AU Small Finance Bank (AUFI) SWOT Analysis / TOWS Matrix / MBA Resources
Consumer Financial Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for AU Small Finance Bank (India)
Based on various researches at Oak Spring University , AU Small Finance Bank is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China,
technology disruption, increasing commodity prices, etc
Introduction to SWOT Analysis of AU Small Finance Bank
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that AU Small Finance Bank can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AU Small Finance Bank, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AU Small Finance 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 AU Small Finance Bank can be done for the following purposes –
1. Strategic planning of AU Small Finance Bank
2. Improving business portfolio management of AU Small Finance Bank
3. Assessing feasibility of the new initiative in India
4. Making a Consumer Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of AU Small Finance Bank
Strengths of AU Small Finance Bank | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of AU Small Finance Bank are -
Operational resilience
– The operational resilience strategy of AU Small Finance Bank comprises – understanding the underlying the factors in the Consumer Financial Services 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.
Ability to recruit top talent
– AU Small Finance Bank is one of the leading players in the Consumer Financial Services industry in India. It is in a position to attract the best talent available in India. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of AU Small Finance Bank in the Financial sector have low bargaining power. AU Small Finance Bank has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps AU Small Finance Bank to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of AU Small Finance Bank in Consumer Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– AU Small Finance 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 Consumer Financial Services 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.
Successful track record of launching new products
– AU Small Finance Bank has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. AU Small Finance Bank has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Sustainable margins compare to other players in Consumer Financial Services industry
– AU Small Finance Bank has clearly differentiated products in the market place. This has enabled AU Small Finance Bank to fetch slight price premium compare to the competitors in the Consumer Financial Services industry. The sustainable margins have also helped AU Small Finance Bank to invest into research and development (R&D) and innovation.
Training and development
– AU Small Finance 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.
Highly skilled collaborators
– AU Small Finance Bank has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Consumer Financial Services industry. Secondly the value chain collaborators of AU Small Finance Bank have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- AU Small Finance Bank 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 AU Small Finance Bank is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at AU Small Finance Bank emphasize – knowledge, initiative, and innovation.
Organizational Resilience of AU Small Finance Bank
– The covid-19 pandemic has put organizational resilience at the centre of everthing AU Small Finance Bank does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– AU Small Finance Bank has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled AU Small Finance Bank to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of AU Small Finance Bank | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AU Small Finance Bank are -
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 AU Small Finance Bank supply chain. Even after few cautionary changes, AU Small Finance Bank is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left AU Small Finance Bank vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, AU Small Finance 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 Consumer Financial Services industry over the last five years. AU Small Finance 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.
Slow to strategic competitive environment developments
– As AU Small Finance Bank is one of the leading players in the Consumer Financial Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Consumer Financial Services industry in last five years.
High cash cycle compare to competitors
AU Small Finance Bank has a high cash cycle compare to other players in the Consumer Financial Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on AU Small Finance Bank ‘s star products
– The top 2 products and services of AU Small Finance Bank still accounts for major business revenue. This dependence on star products in Consumer Financial Services industry has resulted into insufficient focus on developing new products, even though AU Small Finance Bank has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, AU Small Finance Bank 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 Consumer Financial Services industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of AU Small Finance Bank is dominated by functional specialists. It is not different from other players in the Consumer Financial Services industry, but AU Small Finance Bank needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help AU Small Finance Bank to focus more on services in the Consumer Financial Services industry rather than just following the product oriented approach.
Products dominated business model
– Even though AU Small Finance Bank has some of the most successful models in the Consumer Financial Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. AU Small Finance Bank should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of AU Small Finance Bank products
– To increase the profitability and margins on the products, AU Small Finance Bank needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of AU Small Finance Bank strategy
– From the outside it seems that the employees of AU Small Finance 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.
Need for greater diversity
– AU Small Finance Bank has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
AU Small Finance Bank Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of AU Small Finance Bank are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Consumer Financial Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. AU Small Finance Bank 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. AU Small Finance Bank 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.
Buying journey improvements
– AU Small Finance Bank can improve the customer journey of consumers in the Consumer Financial Services 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.
Loyalty marketing
– AU Small Finance 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, AU Small Finance Bank can use these opportunities to build new business models that can help the communities that AU Small Finance Bank operates in. Secondly it can use opportunities from government spending in Consumer Financial Services sector.
Manufacturing automation
– AU Small Finance Bank can use the latest technology developments to improve its manufacturing and designing process in Consumer Financial Services sector. 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.
Learning at scale
– Online learning technologies has now opened space for AU Small Finance 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.
Using analytics as competitive advantage
– AU Small Finance Bank has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Consumer Financial Services sector. This continuous investment in analytics has enabled AU Small Finance Bank to build a competitive advantage using analytics. The analytics driven competitive advantage can help AU Small Finance Bank to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects AU Small Finance Bank can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– AU Small Finance Bank 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, AU Small Finance 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.
Building a culture of innovation
– managers at AU Small Finance Bank can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Consumer Financial Services industry.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, AU Small Finance 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 AU Small Finance 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for AU Small Finance Bank in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Consumer Financial Services industry, and it will provide faster access to the consumers.
Threats AU Small Finance Bank External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of AU Small Finance Bank are -
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. AU Small Finance 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, AU Small Finance 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 AU Small Finance Bank prominent markets.
Technology acceleration in Forth Industrial Revolution
– AU Small Finance Bank has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, AU Small Finance Bank needs to keep up with the evolution of technology in the Consumer Financial Services 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.
Environmental challenges
– AU Small Finance Bank 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. AU Small Finance Bank can take advantage of this fund but it will also bring new competitors in the Consumer Financial Services industry.
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 Consumer Financial Services industry are lowering. It can presents AU Small Finance Bank with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Consumer Financial Services sector.
Increasing wage structure of AU Small Finance 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 AU Small Finance Bank.
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 AU Small Finance Bank.
Consumer confidence and its impact on AU Small Finance Bank 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 Consumer Financial Services industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, AU Small Finance 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 Consumer Financial Services sector.
High dependence on third party suppliers
– AU Small Finance Bank 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.
Shortening product life cycle
– it is one of the major threat that AU Small Finance Bank is facing in Consumer Financial Services 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. AU Small Finance Bank needs to understand the core reasons impacting the Consumer Financial Services industry. This will help it in building a better workplace.
Weighted SWOT Analysis of AU Small Finance Bank Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AU Small Finance 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 AU Small Finance 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 AU Small Finance 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 AU Small Finance 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 AU Small Finance Bank needs to make to build a sustainable competitive advantage.