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 - – increasing energy prices, there is increasing trade war between United States & China, wage bills are increasing, central banks are concerned over increasing inflation, there is backlash against globalization, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%,
increasing commodity prices, talent flight as more people leaving formal jobs, 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 -
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.
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.
Sustainable margins compare to other players in Leadership & Managing People industry
– INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST firm has clearly differentiated products in the market place. This has enabled Governance Icbc to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Governance Icbc to invest into research and development (R&D) and innovation.
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.
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.
Ability to lead change in Leadership & Managing People field
– Governance Icbc is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Governance Icbc in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
Highly skilled collaborators
– Governance Icbc 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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 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.
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 -
Skills based hiring
– The stress on hiring functional specialists at Governance Icbc 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.
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.
Low market penetration in new markets
– Outside its home market of Governance Icbc, firm in the HBR case study INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Increasing silos among functional specialists
– The organizational structure of Governance Icbc is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Governance Icbc needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Governance Icbc to focus more on services rather than just following the product oriented approach.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST, it seems that the employees of Governance Icbc 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.
Slow decision making process
– As mentioned earlier in the report, Governance Icbc 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. Governance Icbc 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 INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST 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 Governance Icbc has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST 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 Governance Icbc 's lucrative customers.
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 -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Governance Icbc can use these opportunities to build new business models that can help the communities that Governance Icbc operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Learning at scale
– Online learning technologies has now opened space for Governance Icbc 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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Governance Icbc 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, INDUSTRIAL AND COMMERCIAL BANK OF CHINA: GOVERNANCE LESSONS FROM EAST TO WEST, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Leveraging digital technologies
– Governance Icbc 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.
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.
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.
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.
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.
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.
Manufacturing automation
– Governance Icbc can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
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 -
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 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.
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.
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. Governance Icbc needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
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.
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 .
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 Governance Icbc in the Leadership & Managing People sector and impact the bottomline of the organization.
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.
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.
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.
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.
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.
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.
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.
