Charles Schwab (SCHW34) SWOT Analysis / TOWS Matrix / MBA Resources
NA
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Charles Schwab (Brazil)
Based on various researches at Oak Spring University , Charles Schwab is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy,
competitive advantages are harder to sustain because of technology dispersion, 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 Charles Schwab can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Charles Schwab, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Charles Schwab 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 Charles Schwab can be done for the following purposes –
1. Strategic planning of Charles Schwab
2. Improving business portfolio management of Charles Schwab
3. Assessing feasibility of the new initiative in Brazil
4. Making a NA sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Charles Schwab
Strengths of Charles Schwab | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Charles Schwab are -
Diverse revenue streams
– Charles Schwab is present in almost all the verticals within the NA industry. This has provided Charles Schwab 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.
Sustainable margins compare to other players in NA industry
– Charles Schwab has clearly differentiated products in the market place. This has enabled Charles Schwab to fetch slight price premium compare to the competitors in the NA industry. The sustainable margins have also helped Charles Schwab to invest into research and development (R&D) and innovation.
Digital Transformation in NA industry
- digital transformation varies from industry to industry. For Charles Schwab digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Charles Schwab 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.
High brand equity
– Charles Schwab has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Charles Schwab to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Charles Schwab in NA industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Charles Schwab 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 Charles Schwab is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Charles Schwab emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of Charles Schwab comprises – understanding the underlying the factors in the NA 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 Charles Schwab
– The covid-19 pandemic has put organizational resilience at the centre of everthing Charles Schwab 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 Charles Schwab 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.
Training and development
– Charles Schwab has one of the best training and development program in NA 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.
Ability to lead change in NA
– Charles Schwab is one of the leading players in the NA industry in Brazil. Over the years it has not only transformed the business landscape in the NA industry in Brazil but also across the existing markets. The ability to lead change has enabled Charles Schwab in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Charles Schwab 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 NA industry. The technology infrastructure of Brazil 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.
Weaknesses of Charles Schwab | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Charles Schwab are -
High dependence on Charles Schwab ‘s star products
– The top 2 products and services of Charles Schwab still accounts for major business revenue. This dependence on star products in NA industry has resulted into insufficient focus on developing new products, even though Charles Schwab has relatively successful track record of launching new products.
High cash cycle compare to competitors
Charles Schwab has a high cash cycle compare to other players in the NA industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring in NA industry
– The stress on hiring functional specialists at Charles Schwab 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.
Low market penetration in new markets
– Outside its home market of Brazil, Charles Schwab needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Charles Schwab supply chain. Even after few cautionary changes, Charles Schwab is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Charles Schwab vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that Charles Schwab needs to have more collaboration between its sales team and marketing team. Sales professionals in the NA industry have deep experience in developing customer relationships. Marketing department at Charles Schwab can leverage the sales team experience to cultivate customer relationships as Charles Schwab is planning to shift buying processes online.
Employees’ less understanding of Charles Schwab strategy
– From the outside it seems that the employees of Charles Schwab 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 decision making process
– As mentioned earlier in the report, Charles Schwab has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the NA industry over the last five years. Charles Schwab 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.
Compensation and incentives
– The revenue per employee of Charles Schwab is just above the NA 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.
Products dominated business model
– Even though Charles Schwab has some of the most successful models in the NA industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Charles Schwab should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Charles Schwab 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 NA industry using digital technology.
Charles Schwab Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Charles Schwab are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Charles Schwab in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the NA industry, and it will provide faster access to the consumers.
Loyalty marketing
– Charles Schwab 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.
Better consumer reach
– The expansion of the 5G network will help Charles Schwab to increase its market reach. Charles Schwab 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, Charles Schwab 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Charles Schwab can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Charles Schwab 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Charles Schwab can use these opportunities to build new business models that can help the communities that Charles Schwab operates in. Secondly it can use opportunities from government spending in NA sector.
Creating value in data economy
– The success of analytics program of Charles Schwab has opened avenues for new revenue streams for the organization in NA industry. This can help Charles Schwab to build a more holistic ecosystem for Charles Schwab products in the NA 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 Charles Schwab 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Charles Schwab 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 Charles Schwab to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the NA industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Charles Schwab 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. Charles Schwab 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in NA industry, but it has also influenced the consumer preferences. Charles Schwab can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Charles Schwab has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in NA sector. This continuous investment in analytics has enabled Charles Schwab to build a competitive advantage using analytics. The analytics driven competitive advantage can help Charles Schwab to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Charles Schwab External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Charles Schwab are -
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. Charles Schwab needs to understand the core reasons impacting the NA industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Charles Schwab 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 Charles Schwab prominent markets.
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. Charles Schwab 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.
Easy access to finance
– Easy access to finance in NA industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Charles Schwab can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Charles Schwab 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.
Shortening product life cycle
– it is one of the major threat that Charles Schwab is facing in NA sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Charles Schwab business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Charles Schwab in NA industry. The NA 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.
Stagnating economy with rate increase
– Charles Schwab 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 NA industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to NA industry are lowering. It can presents Charles Schwab with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the NA sector.
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.
Technology acceleration in Forth Industrial Revolution
– Charles Schwab has witnessed rapid integration of technology during Covid-19 in the NA industry. As one of the leading players in the industry, Charles Schwab needs to keep up with the evolution of technology in the NA 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.
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 Charles Schwab in the NA sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Charles Schwab Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Charles Schwab 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 Charles Schwab 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 Charles Schwab 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 Charles Schwab 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 Charles Schwab needs to make to build a sustainable competitive advantage.
