China Merchants Bank: Business Model Transformation SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study SWOT Analysis Solution
Case Study Description of China Merchants Bank: Business Model Transformation
The chairman and chief executive officer of China Merchants Bank (CMB) had led CMB through a decade of rapid development, implementing two transformations to save capital, develop culture and serve the financial needs of China's new businesses and consumers. Notwithstanding successes, however, CMB's capital constraint was biting and the stock market was punishing CMB's shareholders. Slower domestic growth, an uncertain international economy and increased government regulation increased the challenge facing the chairman: to set CMB's future strategy.
Swot Analysis of "China Merchants Bank: Business Model Transformation" written by Mingkang Liu, Hugh Thomas, Gang Du includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cmb's Cmb facing as an external strategic factors. Some of the topics covered in China Merchants Bank: Business Model Transformation case study are - Strategic Management Strategies, Leadership and Finance & Accounting.
Some of the macro environment factors that can be used to understand the China Merchants Bank: Business Model Transformation casestudy better are - – there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, technology disruption, increasing transportation and logistics costs, central banks are concerned over increasing inflation,
challanges to central banks by blockchain based private currencies, wage bills are increasing, etc
Introduction to SWOT Analysis of China Merchants Bank: Business Model Transformation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in China Merchants Bank: Business Model Transformation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cmb's Cmb, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cmb's Cmb 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 China Merchants Bank: Business Model Transformation can be done for the following purposes –
1. Strategic planning using facts provided in China Merchants Bank: Business Model Transformation case study
2. Improving business portfolio management of Cmb's Cmb
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 Cmb's Cmb
Strengths China Merchants Bank: Business Model Transformation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cmb's Cmb in China Merchants Bank: Business Model Transformation Harvard Business Review case study are -
Innovation driven organization
– Cmb's Cmb is one of the most innovative firm in sector. Manager in China Merchants Bank: Business Model Transformation Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Cmb's Cmb in the sector have low bargaining power. China Merchants Bank: Business Model Transformation has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Cmb's Cmb to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Cmb's Cmb in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Cmb's Cmb is present in almost all the verticals within the industry. This has provided firm in China Merchants Bank: Business Model Transformation 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.
Operational resilience
– The operational resilience strategy in the China Merchants Bank: Business Model Transformation 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)
– Cmb's Cmb 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 China Merchants Bank: Business Model Transformation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Cmb's Cmb digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Cmb's Cmb 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.
High switching costs
– The high switching costs that Cmb's Cmb 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.
Analytics focus
– Cmb's Cmb 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 Mingkang Liu, Hugh Thomas, Gang Du 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.
Sustainable margins compare to other players in Finance & Accounting industry
– China Merchants Bank: Business Model Transformation firm has clearly differentiated products in the market place. This has enabled Cmb's Cmb to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Cmb's Cmb to invest into research and development (R&D) and innovation.
Training and development
– Cmb's Cmb has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in China Merchants Bank: Business Model Transformation 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.
Cross disciplinary teams
– Horizontal connected teams at the Cmb's Cmb 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 China Merchants Bank: Business Model Transformation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China Merchants Bank: Business Model Transformation are -
High cash cycle compare to competitors
Cmb's Cmb 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 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 Cmb's Cmb supply chain. Even after few cautionary changes mentioned in the HBR case study - China Merchants Bank: Business Model Transformation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Cmb's Cmb vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Cmb's Cmb is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study China Merchants Bank: Business Model Transformation can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Cmb's Cmb 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.
Lack of clear differentiation of Cmb's Cmb products
– To increase the profitability and margins on the products, Cmb's Cmb needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Mingkang Liu, Hugh Thomas, Gang Du suggests that, Cmb's Cmb 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.
Slow to strategic competitive environment developments
– As China Merchants Bank: Business Model Transformation HBR case study mentions - Cmb's Cmb takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High operating costs
– Compare to the competitors, firm in the HBR case study China Merchants Bank: Business Model Transformation has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Cmb's Cmb 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Cmb's Cmb 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. Cmb's Cmb 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study China Merchants Bank: Business Model Transformation, is just above the industry average. Cmb's Cmb 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 Cmb's Cmb, firm in the HBR case study China Merchants Bank: Business Model Transformation needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities China Merchants Bank: Business Model Transformation | 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 China Merchants Bank: Business Model Transformation are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Cmb's Cmb can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Cmb's Cmb 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Cmb's Cmb is facing challenges because of the dominance of functional experts in the organization. China Merchants Bank: Business Model Transformation 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Cmb's Cmb 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.
Developing new processes and practices
– Cmb's Cmb 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.
Better consumer reach
– The expansion of the 5G network will help Cmb's Cmb to increase its market reach. Cmb's Cmb 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.
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. Cmb's Cmb 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. Cmb's Cmb 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.
Manufacturing automation
– Cmb's Cmb 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.
Buying journey improvements
– Cmb's Cmb can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. China Merchants Bank: Business Model Transformation 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 Cmb's Cmb 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 Cmb's Cmb to hire the very best people irrespective of their geographical location.
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 Cmb's Cmb in the consumer business. Now Cmb's Cmb can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Cmb's Cmb 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. Cmb's Cmb can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats China Merchants Bank: Business Model Transformation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study China Merchants Bank: Business Model Transformation are -
Increasing wage structure of Cmb's Cmb
– 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 Cmb's Cmb.
Environmental challenges
– Cmb's Cmb 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. Cmb's Cmb can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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.
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 Cmb's Cmb in the Finance & Accounting sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Cmb's Cmb has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Cmb's Cmb 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.
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 Cmb's Cmb business can come under increasing regulations regarding data privacy, data security, etc.
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. Cmb's Cmb 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.
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.
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. Cmb's Cmb can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Cmb's Cmb is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Cmb's Cmb 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.
Stagnating economy with rate increase
– Cmb's Cmb 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.
Consumer confidence and its impact on Cmb's Cmb 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.
Weighted SWOT Analysis of China Merchants Bank: Business Model Transformation 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 China Merchants Bank: Business Model Transformation 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 China Merchants Bank: Business Model Transformation 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 China Merchants Bank: Business Model Transformation 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 China Merchants Bank: Business Model Transformation 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 Cmb's Cmb needs to make to build a sustainable competitive advantage.
