SWOT Analysis / TOWS Matrix for TD Ameritrade (United States)
Based on various researches at Oak Spring University , TD Ameritrade is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, technology disruption, increasing energy prices, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion,
talent flight as more people leaving formal jobs, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that TD Ameritrade can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the TD Ameritrade, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which TD Ameritrade 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 TD Ameritrade can be done for the following purposes –
1. Strategic planning of TD Ameritrade
2. Improving business portfolio management of TD Ameritrade
3. Assessing feasibility of the new initiative in United States
4. Making a Investment Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of TD Ameritrade
Strengths of TD Ameritrade | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of TD Ameritrade are -
Effective Research and Development (R&D)
– TD Ameritrade has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – TD Ameritrade staying ahead in the Investment Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– TD Ameritrade has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Investment Services industry. Secondly the value chain collaborators of TD Ameritrade have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of TD Ameritrade
– The covid-19 pandemic has put organizational resilience at the centre of everthing TD Ameritrade does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- TD Ameritrade 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 TD Ameritrade is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at TD Ameritrade emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– TD Ameritrade has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. TD Ameritrade 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.
Diverse revenue streams
– TD Ameritrade is present in almost all the verticals within the Investment Services industry. This has provided TD Ameritrade 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.
Superior customer experience
– The customer experience strategy of TD Ameritrade in Investment Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– TD Ameritrade is one of the leading players in the Investment Services industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of TD Ameritrade in the Financial sector have low bargaining power. TD Ameritrade has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps TD Ameritrade to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that TD Ameritrade 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.
Strong track record of project management in the Investment Services industry
– TD Ameritrade 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
– TD Ameritrade is one of the most innovative firm in Investment Services sector.
Weaknesses of TD Ameritrade | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of TD Ameritrade are -
Lack of clear differentiation of TD Ameritrade products
– To increase the profitability and margins on the products, TD Ameritrade needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– From the 10K / annual statement of TD Ameritrade, it seems that company is thinking out the frontier risks that can impact Investment Services 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.
High dependence on TD Ameritrade ‘s star products
– The top 2 products and services of TD Ameritrade still accounts for major business revenue. This dependence on star products in Investment Services industry has resulted into insufficient focus on developing new products, even though TD Ameritrade has relatively successful track record of launching new products.
Skills based hiring in Investment Services industry
– The stress on hiring functional specialists at TD Ameritrade 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.
High operating costs
– Compare to the competitors, TD Ameritrade has high operating costs in the Investment Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract TD Ameritrade lucrative customers.
Slow to strategic competitive environment developments
– As TD Ameritrade is one of the leading players in the Investment Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Investment Services industry in last five years.
Compensation and incentives
– The revenue per employee of TD Ameritrade is just above the Investment Services 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, TD Ameritrade is slow explore the new channels of communication. These new channels of communication can help TD Ameritrade to provide better information regarding Investment Services 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, TD Ameritrade has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Investment Services industry over the last five years. TD Ameritrade 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.
Employees’ less understanding of TD Ameritrade strategy
– From the outside it seems that the employees of TD Ameritrade 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.
High bargaining power of channel partners in Investment Services industry
– because of the regulatory requirements in United States, TD Ameritrade 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 Investment Services industry.
TD Ameritrade Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of TD Ameritrade are -
Manufacturing automation
– TD Ameritrade can use the latest technology developments to improve its manufacturing and designing process in Investment Services 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, TD Ameritrade can use these opportunities to build new business models that can help the communities that TD Ameritrade operates in. Secondly it can use opportunities from government spending in Investment Services sector.
Creating value in data economy
– The success of analytics program of TD Ameritrade has opened avenues for new revenue streams for the organization in Investment Services industry. This can help TD Ameritrade to build a more holistic ecosystem for TD Ameritrade products in the Investment Services industry by providing – data insight services, data privacy related products, data based consulting services, 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. TD Ameritrade can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, TD Ameritrade is facing challenges because of the dominance of functional experts in the organization. TD Ameritrade can utilize new technology in the field of Investment Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Investment Services industry, but it has also influenced the consumer preferences. TD Ameritrade can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for TD Ameritrade 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 TD Ameritrade to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Investment Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. TD Ameritrade 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. TD Ameritrade 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.
Buying journey improvements
– TD Ameritrade can improve the customer journey of consumers in the Investment Services 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects TD Ameritrade can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at TD Ameritrade 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 Investment Services industry.
Better consumer reach
– The expansion of the 5G network will help TD Ameritrade to increase its market reach. TD Ameritrade 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, TD Ameritrade 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.
Threats TD Ameritrade External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of TD Ameritrade are -
Consumer confidence and its impact on TD Ameritrade 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 Investment Services industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– TD Ameritrade has witnessed rapid integration of technology during Covid-19 in the Investment Services industry. As one of the leading players in the industry, TD Ameritrade needs to keep up with the evolution of technology in the Investment Services 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Investment Services industry are lowering. It can presents TD Ameritrade with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Investment Services sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for TD Ameritrade in Investment Services industry. The Investment Services 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. TD Ameritrade needs to understand the core reasons impacting the Investment Services industry. This will help it in building a better workplace.
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 TD Ameritrade.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, TD Ameritrade may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Investment Services sector.
Increasing wage structure of TD Ameritrade
– 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 TD Ameritrade.
Easy access to finance
– Easy access to finance in Investment Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. TD Ameritrade can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– TD Ameritrade 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 Investment Services industry.
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.
Shortening product life cycle
– it is one of the major threat that TD Ameritrade is facing in Investment Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– TD Ameritrade 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 Investment Services industry regulations.
Weighted SWOT Analysis of TD Ameritrade Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at TD Ameritrade 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 TD Ameritrade 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 TD Ameritrade 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 TD Ameritrade 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 TD Ameritrade needs to make to build a sustainable competitive advantage.
