Erste Group Bank AG (0MJK) SWOT Analysis / TOWS Matrix / MBA Resources
Regional Banks
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Erste Group Bank AG (United Kingdom)
Based on various researches at Oak Spring University , Erste Group Bank AG is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, increasing transportation and logistics costs, technology disruption, wage bills are increasing, increasing government debt because of Covid-19 spendings,
talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Erste Group Bank AG
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Erste Group Bank AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Erste Group Bank AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Erste Group Bank AG 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 Erste Group Bank AG can be done for the following purposes –
1. Strategic planning of Erste Group Bank AG
2. Improving business portfolio management of Erste Group Bank AG
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Regional Banks sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Erste Group Bank AG
Strengths of Erste Group Bank AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Erste Group Bank AG are -
Analytics focus
– Erste Group Bank AG 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 United Kingdom 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.
Diverse revenue streams
– Erste Group Bank AG is present in almost all the verticals within the Regional Banks industry. This has provided Erste Group Bank AG 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.
Learning organization
- Erste Group Bank AG 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 Erste Group Bank AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Erste Group Bank AG emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Erste Group Bank AG in the Financial sector have low bargaining power. Erste Group Bank AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Erste Group Bank AG to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Erste Group Bank AG 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 Erste Group Bank AG have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Erste Group Bank AG has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Innovation driven organization
– Erste Group Bank AG is one of the most innovative firm in Regional Banks sector.
Strong track record of project management in the Regional Banks industry
– Erste Group Bank AG 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 Regional Banks industry
– Erste Group Bank AG has clearly differentiated products in the market place. This has enabled Erste Group Bank AG to fetch slight price premium compare to the competitors in the Regional Banks industry. The sustainable margins have also helped Erste Group Bank AG to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Erste Group Bank AG in Regional Banks industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Erste Group Bank AG is one of the leading players in the Regional Banks industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Regional Banks
– Erste Group Bank AG is one of the leading players in the Regional Banks industry in United Kingdom. Over the years it has not only transformed the business landscape in the Regional Banks industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Erste Group Bank AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Erste Group Bank AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Erste Group Bank AG are -
Need for greater diversity
– Erste Group Bank AG 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.
Increasing silos among functional specialists
– The organizational structure of Erste Group Bank AG is dominated by functional specialists. It is not different from other players in the Regional Banks industry, but Erste Group Bank AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Erste Group Bank AG to focus more on services in the Regional Banks industry rather than just following the product oriented approach.
High bargaining power of channel partners in Regional Banks industry
– because of the regulatory requirements in United Kingdom, Erste Group Bank AG 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.
High cash cycle compare to competitors
Erste Group Bank AG has a high cash cycle compare to other players in the Regional Banks industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Workers concerns about automation
– As automation is fast increasing in the Regional Banks industry, Erste Group Bank AG 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.
Skills based hiring in Regional Banks industry
– The stress on hiring functional specialists at Erste Group Bank AG 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.
High operating costs
– Compare to the competitors, Erste Group Bank AG 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 Erste Group Bank AG lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Erste Group Bank AG 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 Regional Banks industry using digital technology.
Compensation and incentives
– The revenue per employee of Erste Group Bank AG is just above the Regional Banks industry average. It 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.
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 Erste Group Bank AG supply chain. Even after few cautionary changes, Erste Group Bank AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Erste Group Bank AG vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Erste Group Bank AG 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.
Erste Group Bank AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Erste Group Bank AG 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, Erste Group Bank AG can use these opportunities to build new business models that can help the communities that Erste Group Bank AG operates in. Secondly it can use opportunities from government spending in Regional Banks sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Erste Group Bank AG is facing challenges because of the dominance of functional experts in the organization. Erste Group Bank AG can utilize new technology in the field of Regional Banks industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Erste Group Bank AG 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 Erste Group Bank AG to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Erste Group Bank AG 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 Erste Group Bank AG to build a competitive advantage using analytics. The analytics driven competitive advantage can help Erste Group Bank AG to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Erste Group Bank AG 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.
Better consumer reach
– The expansion of the 5G network will help Erste Group Bank AG to increase its market reach. Erste Group Bank AG will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Manufacturing automation
– Erste Group Bank AG can use the latest technology developments to improve its manufacturing and designing process in Regional Banks 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.
Building a culture of innovation
– managers at Erste Group Bank AG 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 Regional Banks industry.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Erste Group Bank AG 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 Erste Group Bank AG to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Erste Group Bank AG 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Erste Group Bank AG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Erste Group Bank AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Erste Group Bank AG 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.
Threats Erste Group Bank AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Erste Group Bank AG are -
Shortening product life cycle
– it is one of the major threat that Erste Group Bank AG is facing in Regional Banks sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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. Erste Group Bank AG 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 wage structure of Erste Group Bank AG
– 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 Erste Group Bank AG.
Regulatory challenges
– Erste Group Bank AG 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 Regional Banks industry regulations.
Environmental challenges
– Erste Group Bank AG 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. Erste Group Bank AG can take advantage of this fund but it will also bring new competitors in the Regional Banks industry.
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 Erste Group Bank AG business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Erste Group Bank AG 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Erste Group Bank AG 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.
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. Erste Group Bank AG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Erste Group Bank AG 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 Erste Group Bank AG prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Erste Group Bank AG 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.
Weighted SWOT Analysis of Erste Group Bank AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Erste Group Bank AG 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 Erste Group Bank AG 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 Erste Group Bank AG 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 Erste Group Bank AG 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 Erste Group Bank AG needs to make to build a sustainable competitive advantage.