Based on various researches at Oak Spring University , Farmers & Merchants Bancorp is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, increasing energy prices, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, increasing household debt because of falling income levels,
banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, 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 -
Successful track record of launching new products
– Farmers & Merchants Bancorp has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Farmers & Merchants Bancorp 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.
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.
Highly skilled collaborators
– Farmers & Merchants 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 Farmers & Merchants Bancorp have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
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.
Sustainable margins compare to other players in Regional Banks industry
– Farmers & Merchants Bancorp has clearly differentiated products in the market place. This has enabled Farmers & Merchants Bancorp to fetch slight price premium compare to the competitors in the Regional Banks industry. The sustainable margins have also helped Farmers & Merchants Bancorp to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Farmers & Merchants Bancorp in Regional Banks industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous 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.
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.
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.
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 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.
Lack of clear differentiation of Farmers & Merchants Bancorp products
– To increase the profitability and margins on the products, Farmers & Merchants Bancorp needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring in Regional Banks industry
– The stress on hiring functional specialists at Farmers & Merchants Bancorp 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 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.
Compensation and incentives
– The revenue per employee of Farmers & Merchants 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.
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.
Slow to strategic competitive environment developments
– As Farmers & Merchants Bancorp is one of the leading players in the Regional Banks industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Regional Banks industry in last five years.
High cash cycle compare to competitors
Farmers & Merchants Bancorp has a high cash cycle compare to other players in the Regional Banks industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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.
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.
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 -
Leveraging digital technologies
– Farmers & Merchants Bancorp 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.
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.
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.
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.
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.
Buying journey improvements
– Farmers & Merchants 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.
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.
Building a culture of innovation
– managers at Farmers & Merchants 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.
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 Farmers & Merchants Bancorp in the Regional Banks industry. Now Farmers & Merchants Bancorp can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
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 -
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. Farmers & Merchants 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.
Regulatory challenges
– Farmers & Merchants 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.
Technology acceleration in Forth Industrial Revolution
– Farmers & Merchants Bancorp has witnessed rapid integration of technology during Covid-19 in the Regional Banks industry. As one of the leading players in the industry, Farmers & Merchants Bancorp needs to keep up with the evolution of technology in the Regional Banks 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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Farmers & Merchants Bancorp needs to understand the core reasons impacting the Regional Banks industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Regional Banks industry are lowering. It can presents Farmers & Merchants Bancorp with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Regional Banks sector.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Farmers & Merchants 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.
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.
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.