Case Study Description of Comerica Incorporated: The Valuation Dilemma
In early September 2008, in the midst of the subprime crisis, a manager with the student-run Darden Capital Management fund, wants to evaluate whether Comerica Incorporated, a regional bank based in Dallas, Texas, is a good candidate for inclusion in his portfolio. He needs to perform a valuation of the bank to assert whether the bank seems to be undervalued by the market or whether a further decline in value might be possible. He must account for all the factors that affect bank valuation, both as related to the bank itself as well as to the current market conditions. The case can be taught to: a) examine the valuation of a bank during turbulent times; b) understand the key accounting statements (balance sheet and income statement) for a bank and how they may differ from those for an industrial company; and c) understand the key value drivers of bank value (metrics for profitability, credit quality, liquidity, and capital).
Swot Analysis of "Comerica Incorporated: The Valuation Dilemma" written by Yiorgos Allayannis, Baijnath Ramraika includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Bank Comerica facing as an external strategic factors. Some of the topics covered in Comerica Incorporated: The Valuation Dilemma case study are - Strategic Management Strategies, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Comerica Incorporated: The Valuation Dilemma casestudy better are - – digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion,
technology disruption, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Comerica Incorporated: The Valuation Dilemma
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Comerica Incorporated: The Valuation Dilemma case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Bank Comerica, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Bank Comerica 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 Comerica Incorporated: The Valuation Dilemma can be done for the following purposes –
1. Strategic planning using facts provided in Comerica Incorporated: The Valuation Dilemma case study
2. Improving business portfolio management of Bank Comerica
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 Bank Comerica
Strengths Comerica Incorporated: The Valuation Dilemma | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Bank Comerica in Comerica Incorporated: The Valuation Dilemma Harvard Business Review case study are -
Organizational Resilience of Bank Comerica
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Bank Comerica does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Bank Comerica digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Bank Comerica 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.
Analytics focus
– Bank Comerica 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 Yiorgos Allayannis, Baijnath Ramraika 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)
– Bank Comerica 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 Comerica Incorporated: The Valuation Dilemma - 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
– Bank Comerica is one of the most innovative firm in sector. Manager in Comerica Incorporated: The Valuation Dilemma Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Bank Comerica is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Bank Comerica is present in almost all the verticals within the industry. This has provided firm in Comerica Incorporated: The Valuation Dilemma 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.
Learning organization
- Bank Comerica 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 Bank Comerica is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Comerica Incorporated: The Valuation Dilemma Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Bank Comerica has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Comerica Incorporated: The Valuation Dilemma 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.
Highly skilled collaborators
– Bank Comerica 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 Comerica Incorporated: The Valuation Dilemma HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Bank Comerica in the sector have low bargaining power. Comerica Incorporated: The Valuation Dilemma has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Bank Comerica to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Bank Comerica 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.
Weaknesses Comerica Incorporated: The Valuation Dilemma | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Comerica Incorporated: The Valuation Dilemma are -
High bargaining power of channel partners
– Because of the regulatory requirements, Yiorgos Allayannis, Baijnath Ramraika suggests that, Bank Comerica 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.
Products dominated business model
– Even though Bank Comerica 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 - Comerica Incorporated: The Valuation Dilemma should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Bank Comerica 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. Bank Comerica 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Comerica Incorporated: The Valuation Dilemma 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 Bank Comerica has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Comerica Incorporated: The Valuation Dilemma, is just above the industry average. Bank Comerica 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.
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 Bank Comerica supply chain. Even after few cautionary changes mentioned in the HBR case study - Comerica Incorporated: The Valuation Dilemma, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Bank Comerica vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Bank Comerica 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, Bank Comerica 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Bank Comerica 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 to strategic competitive environment developments
– As Comerica Incorporated: The Valuation Dilemma HBR case study mentions - Bank Comerica 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Bank Comerica is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Comerica Incorporated: The Valuation Dilemma can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Comerica Incorporated: The Valuation Dilemma | 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 Comerica Incorporated: The Valuation Dilemma are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Bank Comerica 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Bank Comerica can use these opportunities to build new business models that can help the communities that Bank Comerica operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Bank Comerica 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 Bank Comerica to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Bank Comerica to increase its market reach. Bank Comerica 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Bank Comerica 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.
Buying journey improvements
– Bank Comerica can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Comerica Incorporated: The Valuation Dilemma 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.
Developing new processes and practices
– Bank Comerica 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.
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 Bank Comerica 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.
Creating value in data economy
– The success of analytics program of Bank Comerica has opened avenues for new revenue streams for the organization in the industry. This can help Bank Comerica to build a more holistic ecosystem as suggested in the Comerica Incorporated: The Valuation Dilemma case study. Bank Comerica can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Bank Comerica 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, Comerica Incorporated: The Valuation Dilemma, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Bank Comerica 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.
Loyalty marketing
– Bank Comerica 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.
Building a culture of innovation
– managers at Bank Comerica 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.
Threats Comerica Incorporated: The Valuation Dilemma External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Comerica Incorporated: The Valuation Dilemma are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Comerica Incorporated: The Valuation Dilemma, Bank Comerica 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 .
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 Bank Comerica business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Bank Comerica 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Bank Comerica 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. Bank Comerica can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Bank Comerica 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. Bank Comerica can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Technology acceleration in Forth Industrial Revolution
– Bank Comerica has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Bank Comerica 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.
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. Bank Comerica 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Bank Comerica with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Bank Comerica 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.
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.
Shortening product life cycle
– it is one of the major threat that Bank Comerica 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 Bank Comerica.
Weighted SWOT Analysis of Comerica Incorporated: The Valuation Dilemma 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 Comerica Incorporated: The Valuation Dilemma 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 Comerica Incorporated: The Valuation Dilemma 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 Comerica Incorporated: The Valuation Dilemma 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 Comerica Incorporated: The Valuation Dilemma 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 Bank Comerica needs to make to build a sustainable competitive advantage.
