State Street (STT) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for State Street (United States)

Based on various researches at Oak Spring University , State Street is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, increasing commodity prices, wage bills are increasing, technology disruption, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc

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Introduction to SWOT Analysis of State Street

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that State Street can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the State Street, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which State Street 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 State Street can be done for the following purposes –
1. Strategic planning of State Street
2. Improving business portfolio management of State Street
3. Assessing feasibility of the new initiative in United States
4. Making a Investment Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of State Street

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Strengths of State Street | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of State Street are -

Digital Transformation in Investment Services industry

- digital transformation varies from industry to industry. For State Street digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. State Street 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.

Analytics focus

– State Street 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 Investment Services 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.

Low bargaining power of suppliers

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

Ability to lead change in Investment Services

– State Street is one of the leading players in the Investment Services industry in United States. Over the years it has not only transformed the business landscape in the Investment Services industry in United States but also across the existing markets. The ability to lead change has enabled State Street in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

High brand equity

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

Successful track record of launching new products

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

Diverse revenue streams

– State Street is present in almost all the verticals within the Investment Services industry. This has provided State Street 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.

Ability to recruit top talent

– State Street is one of the leading players in the Investment Services 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.

Strong track record of project management in the Investment Services industry

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

Operational resilience

– The operational resilience strategy of State Street comprises – understanding the underlying the factors in the Investment Services 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.

Learning organization

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

Highly skilled collaborators

– State Street has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Investment Services industry. Secondly the value chain collaborators of State Street have helped the firm to develop new products and bring them quickly to the marketplace.

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Weaknesses of State Street | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of State Street are -

Slow decision making process

– As mentioned earlier in the report, State Street has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Investment Services industry over the last five years. State Street 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, State Street needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Interest costs

– Compare to the competition, State Street 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.

High cash cycle compare to competitors

State Street has a high cash cycle compare to other players in the Investment Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Ability to respond to the competition

– As the decision making is very deliberative at State Street, in the dynamic environment of Investment Services industry it has struggled to respond to the nimble upstart competition. State Street has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Capital Spending Reduction

– Even during the low interest decade, State Street 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 Investment Services industry using digital technology.

Employees’ less understanding of State Street strategy

– From the outside it seems that the employees of State Street 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.

Need for greater diversity

– State Street 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.

High dependence on State Street ‘s star products

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

Compensation and incentives

– The revenue per employee of State Street is just above the Investment Services 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.

Products dominated business model

– Even though State Street has some of the most successful models in the Investment Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. State Street should strive to include more intangible value offerings along with its core products and services.

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State Street Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of State Street are -

Better consumer reach

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for State Street in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Investment Services industry, and it will provide faster access to the consumers.

Low interest rates

– Even though inflation is raising its head in most developed economies, State Street 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.

Harnessing reconfiguration of the global supply chains

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

Use of Bitcoin and other crypto currencies for transactions in Investment Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for State Street in the Investment Services industry. Now State Street can target international markets with far fewer capital restrictions requirements than the existing system.

Creating value in data economy

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

Manufacturing automation

– State Street can use the latest technology developments to improve its manufacturing and designing process in Investment Services 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.

Leveraging digital technologies

– State Street 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.

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. State Street can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Investment Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. State Street 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. State Street 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.

Loyalty marketing

– State Street 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.

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 State Street 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.

Reforming the budgeting process

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

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Threats State Street External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of State Street 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 State Street in the Investment Services sector and impact the bottomline of the organization.

Stagnating economy with rate increase

– State Street 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 Investment Services industry.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for State Street in Investment Services industry. The Investment Services 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.

Consumer confidence and its impact on State Street 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 Investment Services industry and other sectors.

Technology acceleration in Forth Industrial Revolution

– State Street has witnessed rapid integration of technology during Covid-19 in the Investment Services industry. As one of the leading players in the industry, State Street needs to keep up with the evolution of technology in the Investment Services 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 dependence on third party suppliers

– State Street 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.

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.

Barriers of entry lowering

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

Easy access to finance

– Easy access to finance in Investment Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. State Street can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Environmental challenges

– State Street 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. State Street can take advantage of this fund but it will also bring new competitors in the Investment Services industry.

Increasing wage structure of State Street

– 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 State Street.

Regulatory challenges

– State Street 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 Investment Services industry regulations.

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.

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Weighted SWOT Analysis of State Street Template, Example

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

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