Capitec Bank (CPIJ) SWOT Analysis / TOWS Matrix / 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 – technology disruption, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, etc

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Introduction to SWOT Analysis of Capitec Bank

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.

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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

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

The strengths of Capitec Bank are -

Operational resilience

– The operational resilience strategy of Capitec Bank 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.

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.

Innovation driven organization

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

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.

Strong track record of project management in the Regional Banks industry

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

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.

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.

High brand equity

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

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.

Low bargaining power of suppliers

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

Analytics focus

– Capitec Bank is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Regional Banks industry. The technology infrastructure of South Africa is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

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

The weaknesses of Capitec Bank are -

Need for greater diversity

– Capitec Bank 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.

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 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.

High bargaining power of channel partners in Regional Banks industry

– because of the regulatory requirements in South Africa, Capitec Bank 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.

Employees’ less understanding of Capitec Bank strategy

– From the outside it seems that the employees of Capitec Bank 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.

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.

Aligning sales with marketing

– From the outside it seems that Capitec Bank 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 Capitec Bank can leverage the sales team experience to cultivate customer relationships as Capitec Bank is planning to shift buying processes online.

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.

Slow decision making process

– As mentioned earlier in the report, Capitec Bank 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. Capitec Bank 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.

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.

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

The opportunities of Capitec Bank are -

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.

Using analytics as competitive advantage

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

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.

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.

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.

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. Capitec Bank can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Increase in government spending

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

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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Capitec Bank 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 Capitec Bank to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Creating value in data economy

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

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 Capitec Bank 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 Capitec Bank 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.

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

The threats of Capitec Bank are -

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Capitec Bank 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.

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.

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.

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.

Consumer confidence and its impact on Capitec Bank 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 wage structure of Capitec Bank

– 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 Capitec Bank.

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.

Regulatory challenges

– Capitec Bank 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 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.

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.

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.

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.

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.

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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.

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