SWOT Analysis / TOWS Matrix for Financial Institutions (United States)
Based on various researches at Oak Spring University , Financial Institutions is operating in a macro-environment that has been destablized by – wage bills are increasing, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, increasing commodity prices, there is increasing trade war between United States & China, increasing household debt because of falling income levels,
banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, etc
Introduction to SWOT Analysis of Financial Institutions
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Financial Institutions can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Financial Institutions, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Financial Institutions 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 Financial Institutions can be done for the following purposes –
1. Strategic planning of Financial Institutions
2. Improving business portfolio management of Financial Institutions
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 Financial Institutions
Strengths of Financial Institutions | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Financial Institutions are -
Operational resilience
– The operational resilience strategy of Financial Institutions 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.
Ability to recruit top talent
– Financial Institutions is one of the leading players in the Regional Banks 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.
Innovation driven organization
– Financial Institutions is one of the most innovative firm in Regional Banks sector.
Effective Research and Development (R&D)
– Financial Institutions has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Financial Institutions staying ahead in the Regional Banks 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
– Financial Institutions has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Financial Institutions 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 switching costs
– The high switching costs that Financial Institutions 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
– Financial Institutions 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.
Strong track record of project management in the Regional Banks industry
– Financial Institutions is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Regional Banks industry
- digital transformation varies from industry to industry. For Financial Institutions digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Financial Institutions 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
– Financial Institutions is present in almost all the verticals within the Regional Banks industry. This has provided Financial Institutions 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.
Analytics focus
– Financial Institutions 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
– Financial Institutions has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Financial Institutions to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Financial Institutions | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Financial Institutions are -
Capital Spending Reduction
– Even during the low interest decade, Financial Institutions 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.
Ability to respond to the competition
– As the decision making is very deliberative at Financial Institutions, in the dynamic environment of Regional Banks industry it has struggled to respond to the nimble upstart competition. Financial Institutions has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of United States, Financial Institutions 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 Financial Institutions supply chain. Even after few cautionary changes, Financial Institutions is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Financial Institutions vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Financial Institutions 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Financial Institutions is slow explore the new channels of communication. These new channels of communication can help Financial Institutions to provide better information regarding Regional Banks products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring in Regional Banks industry
– The stress on hiring functional specialists at Financial Institutions 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.
Aligning sales with marketing
– From the outside it seems that Financial Institutions 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 Financial Institutions can leverage the sales team experience to cultivate customer relationships as Financial Institutions is planning to shift buying processes online.
Lack of clear differentiation of Financial Institutions products
– To increase the profitability and margins on the products, Financial Institutions needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of Financial Institutions strategy
– From the outside it seems that the employees of Financial Institutions 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.
Products dominated business model
– Even though Financial Institutions 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. Financial Institutions should strive to include more intangible value offerings along with its core products and services.
Financial Institutions Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Financial Institutions are -
Leveraging digital technologies
– Financial Institutions 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. Financial Institutions can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Financial Institutions 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Financial Institutions 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 Financial Institutions to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Financial Institutions can develop new processes and procedures in Regional Banks 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.
Creating value in data economy
– The success of analytics program of Financial Institutions has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help Financial Institutions to build a more holistic ecosystem for Financial Institutions 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 Financial Institutions 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.
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. Financial Institutions can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Financial Institutions can use these opportunities to build new business models that can help the communities that Financial Institutions 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 Financial Institutions to increase its market reach. Financial Institutions 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Financial Institutions 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.
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. Financial Institutions 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. Financial Institutions 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, Financial Institutions is facing challenges because of the dominance of functional experts in the organization. Financial Institutions can utilize new technology in the field of Regional Banks industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Financial Institutions External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Financial Institutions are -
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 Financial Institutions business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Financial Institutions is facing in Regional Banks sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Financial Institutions 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.
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 Financial Institutions in the Regional Banks sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Regional Banks industry are lowering. It can presents Financial Institutions 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, Financial Institutions 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.
Stagnating economy with rate increase
– Financial Institutions 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.
Consumer confidence and its impact on Financial Institutions 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Financial Institutions 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.
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 Financial Institutions.
Environmental challenges
– Financial Institutions 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. Financial Institutions can take advantage of this fund but it will also bring new competitors in the Regional Banks industry.
High dependence on third party suppliers
– Financial Institutions 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.
Increasing wage structure of Financial Institutions
– 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 Financial Institutions.
Weighted SWOT Analysis of Financial Institutions Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Financial Institutions 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 Financial Institutions 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 Financial Institutions 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 Financial Institutions 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 Financial Institutions needs to make to build a sustainable competitive advantage.