Commerzbank (CZB) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Commerzbank (United Kingdom)

Based on various researches at Oak Spring University , Commerzbank is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, increasing household debt because of falling income levels, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, challanges to central banks by blockchain based private currencies, increasing commodity prices, etc

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Introduction to SWOT Analysis of Commerzbank

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Commerzbank can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Commerzbank, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Commerzbank 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Commerzbank can be done for the following purposes –
1. Strategic planning of Commerzbank
2. Improving business portfolio management of Commerzbank
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 Commerzbank

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Strengths of Commerzbank | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Commerzbank are -

Innovation driven organization

– Commerzbank is one of the most innovative firm in Regional Banks sector.

Strong track record of project management in the Regional Banks industry

– Commerzbank is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Ability to lead change in Regional Banks

– Commerzbank 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 Commerzbank in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Low bargaining power of suppliers

– Suppliers of Commerzbank in the Financial sector have low bargaining power. Commerzbank has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Commerzbank to manage not only supply disruptions but also source products at highly competitive prices.

Sustainable margins compare to other players in Regional Banks industry

– Commerzbank has clearly differentiated products in the market place. This has enabled Commerzbank to fetch slight price premium compare to the competitors in the Regional Banks industry. The sustainable margins have also helped Commerzbank to invest into research and development (R&D) and innovation.

Diverse revenue streams

– Commerzbank is present in almost all the verticals within the Regional Banks industry. This has provided Commerzbank 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.

High switching costs

– The high switching costs that Commerzbank 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.

Learning organization

- Commerzbank 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 Commerzbank is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Commerzbank emphasize – knowledge, initiative, and innovation.

Cross disciplinary teams

– Horizontal connected teams at the Commerzbank are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

High brand equity

– Commerzbank has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Commerzbank to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Training and development

– Commerzbank 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.

Operational resilience

– The operational resilience strategy of Commerzbank 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.

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Weaknesses of Commerzbank | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Commerzbank are -

Capital Spending Reduction

– Even during the low interest decade, Commerzbank 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.

High cash cycle compare to competitors

Commerzbank 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.

Need for greater diversity

– Commerzbank 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.

High bargaining power of channel partners in Regional Banks industry

– because of the regulatory requirements in United Kingdom, Commerzbank 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.

Compensation and incentives

– The revenue per employee of Commerzbank 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.

Interest costs

– Compare to the competition, Commerzbank 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.

Skills based hiring in Regional Banks industry

– The stress on hiring functional specialists at Commerzbank 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.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Commerzbank is slow explore the new channels of communication. These new channels of communication can help Commerzbank to provide better information regarding Regional Banks products and services. It can also build an online community to further reach out to potential customers.

Aligning sales with marketing

– From the outside it seems that Commerzbank needs to have more collaboration between its sales team and marketing team. Sales professionals in the Regional Banks industry have deep experience in developing customer relationships. Marketing department at Commerzbank can leverage the sales team experience to cultivate customer relationships as Commerzbank is planning to shift buying processes online.

Employees’ less understanding of Commerzbank strategy

– From the outside it seems that the employees of Commerzbank 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.

Low market penetration in new markets

– Outside its home market of United Kingdom, Commerzbank needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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Commerzbank Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Commerzbank are -

Learning at scale

– Online learning technologies has now opened space for Commerzbank 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Commerzbank 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 Commerzbank to hire the very best people irrespective of their geographical location.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Commerzbank in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Regional Banks industry, and it will provide faster access to the consumers.

Low interest rates

– Even though inflation is raising its head in most developed economies, Commerzbank 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.

Using analytics as competitive advantage

– Commerzbank 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 Commerzbank to build a competitive advantage using analytics. The analytics driven competitive advantage can help Commerzbank to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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 Commerzbank in the Regional Banks industry. Now Commerzbank can target international markets with far fewer capital restrictions requirements than the existing system.

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 Commerzbank 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.

Building a culture of innovation

– managers at Commerzbank 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.

Leveraging digital technologies

– Commerzbank 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.

Better consumer reach

– The expansion of the 5G network will help Commerzbank to increase its market reach. Commerzbank 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.

Buying journey improvements

– Commerzbank 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Regional Banks industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Commerzbank 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. Commerzbank 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.

Creating value in data economy

– The success of analytics program of Commerzbank has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help Commerzbank to build a more holistic ecosystem for Commerzbank products in the Regional Banks industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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Threats Commerzbank External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Commerzbank are -

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. Commerzbank can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Regulatory challenges

– Commerzbank 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.

High dependence on third party suppliers

– Commerzbank 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.

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 Commerzbank in the Regional Banks sector and impact the bottomline of the organization.

Technology acceleration in Forth Industrial Revolution

– Commerzbank has witnessed rapid integration of technology during Covid-19 in the Regional Banks industry. As one of the leading players in the industry, Commerzbank 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.

Stagnating economy with rate increase

– Commerzbank 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.

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. Commerzbank 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Commerzbank 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.

Environmental challenges

– Commerzbank 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. Commerzbank can take advantage of this fund but it will also bring new competitors in the Regional Banks industry.

Consumer confidence and its impact on Commerzbank 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 Regional Banks industry and other sectors.

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 Commerzbank.

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.

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 Commerzbank business can come under increasing regulations regarding data privacy, data security, etc.

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Weighted SWOT Analysis of Commerzbank Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Commerzbank 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 Commerzbank 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 Commerzbank 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 Commerzbank 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 Commerzbank needs to make to build a sustainable competitive advantage.

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