Aareal Bank AG (0MG0) SWOT Analysis / TOWS Matrix / MBA Resources
Regional Banks
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Aareal Bank AG (United Kingdom)
Based on various researches at Oak Spring University , Aareal Bank AG is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion,
increasing energy prices, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Aareal Bank AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aareal Bank AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aareal 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 Aareal Bank AG can be done for the following purposes –
1. Strategic planning of Aareal Bank AG
2. Improving business portfolio management of Aareal 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 Aareal Bank AG
Strengths of Aareal Bank AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aareal Bank AG are -
Sustainable margins compare to other players in Regional Banks industry
– Aareal Bank AG has clearly differentiated products in the market place. This has enabled Aareal Bank AG to fetch slight price premium compare to the competitors in the Regional Banks industry. The sustainable margins have also helped Aareal Bank AG to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Aareal Bank AG is present in almost all the verticals within the Regional Banks industry. This has provided Aareal 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.
High brand equity
– Aareal Bank AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aareal Bank AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Regional Banks industry
– Aareal 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.
Innovation driven organization
– Aareal Bank AG is one of the most innovative firm in Regional Banks sector.
Operational resilience
– The operational resilience strategy of Aareal Bank AG 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.
Cross disciplinary teams
– Horizontal connected teams at the Aareal Bank AG 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.
Highly skilled collaborators
– Aareal 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 Aareal Bank AG have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Regional Banks industry
- digital transformation varies from industry to industry. For Aareal Bank AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aareal Bank AG has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Learning organization
- Aareal 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 Aareal Bank AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Aareal Bank AG emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Aareal Bank AG in the Financial sector have low bargaining power. Aareal Bank AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aareal Bank AG to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Aareal 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.
Weaknesses of Aareal Bank AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Aareal Bank AG are -
Ability to respond to the competition
– As the decision making is very deliberative at Aareal Bank AG, in the dynamic environment of Regional Banks industry it has struggled to respond to the nimble upstart competition. Aareal Bank AG has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Aareal Bank AG 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. Aareal Bank AG 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 harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Aareal Bank AG is slow explore the new channels of communication. These new channels of communication can help Aareal Bank AG to provide better information regarding Regional Banks products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee of Aareal 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.
Employees’ less understanding of Aareal Bank AG strategy
– From the outside it seems that the employees of Aareal Bank AG 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.
Lack of clear differentiation of Aareal Bank AG products
– To increase the profitability and margins on the products, Aareal Bank AG needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Aareal 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.
Aligning sales with marketing
– From the outside it seems that Aareal Bank AG 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 Aareal Bank AG can leverage the sales team experience to cultivate customer relationships as Aareal Bank AG is planning to shift buying processes online.
Skills based hiring in Regional Banks industry
– The stress on hiring functional specialists at Aareal 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.
Workers concerns about automation
– As automation is fast increasing in the Regional Banks industry, Aareal 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.
High operating costs
– Compare to the competitors, Aareal 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 Aareal Bank AG lucrative customers.
Aareal Bank AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Aareal Bank AG are -
Buying journey improvements
– Aareal 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.
Manufacturing automation
– Aareal 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Regional Banks industry, but it has also influenced the consumer preferences. Aareal Bank AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Aareal 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.
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. Aareal Bank AG 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. Aareal Bank AG 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aareal Bank AG 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.
Learning at scale
– Online learning technologies has now opened space for Aareal Bank AG 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.
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 Aareal Bank AG in the Regional Banks industry. Now Aareal Bank AG can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Aareal Bank AG 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Aareal Bank AG 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.
Creating value in data economy
– The success of analytics program of Aareal Bank AG has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help Aareal Bank AG to build a more holistic ecosystem for Aareal Bank AG products in the Regional Banks industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aareal 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aareal 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 Aareal 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.
Threats Aareal Bank AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Aareal Bank AG are -
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Aareal 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.
Shortening product life cycle
– it is one of the major threat that Aareal Bank AG 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. Aareal Bank AG needs to understand the core reasons impacting the Regional Banks industry. This will help it in building a better workplace.
Consumer confidence and its impact on Aareal Bank AG 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.
Environmental challenges
– Aareal 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. Aareal Bank AG can take advantage of this fund but it will also bring new competitors in the Regional Banks industry.
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. Aareal 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 wage structure of Aareal 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 Aareal Bank AG.
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 Aareal Bank AG in the Regional Banks sector and impact the bottomline 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. Aareal 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aareal 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aareal 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 Aareal Bank AG prominent markets.
Stagnating economy with rate increase
– Aareal Bank AG 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.
Weighted SWOT Analysis of Aareal Bank AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Aareal 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 Aareal 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 Aareal 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 Aareal 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 Aareal Bank AG needs to make to build a sustainable competitive advantage.