E-TRADE (ETFC) SWOT Analysis / TOWS Matrix / MBA Resources
Investment Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for E-TRADE (United States)
Based on various researches at Oak Spring University , E-TRADE is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, there is increasing trade war between United States & China,
increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that E-TRADE can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the E-TRADE, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which E-TRADE 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 E-TRADE can be done for the following purposes –
1. Strategic planning of E-TRADE
2. Improving business portfolio management of E-TRADE
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 E-TRADE
Strengths of E-TRADE | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of E-TRADE are -
Digital Transformation in Investment Services industry
- digital transformation varies from industry to industry. For E-TRADE digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. E-TRADE 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 switching costs
– The high switching costs that E-TRADE 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.
Low bargaining power of suppliers
– Suppliers of E-TRADE in the Financial sector have low bargaining power. E-TRADE has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps E-TRADE to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– E-TRADE is present in almost all the verticals within the Investment Services industry. This has provided E-TRADE 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.
Operational resilience
– The operational resilience strategy of E-TRADE comprises – understanding the underlying the factors in the Investment Services 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.
Highly skilled collaborators
– E-TRADE 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 E-TRADE have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of E-TRADE in Investment Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– E-TRADE has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – E-TRADE 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.
Successful track record of launching new products
– E-TRADE has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. E-TRADE 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.
High brand equity
– E-TRADE has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled E-TRADE to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– E-TRADE 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.
Training and development
– E-TRADE 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.
Weaknesses of E-TRADE | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of E-TRADE are -
High cash cycle compare to competitors
E-TRADE has a high cash cycle compare to other players in the Investment Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, E-TRADE 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 Investment Services industry using digital technology.
No frontier risks strategy
– From the 10K / annual statement of E-TRADE, 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, E-TRADE is slow explore the new channels of communication. These new channels of communication can help E-TRADE to provide better information regarding Investment Services products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners in Investment Services industry
– because of the regulatory requirements in United States, E-TRADE 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.
Increasing silos among functional specialists
– The organizational structure of E-TRADE is dominated by functional specialists. It is not different from other players in the Investment Services industry, but E-TRADE needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help E-TRADE to focus more on services in the Investment Services industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, E-TRADE 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. E-TRADE 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.
Ability to respond to the competition
– As the decision making is very deliberative at E-TRADE, in the dynamic environment of Investment Services industry it has struggled to respond to the nimble upstart competition. E-TRADE has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee of E-TRADE 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.
Employees’ less understanding of E-TRADE strategy
– From the outside it seems that the employees of E-TRADE 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.
Need for greater diversity
– E-TRADE 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.
E-TRADE Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of E-TRADE are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects E-TRADE can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for E-TRADE 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 E-TRADE to hire the very best people irrespective of their geographical location.
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. E-TRADE can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– E-TRADE can develop new processes and procedures in Investment Services industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Buying journey improvements
– E-TRADE 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, E-TRADE 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.
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. E-TRADE 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. E-TRADE 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, E-TRADE is facing challenges because of the dominance of functional experts in the organization. E-TRADE 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.
Creating value in data economy
– The success of analytics program of E-TRADE has opened avenues for new revenue streams for the organization in Investment Services industry. This can help E-TRADE to build a more holistic ecosystem for E-TRADE products in the Investment Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– E-TRADE 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, E-TRADE can use these opportunities to build new business models that can help the communities that E-TRADE operates in. Secondly it can use opportunities from government spending in Investment Services sector.
Manufacturing automation
– E-TRADE 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, E-TRADE 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 E-TRADE to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats E-TRADE External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of E-TRADE are -
Shortening product life cycle
– it is one of the major threat that E-TRADE is facing in Investment Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on E-TRADE 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.
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.
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. E-TRADE can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 E-TRADE in the Investment Services sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– E-TRADE has witnessed rapid integration of technology during Covid-19 in the Investment Services industry. As one of the leading players in the industry, E-TRADE 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.
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. E-TRADE 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, E-TRADE 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Investment Services industry are lowering. It can presents E-TRADE with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Investment Services 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.
Stagnating economy with rate increase
– E-TRADE 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.
High dependence on third party suppliers
– E-TRADE 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
– E-TRADE 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. E-TRADE can take advantage of this fund but it will also bring new competitors in the Investment Services industry.
Weighted SWOT Analysis of E-TRADE Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at E-TRADE 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 E-TRADE 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 E-TRADE 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 E-TRADE 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 E-TRADE needs to make to build a sustainable competitive advantage.