INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST
(A short version of this case is also available: IMD-1-0335 Industrial and Commercial Bank of China: The Governance Model.) In June 1999, ICBC - the largest commercial bank in China - was technically bankrupt, with a nonperforming loan ratio of 47.59%. But, thanks to the united efforts of the government, the management team and its employees, the bank rose from the ashes through a transformation in its governance structure. After the third quarter of 2007, ICBC had continued to be ranked as the largest bank in the world by market capitalization, customers' deposits and profitability.This case was developed to record corporate governance reform at ICBC within the context of China's banking reform. It describes the evolution of governance in China, the challenges faced by leaders at all levels, the choices made and the results of these hard decisions. The challenges and discussion are relevant to Western companies in terms of understanding the corporate governance structure adopted by large Chinese enterprises. The success of the bank and its unique governance structure bring much inspiration from East to West. Learning objectives: Participants can explore the different issues behind ICBC's governance reform. At undergraduate level in a political economy program, students can discuss the strategies involved in transforming from a centrally planned economy to a free market economy and the systematic design required to make any reform work. In MBA programs, participants can discuss issues related to corporate restructuring, governance structure, IPOs, as well as competitive strategy. At executive and board level, participants can focus on the banking governance structure and the pros and cons of the ICBC system. By the end of the class discussion, participants should have gained an insight into working with large Chinese companies. They should be able to grasp the problems arising from conflicts of interest among shareholders, directors, supervisors, the management team, strategic investors, the communist party and regulators. They should also understand the inner workings of these stakeholders, in particular the incentives of each stakeholder group, which differ greatly from those in the West. Participants will realize how corporate governance could be managed differently and how complex it could become. The discussions offer participants the opportunity to reflect on governance practices in the West and borrow elements that could be useful.
Swot Analysis of "INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST" written by Didier Cossin, Hongze Abraham Lu includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Governance Icbc facing as an external strategic factors. Some of the topics covered in INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST case study are - Strategic Management Strategies, Emerging markets, Government and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , increasing transportation and logistics costs, technology disruption, cloud computing is disrupting traditional business models,
increasing household debt because of falling income levels, there is backlash against globalization, etc
Introduction to SWOT Analysis of INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Governance Icbc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Governance Icbc 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST can be done for the following purposes –
1. Strategic planning using facts provided in INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST case study
2. Improving business portfolio management of Governance Icbc
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Governance Icbc
Strengths INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Governance Icbc in INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST Harvard Business Review case study are -
High brand equity
– Governance Icbc has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Governance Icbc to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Governance Icbc has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Governance Icbc 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.
Organizational Resilience of Governance Icbc
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Governance Icbc does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Governance Icbc 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.
Innovation driven organization
– Governance Icbc is one of the most innovative firm in sector. Manager in INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST 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 Governance Icbc in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Governance Icbc 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Governance Icbc in the sector have low bargaining power. INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Governance Icbc to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Governance Icbc 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 Governance Icbc is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Governance Icbc is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Governance Icbc 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.
Ability to recruit top talent
– Governance Icbc is one of the leading recruiters in the industry. Managers in the INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST are -
High cash cycle compare to competitors
Governance Icbc 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.
Interest costs
– Compare to the competition, Governance Icbc 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.
Aligning sales with marketing
– It come across in the case study INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST can leverage the sales team experience to cultivate customer relationships as Governance Icbc is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Governance Icbc 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.
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 Governance Icbc supply chain. Even after few cautionary changes mentioned in the HBR case study - INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Governance Icbc vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Governance Icbc 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 - INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Governance Icbc is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST, in the dynamic environment Governance Icbc has struggled to respond to the nimble upstart competition. Governance Icbc has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Governance Icbc 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, Didier Cossin, Hongze Abraham Lu suggests that, Governance Icbc 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST HBR case study mentions - Governance Icbc 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.
Opportunities INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST | 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Governance Icbc is facing challenges because of the dominance of functional experts in the organization. INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST 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 Leadership & Managing People industry, but it has also influenced the consumer preferences. Governance Icbc can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Governance Icbc 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.
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. Governance Icbc can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Governance Icbc can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST 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.
Creating value in data economy
– The success of analytics program of Governance Icbc has opened avenues for new revenue streams for the organization in the industry. This can help Governance Icbc to build a more holistic ecosystem as suggested in the INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST case study. Governance Icbc can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Governance Icbc can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Governance Icbc in the consumer business. Now Governance Icbc can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Governance Icbc in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, Governance Icbc 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Governance Icbc 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. Governance Icbc can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Loyalty marketing
– Governance Icbc 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.
Using analytics as competitive advantage
– Governance Icbc 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Governance Icbc to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST are -
Shortening product life cycle
– it is one of the major threat that Governance Icbc is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Governance Icbc
– 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 Governance Icbc.
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 Governance Icbc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Governance Icbc can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST .
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Governance Icbc can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Governance Icbc 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.
Technology acceleration in Forth Industrial Revolution
– Governance Icbc has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Governance Icbc needs to keep up with the evolution of technology in the Leadership & Managing People 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 Governance Icbc 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 Governance Icbc in the Leadership & Managing People industry. The Leadership & Managing People 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. Governance Icbc 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.
Environmental challenges
– Governance Icbc 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. Governance Icbc can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Regulatory challenges
– Governance Icbc 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 Leadership & Managing People industry regulations.
High dependence on third party suppliers
– Governance Icbc 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.
Weighted SWOT Analysis of INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST 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 Governance Icbc needs to make to build a sustainable competitive advantage.