ICBC (601398) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for ICBC (China)

Based on various researches at Oak Spring University , ICBC is operating in a macro-environment that has been destablized by – technology disruption, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, etc

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Introduction to SWOT Analysis of ICBC

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

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

The strengths of ICBC are -

Training and development

– ICBC has one of the best training and development program in Financial industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Effective Research and Development (R&D)

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

Organizational Resilience of ICBC

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

Sustainable margins compare to other players in Regional Banks industry

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

Diverse revenue streams

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

Low bargaining power of suppliers

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

Superior customer experience

– The customer experience strategy of ICBC in Regional Banks industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Ability to recruit top talent

– ICBC is one of the leading players in the Regional Banks industry in China. It is in a position to attract the best talent available in China. The firm has a robust talent identification program that helps in identifying the brightest.

Innovation driven organization

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

Strong track record of project management in the Regional Banks industry

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

Digital Transformation in Regional Banks industry

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

High brand equity

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

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

The weaknesses of ICBC are -

Compensation and incentives

– The revenue per employee of ICBC is just above the Regional Banks 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.

Low market penetration in new markets

– Outside its home market of China, ICBC needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Products dominated business model

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

Employees’ less understanding of ICBC strategy

– From the outside it seems that the employees of ICBC 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.

Skills based hiring in Regional Banks industry

– The stress on hiring functional specialists at ICBC 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.

Aligning sales with marketing

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

High bargaining power of channel partners in Regional Banks industry

– because of the regulatory requirements in China, ICBC is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Regional Banks industry.

Interest costs

– Compare to the competition, ICBC 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.

Increasing silos among functional specialists

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

Lack of clear differentiation of ICBC products

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

Slow decision making process

– As mentioned earlier in the report, ICBC 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. ICBC 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.

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

The opportunities of ICBC are -

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

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 ICBC 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.

Learning at scale

– Online learning technologies has now opened space for ICBC 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.

Redefining models of collaboration and team work

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

Buying journey improvements

– ICBC can improve the customer journey of consumers in the Regional Banks industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

Loyalty marketing

– ICBC 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.

Leveraging digital technologies

– ICBC 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Regional Banks industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. ICBC 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. ICBC 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.

Manufacturing automation

– ICBC can use the latest technology developments to improve its manufacturing and designing process in Regional Banks 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.

Reforming the budgeting process

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

Creating value in data economy

– The success of analytics program of ICBC has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help ICBC to build a more holistic ecosystem for ICBC 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 ICBC 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.

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

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

The threats of ICBC are -

Increasing wage structure of ICBC

– 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 ICBC.

Backlash against dominant players

– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of ICBC business can come under increasing regulations regarding data privacy, data security, etc.

Environmental challenges

– ICBC 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. ICBC can take advantage of this fund but it will also bring new competitors in the Regional Banks industry.

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 ICBC in the Regional Banks sector and impact the bottomline of the organization.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Stagnating economy with rate increase

– ICBC 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.

High dependence on third party suppliers

– ICBC 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.

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

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.

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. ICBC 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.

Consumer confidence and its impact on ICBC 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.

Learning curve for new practices

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

Increasing international competition and downward pressure on margins

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

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Weighted SWOT Analysis of ICBC Template, Example

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

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