SWOT Analysis / TOWS Matrix for OFG Bancorp (United States)
Based on various researches at Oak Spring University , OFG Bancorp is operating in a macro-environment that has been destablized by – increasing energy prices, increasing commodity prices, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China,
competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that OFG Bancorp can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the OFG Bancorp, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which OFG 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 OFG Bancorp can be done for the following purposes –
1. Strategic planning of OFG Bancorp
2. Improving business portfolio management of OFG 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 OFG Bancorp
Strengths of OFG Bancorp | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of OFG Bancorp are -
Ability to recruit top talent
– OFG 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.
Innovation driven organization
– OFG Bancorp is one of the most innovative firm in Regional Banks sector.
Diverse revenue streams
– OFG Bancorp is present in almost all the verticals within the Regional Banks industry. This has provided OFG Bancorp 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.
Strong track record of project management in the Regional Banks industry
– OFG 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.
Learning organization
- OFG 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 OFG Bancorp is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at OFG Bancorp emphasize – knowledge, initiative, and innovation.
Training and development
– OFG 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 lead change in Regional Banks
– OFG 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 OFG Bancorp in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of OFG Bancorp in the Financial sector have low bargaining power. OFG Bancorp has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps OFG Bancorp to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of OFG Bancorp in Regional Banks industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– OFG Bancorp has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled OFG Bancorp to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that OFG 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.
Cross disciplinary teams
– Horizontal connected teams at the OFG Bancorp are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses of OFG Bancorp | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of OFG Bancorp are -
Ability to respond to the competition
– As the decision making is very deliberative at OFG Bancorp, in the dynamic environment of Regional Banks industry it has struggled to respond to the nimble upstart competition. OFG Bancorp has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– From the 10K / annual statement of OFG Bancorp, 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.
Lack of clear differentiation of OFG Bancorp products
– To increase the profitability and margins on the products, OFG Bancorp needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee of OFG 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.
Interest costs
– Compare to the competition, OFG Bancorp 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, OFG 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. OFG 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.
Low market penetration in new markets
– Outside its home market of United States, OFG Bancorp needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
OFG 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.
Employees’ less understanding of OFG Bancorp strategy
– From the outside it seems that the employees of OFG 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.
Aligning sales with marketing
– From the outside it seems that OFG 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 OFG Bancorp can leverage the sales team experience to cultivate customer relationships as OFG Bancorp is planning to shift buying processes online.
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 OFG Bancorp supply chain. Even after few cautionary changes, OFG Bancorp is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left OFG Bancorp vulnerable to further global disruptions in South East Asia.
OFG Bancorp Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of OFG Bancorp are -
Buying journey improvements
– OFG 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.
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 OFG Bancorp in the Regional Banks industry. Now OFG Bancorp can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, OFG Bancorp is facing challenges because of the dominance of functional experts in the organization. OFG Bancorp 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.
Developing new processes and practices
– OFG 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.
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. OFG Bancorp can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– OFG Bancorp 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, OFG 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 OFG 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.
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 OFG 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
– OFG 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 OFG Bancorp to build a competitive advantage using analytics. The analytics driven competitive advantage can help OFG Bancorp to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help OFG Bancorp to increase its market reach. OFG Bancorp 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.
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. OFG Bancorp 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. OFG Bancorp 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 OFG 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 OFG 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 OFG Bancorp can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats OFG Bancorp External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of OFG Bancorp are -
Environmental challenges
– OFG 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. OFG Bancorp can take advantage of this fund but it will also bring new competitors in the Regional Banks industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Regional Banks industry are lowering. It can presents OFG 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.
Regulatory challenges
– OFG 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, OFG 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.
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. OFG Bancorp can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Shortening product life cycle
– it is one of the major threat that OFG Bancorp is facing in Regional Banks sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 OFG Bancorp in the Regional Banks sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– OFG Bancorp has witnessed rapid integration of technology during Covid-19 in the Regional Banks industry. As one of the leading players in the industry, OFG 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, OFG 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 OFG Bancorp prominent markets.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for OFG Bancorp 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.
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. OFG 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.
Stagnating economy with rate increase
– OFG 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.
Weighted SWOT Analysis of OFG Bancorp Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at OFG 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 OFG 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 OFG 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 OFG 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 OFG Bancorp needs to make to build a sustainable competitive advantage.
