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 – central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, geopolitical disruptions, increasing commodity prices, increasing energy prices, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, increasing household debt because of falling income levels, wage bills are increasing, 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 -

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.

Sustainable margins compare to other players in Investment Services industry

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

Superior customer experience

– The customer experience strategy of State Street in Investment Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Effective Research and Development (R&D)

– State Street has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – State Street staying ahead in the Investment Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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.

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.

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.

Organizational Resilience of State Street

– The covid-19 pandemic has put organizational resilience at the centre of everthing State Street 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 State Street 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.

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.

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.

Innovation driven organization

– State Street is one of the most innovative firm in Investment Services sector.

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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 -

Aligning sales with marketing

– From the outside it seems that State Street needs to have more collaboration between its sales team and marketing team. Sales professionals in the Investment Services industry have deep experience in developing customer relationships. Marketing department at State Street can leverage the sales team experience to cultivate customer relationships as State Street is planning to shift buying processes online.

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.

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.

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.

Skills based hiring in Investment Services industry

– The stress on hiring functional specialists at State Street 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 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.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, State Street is slow explore the new channels of communication. These new channels of communication can help State Street to provide better information regarding Investment Services products and services. It can also build an online community to further reach out to potential customers.

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.

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.

No frontier risks strategy

– From the 10K / annual statement of State Street, it seems that company is thinking out the frontier risks that can impact Investment Services 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.

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.

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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 -

Building a culture of innovation

– managers at State Street 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 Investment Services industry.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Investment Services industry, but it has also influenced the consumer preferences. State Street can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, State Street is facing challenges because of the dominance of functional experts in the organization. State Street can utilize new technology in the field of Investment Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Buying journey improvements

– State Street can improve the customer journey of consumers in the Investment Services 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.

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.

Developing new processes and practices

– State Street can develop new processes and procedures in Investment Services 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. State Street can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for State Street 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 State Street 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 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.

Learning at scale

– Online learning technologies has now opened space for State Street 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 State Street External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of State Street are -

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. State Street needs to understand the core reasons impacting the Investment Services industry. This will help it in building a better workplace.

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.

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.

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. State Street 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.

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 international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, State Street 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 State Street prominent markets.

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.

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, State Street may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Investment Services sector.

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.

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.

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.

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 State Street.

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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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