Capitec Bank (CPIJ) SWOT Analysis / TOWS Matrix / MBA Resources
Regional Banks
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Capitec Bank (South Africa)
Based on various researches at Oak Spring University , Capitec Bank is operating in a macro-environment that has been destablized by – increasing energy prices, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, wage bills are increasing, increasing commodity prices, talent flight as more people leaving formal jobs,
digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Capitec Bank can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Capitec Bank, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Capitec Bank 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 Capitec Bank can be done for the following purposes –
1. Strategic planning of Capitec Bank
2. Improving business portfolio management of Capitec Bank
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 Capitec Bank
Strengths of Capitec Bank | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Capitec Bank are -
High switching costs
– The high switching costs that Capitec Bank 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.
Effective Research and Development (R&D)
– Capitec Bank has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Capitec Bank 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.
Cross disciplinary teams
– Horizontal connected teams at the Capitec Bank 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.
Organizational Resilience of Capitec Bank
– The covid-19 pandemic has put organizational resilience at the centre of everthing Capitec Bank does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Capitec Bank 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.
Learning organization
- Capitec Bank 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 Capitec Bank is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Capitec Bank emphasize – knowledge, initiative, and innovation.
Ability to lead change in Regional Banks
– Capitec Bank 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 Capitec Bank in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Capitec Bank 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 Capitec Bank have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Capitec Bank 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.
Sustainable margins compare to other players in Regional Banks industry
– Capitec Bank has clearly differentiated products in the market place. This has enabled Capitec Bank to fetch slight price premium compare to the competitors in the Regional Banks industry. The sustainable margins have also helped Capitec Bank to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Capitec Bank has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Capitec Bank 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.
Digital Transformation in Regional Banks industry
- digital transformation varies from industry to industry. For Capitec Bank digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Capitec Bank 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.
Weaknesses of Capitec Bank | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Capitec Bank are -
Lack of clear differentiation of Capitec Bank products
– To increase the profitability and margins on the products, Capitec Bank needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the Regional Banks industry, Capitec Bank 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.
No frontier risks strategy
– From the 10K / annual statement of Capitec Bank, it seems that company is thinking out the frontier risks that can impact Regional Banks industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Interest costs
– Compare to the competition, Capitec Bank 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 Capitec Bank 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.
Increasing silos among functional specialists
– The organizational structure of Capitec Bank is dominated by functional specialists. It is not different from other players in the Regional Banks industry, but Capitec Bank needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Capitec Bank to focus more on services in the Regional Banks industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of South Africa, Capitec Bank needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Capitec Bank 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.
Compensation and incentives
– The revenue per employee of Capitec Bank 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 Capitec Bank supply chain. Even after few cautionary changes, Capitec Bank is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Capitec Bank vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Capitec Bank 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.
Capitec Bank Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Capitec Bank are -
Buying journey improvements
– Capitec Bank 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 Capitec Bank to increase its market reach. Capitec Bank 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.
Loyalty marketing
– Capitec Bank 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Capitec Bank 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.
Manufacturing automation
– Capitec Bank 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.
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. Capitec Bank 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. Capitec Bank 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.
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 Capitec Bank in the Regional Banks industry. Now Capitec Bank can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Capitec Bank 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Capitec Bank is facing challenges because of the dominance of functional experts in the organization. Capitec Bank 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Capitec Bank 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.
Leveraging digital technologies
– Capitec Bank 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Capitec Bank 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 Capitec Bank to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Capitec Bank can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Capitec Bank External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Capitec Bank 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. Capitec Bank 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.
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 Capitec Bank business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Capitec Bank 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.
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 Capitec Bank.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Capitec Bank 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 Capitec Bank prominent markets.
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.
High dependence on third party suppliers
– Capitec Bank 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
– Capitec Bank 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. Capitec Bank can take advantage of this fund but it will also bring new competitors in the Regional Banks industry.
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. Capitec Bank needs to understand the core reasons impacting the Regional Banks industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Capitec Bank is facing in Regional Banks sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Capitec Bank in the Regional Banks sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Regional Banks industry are lowering. It can presents Capitec Bank with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Regional Banks sector.
Weighted SWOT Analysis of Capitec Bank Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Capitec Bank 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 Capitec Bank 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 Capitec Bank 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 Capitec Bank 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 Capitec Bank needs to make to build a sustainable competitive advantage.
