Islamic Banking Lessons for the Financial Sector SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Islamic Banking Lessons for the Financial Sector
The financial crisis that started with the demise of Lehman Brothers in 2008 and almost brought the world economy to its knees has prompted many international financial institutions to do some serious soul-searching. As they try to strengthen their capital and reduce their risk operations, whom should governments, regulators and financial bosses turn to for inspiration? A good place to start would be to study those banks that have performed best since the crisis - many of which, ironically, were shown to be "underperforming" in 2006, during the heady days of the housing boom. In this sense, Islamic banking is a good test case. The authors, who all have extensive experience in the Middle East, analyze how faith-based values have shaped some of the unconventional products and services that Islamic banks offer, and they highlight the challenges these banks face as they expand their presence to Western countries. Might there be useful lessons for conventional banks as they reconceptualize and rebuild their damaged institutions in the wake of the crisis?
Authors :: Albert Ribera, Veit Etzold, Philipp Wackerbeck
Swot Analysis of "Islamic Banking Lessons for the Financial Sector" written by Albert Ribera, Veit Etzold, Philipp Wackerbeck includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Islamic Banks facing as an external strategic factors. Some of the topics covered in Islamic Banking Lessons for the Financial Sector case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Islamic Banking Lessons for the Financial Sector casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, geopolitical disruptions, talent flight as more people leaving formal jobs, increasing commodity prices,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Islamic Banking Lessons for the Financial Sector
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Islamic Banking Lessons for the Financial Sector case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Islamic Banks, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Islamic Banks 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 Islamic Banking Lessons for the Financial Sector can be done for the following purposes –
1. Strategic planning using facts provided in Islamic Banking Lessons for the Financial Sector case study
2. Improving business portfolio management of Islamic Banks
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 Islamic Banks
Strengths Islamic Banking Lessons for the Financial Sector | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Islamic Banks in Islamic Banking Lessons for the Financial Sector Harvard Business Review case study are -
Learning organization
- Islamic Banks 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 Islamic Banks is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Islamic Banking Lessons for the Financial Sector Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Islamic Banks 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 Islamic Banking Lessons for the Financial Sector HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Islamic Banks is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Islamic Banks has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Islamic Banks to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Islamic Banking Lessons for the Financial Sector 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.
Effective Research and Development (R&D)
– Islamic Banks 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 Islamic Banking Lessons for the Financial Sector - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Islamic Banks 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.
Analytics focus
– Islamic Banks 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 Albert Ribera, Veit Etzold, Philipp Wackerbeck 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.
Innovation driven organization
– Islamic Banks is one of the most innovative firm in sector. Manager in Islamic Banking Lessons for the Financial Sector Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Islamic Banks 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 Islamic Banks 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.
Ability to recruit top talent
– Islamic Banks is one of the leading recruiters in the industry. Managers in the Islamic Banking Lessons for the Financial Sector are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Islamic Banking Lessons for the Financial Sector | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Islamic Banking Lessons for the Financial Sector are -
Workers concerns about automation
– As automation is fast increasing in the segment, Islamic Banks 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Albert Ribera, Veit Etzold, Philipp Wackerbeck suggests that, Islamic Banks 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Islamic Banking Lessons for the Financial Sector, is just above the industry average. Islamic Banks 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.
Products dominated business model
– Even though Islamic Banks 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 - Islamic Banking Lessons for the Financial Sector should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Islamic Banks 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.
Increasing silos among functional specialists
– The organizational structure of Islamic Banks is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Islamic Banks needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Islamic Banks to focus more on services rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Islamic Banks 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Islamic Banking Lessons for the Financial Sector, in the dynamic environment Islamic Banks has struggled to respond to the nimble upstart competition. Islamic Banks has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Islamic Banks 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Islamic Banking Lessons for the Financial Sector, it seems that the employees of Islamic Banks don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Aligning sales with marketing
– It come across in the case study Islamic Banking Lessons for the Financial Sector 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 Islamic Banking Lessons for the Financial Sector can leverage the sales team experience to cultivate customer relationships as Islamic Banks is planning to shift buying processes online.
Opportunities Islamic Banking Lessons for the Financial Sector | 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 Islamic Banking Lessons for the Financial Sector are -
Buying journey improvements
– Islamic Banks can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Islamic Banking Lessons for the Financial Sector 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Islamic Banks 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 Islamic Banks to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Islamic Banks 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 Islamic Banking Lessons for the Financial Sector - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Islamic Banks to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Islamic Banks 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Islamic Banks 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.
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 Islamic Banks in the consumer business. Now Islamic Banks can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Islamic Banks is facing challenges because of the dominance of functional experts in the organization. Islamic Banking Lessons for the Financial Sector 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.
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. Islamic Banks can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Islamic Banks has opened avenues for new revenue streams for the organization in the industry. This can help Islamic Banks to build a more holistic ecosystem as suggested in the Islamic Banking Lessons for the Financial Sector case study. Islamic Banks can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Islamic Banks 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.
Learning at scale
– Online learning technologies has now opened space for Islamic Banks 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.
Building a culture of innovation
– managers at Islamic Banks 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 Finance & Accounting segment.
Leveraging digital technologies
– Islamic Banks 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.
Threats Islamic Banking Lessons for the Financial Sector External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Islamic Banking Lessons for the Financial Sector are -
Technology acceleration in Forth Industrial Revolution
– Islamic Banks has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Islamic Banks 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.
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. Islamic Banks needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Islamic Banks 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Islamic Banks with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Islamic Banks 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. Islamic Banks can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing wage structure of Islamic Banks
– 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 Islamic Banks.
Consumer confidence and its impact on Islamic Banks 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.
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 Islamic Banks.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Islamic Banking Lessons for the Financial Sector, Islamic Banks 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 .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Islamic Banks 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.
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
– Islamic Banks 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.
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. Islamic Banks can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Islamic Banking Lessons for the Financial Sector 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 Islamic Banking Lessons for the Financial Sector 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 Islamic Banking Lessons for the Financial Sector 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 Islamic Banking Lessons for the Financial Sector 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 Islamic Banking Lessons for the Financial Sector 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 Islamic Banks needs to make to build a sustainable competitive advantage.
