What's In a Relationship? The Case of Commercial Lending SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
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Case Study SWOT Analysis Solution
Case Study Description of What's In a Relationship? The Case of Commercial Lending
This article presents a survey and an analysis of the academic literature on relationship lending to small and mid-sized enterprises (SMEs). It is noted herein that relationship lending depends on soft (non-quantifiable) information, while other "lending technologies" depend on hard (quantifiable) information. Based on relative benefits and costs, relationship lending may be best suited for some types of SMEs, with alternate lending technologies better matched to others. Also discussed in this article are some interesting managerial and public policy issues. On the bank management dimension, relationship lending may create a special challenge for risk managers. On the public policy dimension, evidence suggests that relationship lending may be better delivered by smaller community banks; banking industry consolidation could, however, threaten the presence of such providers. Counter-intuitively, it is possible that banking industry competition may not be the best environment for relationship lending. Finally, this article highlights potentially interesting differences in the relative importance of relationship lending and the other lending technologies across countries with different financial architectures, and examines a potentially powerful link between relationship lending and monetary policy and other monetary shocks.
Swot Analysis of "What's In a Relationship? The Case of Commercial Lending" written by Gregory F. Udell includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lending Relationship facing as an external strategic factors. Some of the topics covered in What's In a Relationship? The Case of Commercial Lending case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the What's In a Relationship? The Case of Commercial Lending casestudy better are - – technology disruption, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, wage bills are increasing, geopolitical disruptions, supply chains are disrupted by pandemic ,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of What's In a Relationship? The Case of Commercial Lending
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in What's In a Relationship? The Case of Commercial Lending case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lending Relationship, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lending Relationship 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 What's In a Relationship? The Case of Commercial Lending can be done for the following purposes –
1. Strategic planning using facts provided in What's In a Relationship? The Case of Commercial Lending case study
2. Improving business portfolio management of Lending Relationship
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 Lending Relationship
Strengths What's In a Relationship? The Case of Commercial Lending | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lending Relationship in What's In a Relationship? The Case of Commercial Lending Harvard Business Review case study are -
Analytics focus
– Lending Relationship 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 Gregory F. Udell 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.
Operational resilience
– The operational resilience strategy in the What's In a Relationship? The Case of Commercial Lending 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.
Successful track record of launching new products
– Lending Relationship has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lending Relationship 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.
Training and development
– Lending Relationship has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in What's In a Relationship? The Case of Commercial Lending 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.
High brand equity
– Lending Relationship has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lending Relationship to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Lending Relationship is present in almost all the verticals within the industry. This has provided firm in What's In a Relationship? The Case of Commercial Lending 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.
Low bargaining power of suppliers
– Suppliers of Lending Relationship in the sector have low bargaining power. What's In a Relationship? The Case of Commercial Lending has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lending Relationship to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Lending Relationship is one of the leading recruiters in the industry. Managers in the What's In a Relationship? The Case of Commercial Lending are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Lending Relationship 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 Lending Relationship is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in What's In a Relationship? The Case of Commercial Lending Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Lending Relationship 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.
Superior customer experience
– The customer experience strategy of Lending Relationship 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)
– Lending Relationship 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 What's In a Relationship? The Case of Commercial Lending - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses What's In a Relationship? The Case of Commercial Lending | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of What's In a Relationship? The Case of Commercial Lending are -
High operating costs
– Compare to the competitors, firm in the HBR case study What's In a Relationship? The Case of Commercial Lending 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 Lending Relationship 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Lending Relationship, firm in the HBR case study What's In a Relationship? The Case of Commercial Lending needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study What's In a Relationship? The Case of Commercial Lending, is just above the industry average. Lending Relationship 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.
Slow to strategic competitive environment developments
– As What's In a Relationship? The Case of Commercial Lending HBR case study mentions - Lending Relationship takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Lending Relationship 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. Lending Relationship 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 bargaining power of channel partners
– Because of the regulatory requirements, Gregory F. Udell suggests that, Lending Relationship 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study What's In a Relationship? The Case of Commercial Lending, it seems that the employees of Lending Relationship 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 to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lending Relationship is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study What's In a Relationship? The Case of Commercial Lending can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study What's In a Relationship? The Case of Commercial Lending, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Skills based hiring
– The stress on hiring functional specialists at Lending Relationship 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.
Capital Spending Reduction
– Even during the low interest decade, Lending Relationship 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.
Opportunities What's In a Relationship? The Case of Commercial Lending | 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 What's In a Relationship? The Case of Commercial Lending 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, Lending Relationship can use these opportunities to build new business models that can help the communities that Lending Relationship operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lending Relationship can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Lending Relationship can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Lending Relationship 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. Lending Relationship 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.
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. Lending Relationship can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Lending Relationship 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.
Using analytics as competitive advantage
– Lending Relationship 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 What's In a Relationship? The Case of Commercial Lending - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lending Relationship to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lending Relationship is facing challenges because of the dominance of functional experts in the organization. What's In a Relationship? The Case of Commercial Lending 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lending Relationship 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 Lending Relationship to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Lending Relationship can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. What's In a Relationship? The Case of Commercial Lending 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.
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 Lending Relationship to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Creating value in data economy
– The success of analytics program of Lending Relationship has opened avenues for new revenue streams for the organization in the industry. This can help Lending Relationship to build a more holistic ecosystem as suggested in the What's In a Relationship? The Case of Commercial Lending case study. Lending Relationship can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Lending Relationship 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.
Threats What's In a Relationship? The Case of Commercial Lending External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study What's In a Relationship? The Case of Commercial Lending are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study What's In a Relationship? The Case of Commercial Lending, Lending Relationship may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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. Lending Relationship 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.
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 Lending Relationship is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Lending Relationship needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lending Relationship 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 What's In a Relationship? The Case of Commercial Lending .
Technology acceleration in Forth Industrial Revolution
– Lending Relationship has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Lending Relationship 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lending Relationship with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Lending Relationship business can come under increasing regulations regarding data privacy, data security, etc.
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.
Stagnating economy with rate increase
– Lending Relationship 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.
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 Lending Relationship in the Finance & Accounting sector and impact the bottomline of the organization.
Consumer confidence and its impact on Lending Relationship 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 What's In a Relationship? The Case of Commercial Lending 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 What's In a Relationship? The Case of Commercial Lending 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 What's In a Relationship? The Case of Commercial Lending 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 What's In a Relationship? The Case of Commercial Lending 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 What's In a Relationship? The Case of Commercial Lending 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 Lending Relationship needs to make to build a sustainable competitive advantage.
