The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise?
In 2014, after nearly 150 years as one of Portugal's most wealthy and powerful families, the EspArito Santo family completely lost control of its empire, which included Banco EspArito Santo, Portugal's largest bank by market capitalization and second-largest private-sector bank in terms of assets, along with stakes in numerous financial, non-financial, privately held, and publicly traded companies. During the European financial crisis of 2010 to 2014, many of the family's companies required capital investment. To avoid family equity dilution, the family's patriarch, Ricardo EspArito Santo Silva Salgado, engaged in a creative money-go-round structure whereby Banco EspArito Santo would legally raise short-term commercial paper with high interest rates and sell them to third parties that were partially owned by the EspArito Santo family. These third parties then would sell that paper back to the bank's retail clients as safe investments similar to Portuguese deposits. The plan failed, and the house of cards that was the EspArito Santo empire collapsed. Students will consider whether Salgado and the board of Banco EspArito Santo acted appropriately or if they failed their fiduciary duties to the non-family shareholders of the bank.
Swot Analysis of "The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise?" written by James Shein, Jason P. Hawbecker includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Santo Esparito facing as an external strategic factors. Some of the topics covered in The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? case study are - Strategic Management Strategies, Competitive strategy, Crisis management, Entrepreneurial finance, Ethics, Financial management, Public relations, Risk management and Global Business.
Some of the macro environment factors that can be used to understand the The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? casestudy better are - – cloud computing is disrupting traditional business models, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies,
digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Santo Esparito, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Santo Esparito 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 The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? can be done for the following purposes –
1. Strategic planning using facts provided in The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? case study
2. Improving business portfolio management of Santo Esparito
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Santo Esparito
Strengths The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Santo Esparito in The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? Harvard Business Review case study are -
Analytics focus
– Santo Esparito 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 James Shein, Jason P. Hawbecker 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.
High switching costs
– The high switching costs that Santo Esparito 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.
Training and development
– Santo Esparito has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? 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.
Effective Research and Development (R&D)
– Santo Esparito 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 The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Santo Esparito in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Santo Esparito 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.
Learning organization
- Santo Esparito 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 Santo Esparito is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Santo Esparito digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Santo Esparito 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.
Strong track record of project management
– Santo Esparito 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
– Santo Esparito has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Santo Esparito to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Santo Esparito has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Santo Esparito has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Sustainable margins compare to other players in Global Business industry
– The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? firm has clearly differentiated products in the market place. This has enabled Santo Esparito to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Santo Esparito to invest into research and development (R&D) and innovation.
Weaknesses The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? are -
Skills based hiring
– The stress on hiring functional specialists at Santo Esparito has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Products dominated business model
– Even though Santo Esparito 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 - The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Santo Esparito 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise?, it seems that the employees of Santo Esparito 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.
High bargaining power of channel partners
– Because of the regulatory requirements, James Shein, Jason P. Hawbecker suggests that, Santo Esparito 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.
Capital Spending Reduction
– Even during the low interest decade, Santo Esparito 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.
Low market penetration in new markets
– Outside its home market of Santo Esparito, firm in the HBR case study The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Santo Esparito 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? 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 Santo Esparito has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Santo Esparito 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.
Increasing silos among functional specialists
– The organizational structure of Santo Esparito is dominated by functional specialists. It is not different from other players in the Global Business segment. Santo Esparito needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Santo Esparito to focus more on services rather than just following the product oriented approach.
Opportunities The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? | 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 The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? are -
Using analytics as competitive advantage
– Santo Esparito 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 The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Santo Esparito to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Santo Esparito 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Santo Esparito 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 Santo Esparito to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Santo Esparito is facing challenges because of the dominance of functional experts in the organization. The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? 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 Santo Esparito has opened avenues for new revenue streams for the organization in the industry. This can help Santo Esparito to build a more holistic ecosystem as suggested in the The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? case study. Santo Esparito can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Santo Esparito 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 Global Business segment.
Learning at scale
– Online learning technologies has now opened space for Santo Esparito 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Santo Esparito can use these opportunities to build new business models that can help the communities that Santo Esparito operates in. Secondly it can use opportunities from government spending in Global Business sector.
Better consumer reach
– The expansion of the 5G network will help Santo Esparito to increase its market reach. Santo Esparito 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 Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Santo Esparito 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. Santo Esparito 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Santo Esparito in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Santo Esparito can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Santo Esparito can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? 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.
Threats The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? are -
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.
Stagnating economy with rate increase
– Santo Esparito 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.
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.
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 Santo Esparito in the Global Business sector and impact the bottomline of the organization.
Consumer confidence and its impact on Santo Esparito 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 Santo Esparito business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Santo Esparito in the Global Business industry. The Global Business 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.
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. Santo Esparito 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.
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 Santo Esparito.
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. Santo Esparito needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Santo Esparito has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Santo Esparito needs to keep up with the evolution of technology in the Global Business 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.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Santo Esparito can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Santo Esparito 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 Global Business industry regulations.
Weighted SWOT Analysis of The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? 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 The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? 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 The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? 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 The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? 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 The Fall of Banco Espirito Santo: Holy Spirit or Devil in Disguise? 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 Santo Esparito needs to make to build a sustainable competitive advantage.
