Preferred Bank (PFBC) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Preferred Bank (United States)

Based on various researches at Oak Spring University , Preferred Bank is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, geopolitical disruptions, etc

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Introduction to SWOT Analysis of Preferred Bank

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Preferred Bank can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Preferred Bank, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Preferred Bank 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 Preferred Bank can be done for the following purposes –
1. Strategic planning of Preferred Bank
2. Improving business portfolio management of Preferred Bank
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 Preferred Bank

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Strengths of Preferred Bank | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Preferred Bank are -

Low bargaining power of suppliers

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

Successful track record of launching new products

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

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

Operational resilience

– The operational resilience strategy of Preferred Bank 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.

Organizational Resilience of Preferred Bank

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

High switching costs

– The high switching costs that Preferred Bank 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.

Effective Research and Development (R&D)

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

Learning organization

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

Sustainable margins compare to other players in Regional Banks industry

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

Innovation driven organization

– Preferred Bank is one of the most innovative firm in Regional Banks sector.

Digital Transformation in Regional Banks industry

- digital transformation varies from industry to industry. For Preferred Bank digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Preferred Bank has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

Strong track record of project management in the Regional Banks industry

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

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Weaknesses of Preferred Bank | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Preferred Bank are -

Workers concerns about automation

– As automation is fast increasing in the Regional Banks industry, Preferred Bank needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

Low market penetration in new markets

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

Skills based hiring in Regional Banks industry

– The stress on hiring functional specialists at Preferred Bank 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 dependence on Preferred Bank ‘s star products

– The top 2 products and services of Preferred Bank still accounts for major business revenue. This dependence on star products in Regional Banks industry has resulted into insufficient focus on developing new products, even though Preferred Bank has relatively successful track record of launching new products.

Products dominated business model

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

Slow to strategic competitive environment developments

– As Preferred Bank 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

Preferred Bank 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.

Interest costs

– Compare to the competition, Preferred Bank 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, Preferred Bank 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. Preferred Bank 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 Preferred Bank products

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

Increasing silos among functional specialists

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

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Preferred Bank Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Preferred Bank are -

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. Preferred Bank can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Buying journey improvements

– Preferred Bank 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.

Leveraging digital technologies

– Preferred Bank 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.

Redefining models of collaboration and team work

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

Creating value in data economy

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Preferred Bank 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.

Reforming the budgeting process

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

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

Better consumer reach

– The expansion of the 5G network will help Preferred Bank to increase its market reach. Preferred Bank 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Preferred Bank 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 Preferred Bank 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, Preferred Bank can use these opportunities to build new business models that can help the communities that Preferred Bank operates in. Secondly it can use opportunities from government spending in Regional Banks sector.

Building a culture of innovation

– managers at Preferred Bank 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.

Using analytics as competitive advantage

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

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Threats Preferred Bank External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Preferred Bank are -

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 Preferred Bank in the Regional Banks sector and impact the bottomline of the organization.

High dependence on third party suppliers

– Preferred Bank high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Preferred Bank 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 Preferred Bank prominent markets.

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 Preferred Bank.

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

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.

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. Preferred Bank can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Technology acceleration in Forth Industrial Revolution

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

Shortening product life cycle

– it is one of the major threat that Preferred Bank is facing in Regional Banks sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Increasing wage structure of Preferred Bank

– 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 Preferred Bank.

Consumer confidence and its impact on Preferred Bank 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.

Regulatory challenges

– Preferred Bank 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.

Stagnating economy with rate increase

– Preferred Bank 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.

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Weighted SWOT Analysis of Preferred Bank Template, Example

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

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