Absa (ABGJ) SWOT Analysis / TOWS Matrix / MBA Resources
Regional Banks
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Absa (South Africa)
Based on various researches at Oak Spring University , Absa is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, geopolitical disruptions, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%,
increasing commodity prices, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Absa can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Absa, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Absa 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 Absa can be done for the following purposes –
1. Strategic planning of Absa
2. Improving business portfolio management of Absa
3. Assessing feasibility of the new initiative in South Africa
4. Making a Regional Banks sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Absa
Strengths of Absa | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Absa are -
Operational resilience
– The operational resilience strategy of Absa 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.
High brand equity
– Absa has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Absa to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Absa in the Financial sector have low bargaining power. Absa has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Absa to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Regional Banks industry
– Absa is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Absa has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Absa 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 Absa 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.
Digital Transformation in Regional Banks industry
- digital transformation varies from industry to industry. For Absa digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Absa 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.
Ability to recruit top talent
– Absa is one of the leading players in the Regional Banks industry in South Africa. It is in a position to attract the best talent available in South Africa. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Absa is present in almost all the verticals within the Regional Banks industry. This has provided Absa 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.
Innovation driven organization
– Absa is one of the most innovative firm in Regional Banks sector.
Highly skilled collaborators
– Absa 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 Absa have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Absa has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Absa 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.
Weaknesses of Absa | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Absa are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Absa is slow explore the new channels of communication. These new channels of communication can help Absa to provide better information regarding Regional Banks products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Absa 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. Absa 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.
Workers concerns about automation
– As automation is fast increasing in the Regional Banks industry, Absa 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 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 Absa supply chain. Even after few cautionary changes, Absa is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Absa vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Absa 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 Absa 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 Absa can leverage the sales team experience to cultivate customer relationships as Absa is planning to shift buying processes online.
Employees’ less understanding of Absa strategy
– From the outside it seems that the employees of Absa 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.
Interest costs
– Compare to the competition, Absa 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.
High bargaining power of channel partners in Regional Banks industry
– because of the regulatory requirements in South Africa, Absa 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.
Lack of clear differentiation of Absa products
– To increase the profitability and margins on the products, Absa needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Absa 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.
Absa Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Absa are -
Buying journey improvements
– Absa 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Absa 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 Absa to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Absa 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.
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 Absa 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Absa is facing challenges because of the dominance of functional experts in the organization. Absa 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.
Using analytics as competitive advantage
– Absa 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 Absa to build a competitive advantage using analytics. The analytics driven competitive advantage can help Absa to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Absa 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.
Creating value in data economy
– The success of analytics program of Absa has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help Absa to build a more holistic ecosystem for Absa products in the Regional Banks industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Absa 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.
Developing new processes and practices
– Absa 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.
Loyalty marketing
– Absa 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Absa 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 Absa to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Absa to increase its market reach. Absa 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.
Threats Absa External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Absa are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Regional Banks industry are lowering. It can presents Absa with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Regional Banks sector.
Regulatory challenges
– Absa 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.
Consumer confidence and its impact on Absa 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Absa 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 Absa prominent markets.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Absa 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.
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. Absa needs to understand the core reasons impacting the Regional Banks industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Absa 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Absa 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.
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 Absa in the Regional Banks sector and impact the bottomline of the organization.
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.
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. Absa can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Absa has witnessed rapid integration of technology during Covid-19 in the Regional Banks industry. As one of the leading players in the industry, Absa 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.
Weighted SWOT Analysis of Absa Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Absa 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 Absa 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 Absa 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 Absa 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 Absa needs to make to build a sustainable competitive advantage.
