First Midwest (FMBI) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for First Midwest (United States)

Based on various researches at Oak Spring University , First Midwest is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing commodity prices, wage bills are increasing, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, there is backlash against globalization, increasing government debt because of Covid-19 spendings, etc

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Introduction to SWOT Analysis of First Midwest

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that First Midwest can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the First Midwest, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which First Midwest operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of First Midwest can be done for the following purposes –
1. Strategic planning of First Midwest
2. Improving business portfolio management of First Midwest
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 First Midwest

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Strengths of First Midwest | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of First Midwest are -

Superior customer experience

– The customer experience strategy of First Midwest 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)

– First Midwest has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – First Midwest 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.

Low bargaining power of suppliers

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

Training and development

– First Midwest 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.

Successful track record of launching new products

– First Midwest has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. First Midwest 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.

Ability to lead change in Regional Banks

– First Midwest 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 First Midwest in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Highly skilled collaborators

– First Midwest 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 First Midwest have helped the firm to develop new products and bring them quickly to the marketplace.

High switching costs

– The high switching costs that First Midwest 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.

High brand equity

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

Analytics focus

– First Midwest 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.

Strong track record of project management in the Regional Banks industry

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

Sustainable margins compare to other players in Regional Banks industry

– First Midwest has clearly differentiated products in the market place. This has enabled First Midwest to fetch slight price premium compare to the competitors in the Regional Banks industry. The sustainable margins have also helped First Midwest to invest into research and development (R&D) and innovation.

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Weaknesses of First Midwest | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of First Midwest are -

Increasing silos among functional specialists

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

Need for greater diversity

– First Midwest 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.

No frontier risks strategy

– From the 10K / annual statement of First Midwest, it seems that company is thinking out the frontier risks that can impact Regional Banks 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.

High operating costs

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

Capital Spending Reduction

– Even during the low interest decade, First Midwest 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 First Midwest, in the dynamic environment of Regional Banks industry it has struggled to respond to the nimble upstart competition. First Midwest 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 First Midwest 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.

Interest costs

– Compare to the competition, First Midwest 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 decision making process

– As mentioned earlier in the report, First Midwest 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. First Midwest 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.

Products dominated business model

– Even though First Midwest 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. First Midwest should strive to include more intangible value offerings along with its core products and services.

Slow to strategic competitive environment developments

– As First Midwest 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.

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First Midwest Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of First Midwest are -

Using analytics as competitive advantage

– First Midwest 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 First Midwest to build a competitive advantage using analytics. The analytics driven competitive advantage can help First Midwest to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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

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 First Midwest 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.

Manufacturing automation

– First Midwest 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.

Building a culture of innovation

– managers at First Midwest 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, First Midwest 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 First Midwest to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Loyalty marketing

– First Midwest 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, First Midwest is facing challenges because of the dominance of functional experts in the organization. First Midwest 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.

Leveraging digital technologies

– First Midwest 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.

Learning at scale

– Online learning technologies has now opened space for First Midwest 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.

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. First Midwest 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. First Midwest 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for First Midwest 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 First Midwest to hire the very best people irrespective of their geographical location.

Increase in government spending

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

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Threats First Midwest External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of First Midwest are -

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, First Midwest 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 First Midwest prominent markets.

Stagnating economy with rate increase

– First Midwest 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.

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 First Midwest.

Consumer confidence and its impact on First Midwest 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.

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 First Midwest in the Regional Banks sector and impact the bottomline of the organization.

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 First Midwest business can come under increasing regulations regarding data privacy, data security, etc.

Regulatory challenges

– First Midwest 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.

Learning curve for new practices

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

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Regional Banks industry are lowering. It can presents First Midwest with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Regional Banks sector.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for First Midwest 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.

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.

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. First Midwest needs to understand the core reasons impacting the Regional Banks industry. This will help it in building a better workplace.

Increasing wage structure of First Midwest

– 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 First Midwest.

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Weighted SWOT Analysis of First Midwest Template, Example

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

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