State Street (STT) SWOT Analysis / TOWS Matrix / MBA Resources
Investment Services
Strategy / 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 – wage bills are increasing, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, increasing energy prices, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion,
customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, etc
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.
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
Strengths of State Street | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of State Street are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the State Street 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.
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.
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.
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.
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.
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.
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.
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.
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 State Street supply chain. Even after few cautionary changes, State Street is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left State Street vulnerable to further global disruptions in South East Asia.
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.
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.
Slow to strategic competitive environment developments
– As State Street is one of the leading players in the Investment Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Investment Services industry in last five years.
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.
State Street Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of State Street are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Using analytics as competitive advantage
– State Street has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Investment Services sector. This continuous investment in analytics has enabled State Street to build a competitive advantage using analytics. The analytics driven competitive advantage can help State Street to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, State Street can use these opportunities to build new business models that can help the communities that State Street operates in. Secondly it can use opportunities from government spending in Investment Services sector.
Threats State Street External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of State Street are -
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 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.
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.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that State Street is facing in Investment Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
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.
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.
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.