Nedbank Group (NEDJ) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nedbank Group (South Africa)

Based on various researches at Oak Spring University , Nedbank Group is operating in a macro-environment that has been destablized by – technology disruption, increasing energy prices, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, central banks are concerned over increasing inflation, etc

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Introduction to SWOT Analysis of Nedbank Group

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nedbank Group can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nedbank Group, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nedbank Group 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 Nedbank Group can be done for the following purposes –
1. Strategic planning of Nedbank Group
2. Improving business portfolio management of Nedbank Group
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 Nedbank Group

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

The strengths of Nedbank Group are -

Digital Transformation in Regional Banks industry

- digital transformation varies from industry to industry. For Nedbank Group digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nedbank Group 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

– Nedbank Group 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.

Cross disciplinary teams

– Horizontal connected teams at the Nedbank Group 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.

Ability to lead change in Regional Banks

– Nedbank Group is one of the leading players in the Regional Banks industry in South Africa. Over the years it has not only transformed the business landscape in the Regional Banks industry in South Africa but also across the existing markets. The ability to lead change has enabled Nedbank Group in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Successful track record of launching new products

– Nedbank Group has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nedbank Group 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.

Effective Research and Development (R&D)

– Nedbank Group has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nedbank Group 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.

Low bargaining power of suppliers

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

Learning organization

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

Operational resilience

– The operational resilience strategy of Nedbank Group 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.

Organizational Resilience of Nedbank Group

– The covid-19 pandemic has put organizational resilience at the centre of everthing Nedbank Group does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

High switching costs

– The high switching costs that Nedbank Group 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.

High brand equity

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

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

The weaknesses of Nedbank Group are -

Ability to respond to the competition

– As the decision making is very deliberative at Nedbank Group, in the dynamic environment of Regional Banks industry it has struggled to respond to the nimble upstart competition. Nedbank Group has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Skills based hiring in Regional Banks industry

– The stress on hiring functional specialists at Nedbank Group 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 strategic competitive environment developments

– As Nedbank Group is one of the leading players in the Regional Banks industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Regional Banks industry in last five years.

Interest costs

– Compare to the competition, Nedbank Group 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.

Capital Spending Reduction

– Even during the low interest decade, Nedbank Group 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

Nedbank Group 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.

Lack of clear differentiation of Nedbank Group products

– To increase the profitability and margins on the products, Nedbank Group needs to provide more differentiated products than what it is currently offering in the marketplace.

Employees’ less understanding of Nedbank Group strategy

– From the outside it seems that the employees of Nedbank Group 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.

Workers concerns about automation

– As automation is fast increasing in the Regional Banks industry, Nedbank Group 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.

Slow decision making process

– As mentioned earlier in the report, Nedbank Group 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. Nedbank Group 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, Nedbank Group is slow explore the new channels of communication. These new channels of communication can help Nedbank Group to provide better information regarding Regional Banks products and services. It can also build an online community to further reach out to potential customers.

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

The opportunities of Nedbank Group are -

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Nedbank Group can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Better consumer reach

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

Learning at scale

– Online learning technologies has now opened space for Nedbank Group 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.

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. Nedbank Group 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. Nedbank Group 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.

Manufacturing automation

– Nedbank Group 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nedbank Group can use these opportunities to build new business models that can help the communities that Nedbank Group operates in. Secondly it can use opportunities from government spending in Regional Banks sector.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Nedbank Group 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.

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. Nedbank Group can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Low interest rates

– Even though inflation is raising its head in most developed economies, Nedbank Group 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

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

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. Nedbank Group can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Buying journey improvements

– Nedbank Group 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Nedbank Group is facing challenges because of the dominance of functional experts in the organization. Nedbank Group 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.

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

The threats of Nedbank Group 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. Nedbank Group 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.

High dependence on third party suppliers

– Nedbank Group 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.

Environmental challenges

– Nedbank Group 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. Nedbank Group 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. Nedbank Group 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

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

Consumer confidence and its impact on Nedbank Group 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.

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. Nedbank Group needs to understand the core reasons impacting the Regional Banks industry. This will help it in building a better workplace.

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.

Increasing wage structure of Nedbank Group

– 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 Nedbank Group.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Nedbank Group 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 Nedbank Group prominent markets.

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

Shortening product life cycle

– it is one of the major threat that Nedbank Group is facing in Regional Banks sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

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Weighted SWOT Analysis of Nedbank Group Template, Example

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

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