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 - – customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies,
digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, 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 -
High brand equity
– Bandhan Bank has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Bandhan Bank to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
Effective Research and Development (R&D)
– Bandhan Bank 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 Bandhan Microfinance: Is Transformation to Bank Status Required? - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Bandhan Bank is one of the most innovative firm in sector. Manager in Bandhan Microfinance: Is Transformation to Bank Status Required? Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
Low bargaining power of suppliers
– Suppliers of Bandhan Bank in the sector have low bargaining power. Bandhan Microfinance: Is Transformation to Bank Status Required? has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Bandhan Bank to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
High switching costs
– The high switching costs that Bandhan Bank 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.
Operational resilience
– The operational resilience strategy in the Bandhan Microfinance: Is Transformation to Bank Status Required? 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.
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 -
High bargaining power of channel partners
– Because of the regulatory requirements, Sujit Jagadale, Debasish Maitra suggests that, Bandhan 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.
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.
Need for greater diversity
– Bandhan Bank 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.
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 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.
Capital Spending Reduction
– Even during the low interest decade, Bandhan 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Bandhan Bank is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Bandhan Microfinance: Is Transformation to Bank Status Required? can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Bandhan Microfinance: Is Transformation to Bank Status Required?, in the dynamic environment Bandhan Bank has struggled to respond to the nimble upstart competition. Bandhan Bank has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Bandhan Bank 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.
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.
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 -
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.
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.
Creating value in data economy
– The success of analytics program of Bandhan Bank has opened avenues for new revenue streams for the organization in the industry. This can help Bandhan Bank to build a more holistic ecosystem as suggested in the Bandhan Microfinance: Is Transformation to Bank Status Required? case study. Bandhan Bank 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 Bandhan Bank 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Bandhan Bank in the consumer business. Now Bandhan Bank can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Loyalty marketing
– Bandhan 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.
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.
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.
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.
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.
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.
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. Bandhan Bank can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 -
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. Bandhan Bank can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
High dependence on third party suppliers
– Bandhan Bank 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.
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.
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.
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? .
Consumer confidence and its impact on Bandhan Bank 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.
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 Bandhan Bank business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Bandhan 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.
Regulatory challenges
– Bandhan 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.
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.
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.
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.
