opportunities Bandhan Microfinance: Is Transformation to Bank Status Required? | 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 Bandhan Microfinance: Is Transformation to Bank Status Required? are -
Developing new processes and practices
– Bandhan Bank can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Bandhan Bank can use these opportunities to build new business models that can help the communities that Bandhan 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. Bandhan Bank can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Bandhan 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 Bandhan 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, Bandhan Bank is facing challenges because of the dominance of functional experts in the organization. Bandhan Microfinance: Is Transformation to Bank Status Required? 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.
Buying journey improvements
– Bandhan Bank can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Bandhan Microfinance: Is Transformation to Bank Status Required? 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
– Bandhan Bank can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Bandhan 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Bandhan Bank 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, Bandhan Microfinance: Is Transformation to Bank Status Required?, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Bandhan Bank to increase its market reach. Bandhan 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.
Leveraging digital technologies
– Bandhan 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Bandhan Bank 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. Bandhan Bank 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.
Learning at scale
– Online learning technologies has now opened space for Bandhan 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.
Threats Bandhan Microfinance: Is Transformation to Bank Status Required? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Bandhan Microfinance: Is Transformation to Bank Status Required? are -
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 Bandhan Bank in the Finance & Accounting sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Bandhan 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Bandhan 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 Bandhan Microfinance: Is Transformation to Bank Status Required? .
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 Bandhan Bank.
Technology acceleration in Forth Industrial Revolution
– Bandhan Bank has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Bandhan Bank needs to keep up with the evolution of technology in the Finance & Accounting 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Bandhan Bank with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Bandhan 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 Bandhan Bank.
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.
Environmental challenges
– Bandhan 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. Bandhan Bank can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Shortening product life cycle
– it is one of the major threat that Bandhan Bank is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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. Bandhan Bank needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Bandhan Microfinance: Is Transformation to Bank Status Required?, Bandhan Bank may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Weighted SWOT Analysis of Bandhan Microfinance: Is Transformation to Bank Status Required? 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 Bandhan Microfinance: Is Transformation to Bank Status Required? 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 Bandhan Microfinance: Is Transformation to Bank Status Required? 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 Bandhan Microfinance: Is Transformation to Bank Status Required? 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 Bandhan Microfinance: Is Transformation to Bank Status Required? 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 Bandhan Bank needs to make to build a sustainable competitive advantage.