Based on various researches at Oak Spring University , Farmers & Merchants Bancorp is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, geopolitical disruptions, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies,
digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Farmers & Merchants Bancorp
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Farmers & Merchants Bancorp can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Farmers & Merchants Bancorp, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Farmers & Merchants 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.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Farmers & Merchants Bancorp can be done for the following purposes –
1. Strategic planning of Farmers & Merchants Bancorp
2. Improving business portfolio management of Farmers & Merchants 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 Farmers & Merchants Bancorp
Strengths of Farmers & Merchants Bancorp | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Farmers & Merchants Bancorp are -
Low bargaining power of suppliers
– Suppliers of Farmers & Merchants Bancorp in the Financial sector have low bargaining power. Farmers & Merchants Bancorp has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Farmers & Merchants Bancorp to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Farmers & Merchants 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 Farmers & Merchants Bancorp is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Farmers & Merchants Bancorp emphasize – knowledge, initiative, and innovation.
High brand equity
– Farmers & Merchants Bancorp has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Farmers & Merchants Bancorp to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Regional Banks industry
- digital transformation varies from industry to industry. For Farmers & Merchants Bancorp digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Farmers & Merchants 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.
Operational resilience
– The operational resilience strategy of Farmers & Merchants Bancorp 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.
High switching costs
– The high switching costs that Farmers & Merchants Bancorp 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.
Ability to recruit top talent
– Farmers & Merchants Bancorp 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.
Analytics focus
– Farmers & Merchants 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.
Ability to lead change in Regional Banks
– Farmers & Merchants Bancorp is one of the leading players in the Regional Banks industry in United States. Over the years it has not only transformed the business landscape in the Regional Banks industry in United States but also across the existing markets. The ability to lead change has enabled Farmers & Merchants Bancorp in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management in the Regional Banks industry
– Farmers & Merchants 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.
Training and development
– Farmers & Merchants 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.
Effective Research and Development (R&D)
– Farmers & Merchants Bancorp has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Farmers & Merchants Bancorp 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.
Weaknesses of Farmers & Merchants Bancorp | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Farmers & Merchants Bancorp are -
High bargaining power of channel partners in Regional Banks industry
– because of the regulatory requirements in United States, Farmers & Merchants Bancorp 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 Regional Banks industry.
Slow decision making process
– As mentioned earlier in the report, Farmers & Merchants Bancorp has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Regional Banks industry over the last five years. Farmers & Merchants Bancorp 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.
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 Farmers & Merchants Bancorp supply chain. Even after few cautionary changes, Farmers & Merchants Bancorp is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Farmers & Merchants Bancorp vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that Farmers & Merchants 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 Farmers & Merchants Bancorp can leverage the sales team experience to cultivate customer relationships as Farmers & Merchants Bancorp is planning to shift buying processes online.
Products dominated business model
– Even though Farmers & Merchants 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. Farmers & Merchants Bancorp should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative at Farmers & Merchants Bancorp, in the dynamic environment of Regional Banks industry it has struggled to respond to the nimble upstart competition. Farmers & Merchants Bancorp has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Farmers & Merchants 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.
Employees’ less understanding of Farmers & Merchants Bancorp strategy
– From the outside it seems that the employees of Farmers & Merchants Bancorp 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.
Low market penetration in new markets
– Outside its home market of United States, Farmers & Merchants Bancorp needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Farmers & Merchants Bancorp is dominated by functional specialists. It is not different from other players in the Regional Banks industry, but Farmers & Merchants Bancorp needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Farmers & Merchants Bancorp to focus more on services in the Regional Banks industry rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Farmers & Merchants Bancorp is slow explore the new channels of communication. These new channels of communication can help Farmers & Merchants Bancorp to provide better information regarding Regional Banks products and services. It can also build an online community to further reach out to potential customers.
Farmers & Merchants Bancorp Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Farmers & Merchants Bancorp are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Farmers & Merchants Bancorp can use these opportunities to build new business models that can help the communities that Farmers & Merchants Bancorp operates in. Secondly it can use opportunities from government spending in Regional Banks sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Farmers & Merchants Bancorp 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.
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. Farmers & Merchants Bancorp can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Farmers & Merchants Bancorp 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 Farmers & Merchants Bancorp to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Farmers & Merchants 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.
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. Farmers & Merchants 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 Farmers & Merchants 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.
Using analytics as competitive advantage
– Farmers & Merchants Bancorp has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Regional Banks sector. This continuous investment in analytics has enabled Farmers & Merchants Bancorp to build a competitive advantage using analytics. The analytics driven competitive advantage can help Farmers & Merchants Bancorp to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Farmers & Merchants 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.
Developing new processes and practices
– Farmers & Merchants Bancorp 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Farmers & Merchants Bancorp 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 Farmers & Merchants Bancorp to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Farmers & Merchants Bancorp can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Farmers & Merchants Bancorp has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help Farmers & Merchants Bancorp to build a more holistic ecosystem for Farmers & Merchants Bancorp products in the Regional Banks industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Farmers & Merchants Bancorp External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Farmers & Merchants Bancorp are -
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
– Farmers & Merchants 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.
Consumer confidence and its impact on Farmers & Merchants 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.
High dependence on third party suppliers
– Farmers & Merchants 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.
Increasing wage structure of Farmers & Merchants 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 Farmers & Merchants Bancorp.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Farmers & Merchants 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 Farmers & Merchants Bancorp prominent markets.
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 Farmers & Merchants Bancorp business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Farmers & Merchants 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. Farmers & Merchants Bancorp can take advantage of this fund but it will also bring new competitors in the Regional Banks industry.
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 Farmers & Merchants Bancorp in the Regional Banks sector and impact the bottomline of the organization.
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.
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 Farmers & Merchants Bancorp.
Shortening product life cycle
– it is one of the major threat that Farmers & Merchants Bancorp is facing in Regional Banks sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Farmers & Merchants Bancorp can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Farmers & Merchants Bancorp Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Farmers & Merchants 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 Farmers & Merchants 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 Farmers & Merchants 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 Farmers & Merchants 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 Farmers & Merchants Bancorp needs to make to build a sustainable competitive advantage.
