ESSA Bancorp (ESSA) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for ESSA Bancorp (United States)

Based on various researches at Oak Spring University , ESSA Bancorp is operating in a macro-environment that has been destablized by – technology disruption, there is increasing trade war between United States & China, increasing commodity prices, there is backlash against globalization, supply chains are disrupted by pandemic , wage bills are increasing, geopolitical disruptions, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, etc

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Introduction to SWOT Analysis of ESSA Bancorp

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that ESSA Bancorp can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the ESSA Bancorp, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which ESSA Bancorp 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 ESSA Bancorp can be done for the following purposes –
1. Strategic planning of ESSA Bancorp
2. Improving business portfolio management of ESSA Bancorp
3. Assessing feasibility of the new initiative in United States
4. Making a Regional Banks sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of ESSA Bancorp

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Strengths of ESSA Bancorp | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of ESSA Bancorp are -

Learning organization

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

Innovation driven organization

– ESSA Bancorp is one of the most innovative firm in Regional Banks sector.

Analytics focus

– ESSA Bancorp 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 United States 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.

High brand equity

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

Highly skilled collaborators

– ESSA Bancorp 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 ESSA Bancorp have helped the firm to develop new products and bring them quickly to the marketplace.

Low bargaining power of suppliers

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

Digital Transformation in Regional Banks industry

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

Diverse revenue streams

– ESSA Bancorp is present in almost all the verticals within the Regional Banks industry. This has provided ESSA Bancorp 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.

Cross disciplinary teams

– Horizontal connected teams at the ESSA Bancorp 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.

Training and development

– ESSA Bancorp 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.

Organizational Resilience of ESSA Bancorp

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

Strong track record of project management in the Regional Banks industry

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

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Weaknesses of ESSA Bancorp | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of ESSA Bancorp are -

Compensation and incentives

– The revenue per employee of ESSA Bancorp 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.

Products dominated business model

– Even though ESSA Bancorp has some of the most successful models in the Regional Banks industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. ESSA Bancorp should strive to include more intangible value offerings along with its core products and services.

Capital Spending Reduction

– Even during the low interest decade, ESSA Bancorp 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 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 ESSA Bancorp supply chain. Even after few cautionary changes, ESSA Bancorp is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left ESSA Bancorp vulnerable to further global disruptions in South East Asia.

Aligning sales with marketing

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

Lack of clear differentiation of ESSA Bancorp products

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

High operating costs

– Compare to the competitors, ESSA Bancorp has high operating costs in the Regional Banks industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract ESSA Bancorp lucrative customers.

Increasing silos among functional specialists

– The organizational structure of ESSA Bancorp is dominated by functional specialists. It is not different from other players in the Regional Banks industry, but ESSA Bancorp needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help ESSA Bancorp to focus more on services in the Regional Banks industry rather than just following the product oriented approach.

High dependence on ESSA Bancorp ‘s star products

– The top 2 products and services of ESSA Bancorp still accounts for major business revenue. This dependence on star products in Regional Banks industry has resulted into insufficient focus on developing new products, even though ESSA Bancorp has relatively successful track record of launching new products.

Interest costs

– Compare to the competition, ESSA Bancorp 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.

Need for greater diversity

– ESSA Bancorp 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.

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ESSA Bancorp Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of ESSA Bancorp are -

Building a culture of innovation

– managers at ESSA Bancorp 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.

Buying journey improvements

– ESSA Bancorp 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.

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 ESSA Bancorp in the Regional Banks industry. Now ESSA Bancorp can target international markets with far fewer capital restrictions requirements than the existing system.

Better consumer reach

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

Manufacturing automation

– ESSA Bancorp 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.

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

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 ESSA Bancorp 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.

Reforming the budgeting process

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

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. ESSA Bancorp 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. ESSA Bancorp 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 ESSA Bancorp 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.

Increase in government spending

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

Creating value in data economy

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

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Threats ESSA Bancorp External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of ESSA Bancorp are -

High dependence on third party suppliers

– ESSA Bancorp 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.

Stagnating economy with rate increase

– ESSA Bancorp 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 Regional Banks industry.

Environmental challenges

– ESSA Bancorp 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. ESSA Bancorp can take advantage of this fund but it will also bring new competitors in the Regional Banks industry.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, ESSA Bancorp 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.

Increasing wage structure of ESSA Bancorp

– 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 ESSA Bancorp.

Shortening product life cycle

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

Consumer confidence and its impact on ESSA Bancorp 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.

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 ESSA Bancorp.

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. ESSA Bancorp can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Regulatory challenges

– ESSA Bancorp 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.

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. ESSA Bancorp 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, ESSA Bancorp 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 ESSA Bancorp prominent markets.

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 ESSA Bancorp Template, Example

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

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