HDFC Bank (HDBK) SWOT Analysis / TOWS Matrix / MBA Resources
Regional Banks
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for HDFC Bank (India)
Based on various researches at Oak Spring University , HDFC Bank is operating in a macro-environment that has been destablized by – geopolitical disruptions, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies,
cloud computing is disrupting traditional business models, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that HDFC Bank can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the HDFC Bank, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which HDFC Bank 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 HDFC Bank can be done for the following purposes –
1. Strategic planning of HDFC Bank
2. Improving business portfolio management of HDFC Bank
3. Assessing feasibility of the new initiative in India
4. Making a Regional Banks sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of HDFC Bank
Strengths of HDFC Bank | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of HDFC Bank are -
Innovation driven organization
– HDFC Bank is one of the most innovative firm in Regional Banks sector.
Analytics focus
– HDFC Bank 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 Regional Banks industry. The technology infrastructure of India is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Effective Research and Development (R&D)
– HDFC Bank has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – HDFC Bank staying ahead in the Regional Banks industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that HDFC Bank 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.
Diverse revenue streams
– HDFC Bank is present in almost all the verticals within the Regional Banks industry. This has provided HDFC Bank a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy of HDFC Bank comprises – understanding the underlying the factors in the Regional Banks 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.
Highly skilled collaborators
– HDFC Bank has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Regional Banks industry. Secondly the value chain collaborators of HDFC Bank have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of HDFC Bank in the Financial sector have low bargaining power. HDFC Bank has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps HDFC Bank to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of HDFC Bank
– The covid-19 pandemic has put organizational resilience at the centre of everthing HDFC Bank does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– HDFC Bank has one of the best training and development program in Financial industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Superior customer experience
– The customer experience strategy of HDFC Bank in Regional Banks industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Regional Banks
– HDFC Bank is one of the leading players in the Regional Banks industry in India. Over the years it has not only transformed the business landscape in the Regional Banks industry in India but also across the existing markets. The ability to lead change has enabled HDFC Bank in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of HDFC Bank | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of HDFC Bank are -
Slow to strategic competitive environment developments
– As HDFC Bank is one of the leading players in the Regional Banks industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Regional Banks industry in last five years.
Slow decision making process
– As mentioned earlier in the report, HDFC Bank has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Regional Banks industry over the last five years. HDFC Bank 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.
Interest costs
– Compare to the competition, HDFC Bank 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.
Low market penetration in new markets
– Outside its home market of India, HDFC Bank needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners in Regional Banks industry
– because of the regulatory requirements in India, HDFC Bank 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 Regional Banks industry.
Ability to respond to the competition
– As the decision making is very deliberative at HDFC Bank, in the dynamic environment of Regional Banks industry it has struggled to respond to the nimble upstart competition. HDFC Bank has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though HDFC Bank has some of the most successful models in the Regional Banks industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. HDFC Bank should strive to include more intangible value offerings along with its core products and services.
Employees’ less understanding of HDFC Bank strategy
– From the outside it seems that the employees of HDFC Bank 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, HDFC Bank is slow explore the new channels of communication. These new channels of communication can help HDFC Bank to provide better information regarding Regional Banks products and services. It can also build an online community to further reach out to potential customers.
High dependence on HDFC Bank ‘s star products
– The top 2 products and services of HDFC Bank still accounts for major business revenue. This dependence on star products in Regional Banks industry has resulted into insufficient focus on developing new products, even though HDFC Bank has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, HDFC Bank has high operating costs in the Regional Banks industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract HDFC Bank lucrative customers.
HDFC Bank Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of HDFC Bank are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, HDFC Bank 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 HDFC Bank to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, HDFC Bank can use these opportunities to build new business models that can help the communities that HDFC Bank operates in. Secondly it can use opportunities from government spending in Regional Banks sector.
Buying journey improvements
– HDFC Bank can improve the customer journey of consumers in the Regional Banks industry by using analytics and artificial intelligence. It 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects HDFC Bank can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– HDFC Bank has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Regional Banks sector. This continuous investment in analytics has enabled HDFC Bank to build a competitive advantage using analytics. The analytics driven competitive advantage can help HDFC Bank to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 HDFC Bank 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.
Developing new processes and practices
– HDFC Bank can develop new processes and procedures in Regional Banks industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Use of Bitcoin and other crypto currencies for transactions in Regional Banks industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for HDFC Bank in the Regional Banks industry. Now HDFC Bank can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for HDFC Bank 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 HDFC Bank has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help HDFC Bank to build a more holistic ecosystem for HDFC Bank products in the Regional Banks industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, HDFC Bank 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for HDFC Bank 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 HDFC Bank to hire the very best people irrespective of their geographical location.
Loyalty marketing
– HDFC Bank 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 HDFC Bank External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of HDFC Bank are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, HDFC Bank 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 HDFC Bank prominent markets.
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 HDFC Bank in the Regional Banks sector and impact the bottomline of the organization.
Increasing wage structure of HDFC Bank
– 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 HDFC Bank.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, HDFC Bank may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Regional Banks sector.
Technology acceleration in Forth Industrial Revolution
– HDFC Bank has witnessed rapid integration of technology during Covid-19 in the Regional Banks industry. As one of the leading players in the industry, HDFC Bank needs to keep up with the evolution of technology in the Regional Banks 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Regional Banks industry are lowering. It can presents HDFC Bank with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Regional Banks sector.
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. HDFC Bank 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.
Easy access to finance
– Easy access to finance in Regional Banks industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. HDFC Bank 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
– HDFC Bank 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 Regional Banks industry.
Shortening product life cycle
– it is one of the major threat that HDFC Bank is facing in Regional Banks sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. HDFC Bank needs to understand the core reasons impacting the Regional Banks industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for HDFC Bank in Regional Banks industry. The Regional Banks 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.
Weighted SWOT Analysis of HDFC Bank Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at HDFC Bank 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 HDFC Bank 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 HDFC Bank 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 HDFC Bank 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 HDFC Bank needs to make to build a sustainable competitive advantage.