Old Second Bancorp (OSBC) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Old Second Bancorp (United States)

Based on various researches at Oak Spring University , Old Second Bancorp is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, technology disruption, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, etc

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Introduction to SWOT Analysis of Old Second Bancorp

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

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

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

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Strengths of Old Second Bancorp | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Old Second Bancorp are -

Ability to lead change in Regional Banks

– Old Second 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 Old Second Bancorp in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Learning organization

- Old Second 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 Old Second Bancorp is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Old Second Bancorp emphasize – knowledge, initiative, and innovation.

Cross disciplinary teams

– Horizontal connected teams at the Old Second 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.

Highly skilled collaborators

– Old Second 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 Old Second Bancorp have helped the firm to develop new products and bring them quickly to the marketplace.

Sustainable margins compare to other players in Regional Banks industry

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

Diverse revenue streams

– Old Second Bancorp is present in almost all the verticals within the Regional Banks industry. This has provided Old Second 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.

Analytics focus

– Old Second 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.

Successful track record of launching new products

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

Low bargaining power of suppliers

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

Operational resilience

– The operational resilience strategy of Old Second 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.

Training and development

– Old Second 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.

Organizational Resilience of Old Second Bancorp

– The covid-19 pandemic has put organizational resilience at the centre of everthing Old Second Bancorp does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

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Weaknesses of Old Second Bancorp | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Old Second Bancorp are -

Skills based hiring in Regional Banks industry

– The stress on hiring functional specialists at Old Second 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.

High bargaining power of channel partners in Regional Banks industry

– because of the regulatory requirements in United States, Old Second 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, Old Second 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. Old Second 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.

Lack of clear differentiation of Old Second Bancorp products

– To increase the profitability and margins on the products, Old Second Bancorp needs to provide more differentiated products than what it is currently offering in the marketplace.

High operating costs

– Compare to the competitors, Old Second Bancorp 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 Old Second Bancorp lucrative customers.

Interest costs

– Compare to the competition, Old Second 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.

Aligning sales with marketing

– From the outside it seems that Old Second 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 Old Second Bancorp can leverage the sales team experience to cultivate customer relationships as Old Second Bancorp is planning to shift buying processes online.

High cash cycle compare to competitors

Old Second 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.

Low market penetration in new markets

– Outside its home market of United States, Old Second Bancorp needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Employees’ less understanding of Old Second Bancorp strategy

– From the outside it seems that the employees of Old Second 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.

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 Old Second Bancorp supply chain. Even after few cautionary changes, Old Second Bancorp is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Old Second Bancorp vulnerable to further global disruptions in South East Asia.

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Old Second Bancorp Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Old Second Bancorp are -

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Old Second Bancorp can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Increase in government spending

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Old Second Bancorp in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Regional Banks industry, and it will provide faster access to the consumers.

Buying journey improvements

– Old Second 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.

Loyalty marketing

– Old Second 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, Old Second 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 Old Second 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Old Second 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.

Creating value in data economy

– The success of analytics program of Old Second Bancorp has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help Old Second Bancorp to build a more holistic ecosystem for Old Second Bancorp products in the Regional Banks industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Reconfiguring business model

– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Old Second 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Old Second Bancorp is facing challenges because of the dominance of functional experts in the organization. Old Second 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.

Building a culture of innovation

– managers at Old Second 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.

Remote work and new talent hiring opportunities

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

Learning at scale

– Online learning technologies has now opened space for Old Second 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.

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Threats Old Second Bancorp External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Old Second 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. Old Second 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.

Shortening product life cycle

– it is one of the major threat that Old Second 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. Old Second Bancorp can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Stagnating economy with rate increase

– Old Second 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.

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. Old Second 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 Old Second 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.

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 Old Second Bancorp.

Consumer confidence and its impact on Old Second 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.

Technology acceleration in Forth Industrial Revolution

– Old Second Bancorp has witnessed rapid integration of technology during Covid-19 in the Regional Banks industry. As one of the leading players in the industry, Old Second 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.

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 Old Second 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.

Trade war between China and United States

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

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Weighted SWOT Analysis of Old Second Bancorp Template, Example

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

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