China Construction Bank (601939) SWOT Analysis / TOWS Matrix / MBA Resources
Regional Banks
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for China Construction Bank (China)
Based on various researches at Oak Spring University , China Construction Bank is operating in a macro-environment that has been destablized by – increasing commodity prices, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, technology disruption,
there is backlash against globalization, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of China Construction Bank
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that China Construction Bank can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the China Construction Bank, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which China Construction Bank operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of China Construction Bank can be done for the following purposes –
1. Strategic planning of China Construction Bank
2. Improving business portfolio management of China Construction Bank
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 China Construction Bank
Strengths of China Construction Bank | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of China Construction Bank are -
Ability to recruit top talent
– China Construction Bank 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.
Learning organization
- China Construction Bank is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at China Construction Bank is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at China Construction Bank emphasize – knowledge, initiative, and innovation.
Digital Transformation in Regional Banks industry
- digital transformation varies from industry to industry. For China Construction Bank digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. China Construction Bank has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Training and development
– China Construction Bank 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.
Operational resilience
– The operational resilience strategy of China Construction Bank comprises – understanding the underlying the factors in the Regional Banks industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Regional Banks industry
– China Construction Bank has clearly differentiated products in the market place. This has enabled China Construction Bank to fetch slight price premium compare to the competitors in the Regional Banks industry. The sustainable margins have also helped China Construction Bank to invest into research and development (R&D) and innovation.
High brand equity
– China Construction Bank has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled China Construction Bank to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of China Construction Bank in the Financial sector have low bargaining power. China Construction Bank has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps China Construction Bank to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of China Construction Bank in Regional Banks industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that China Construction Bank has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Effective Research and Development (R&D)
– China Construction Bank has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – China Construction Bank staying ahead in the Regional Banks industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management in the Regional Banks industry
– China Construction Bank is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of China Construction Bank | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China Construction Bank are -
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 China Construction Bank supply chain. Even after few cautionary changes, China Construction Bank is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left China Construction Bank vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– From the 10K / annual statement of China Construction Bank, it seems that company is thinking out the frontier risks that can impact Regional Banks 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.
Interest costs
– Compare to the competition, China Construction Bank has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High bargaining power of channel partners in Regional Banks industry
– because of the regulatory requirements in China, China Construction Bank 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.
Increasing silos among functional specialists
– The organizational structure of China Construction Bank is dominated by functional specialists. It is not different from other players in the Regional Banks industry, but China Construction Bank needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help China Construction Bank to focus more on services in the Regional Banks industry rather than just following the product oriented approach.
Employees’ less understanding of China Construction Bank strategy
– From the outside it seems that the employees of China Construction Bank 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 decision making process
– As mentioned earlier in the report, China Construction Bank has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Regional Banks industry over the last five years. China Construction Bank even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Need for greater diversity
– China Construction Bank 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.
Ability to respond to the competition
– As the decision making is very deliberative at China Construction Bank, in the dynamic environment of Regional Banks industry it has struggled to respond to the nimble upstart competition. China Construction Bank has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of China, China Construction Bank needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of China Construction Bank products
– To increase the profitability and margins on the products, China Construction Bank needs to provide more differentiated products than what it is currently offering in the marketplace.
China Construction Bank Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of China Construction Bank are -
Developing new processes and practices
– China Construction Bank can develop new processes and procedures in Regional Banks 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.
Creating value in data economy
– The success of analytics program of China Construction Bank has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help China Construction Bank to build a more holistic ecosystem for China Construction Bank products in the Regional Banks industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– China Construction Bank has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Regional Banks sector. This continuous investment in analytics has enabled China Construction Bank to build a competitive advantage using analytics. The analytics driven competitive advantage can help China Construction Bank to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for China Construction Bank in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Regional Banks industry, and it will provide faster access to the consumers.
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. China Construction Bank can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– China Construction Bank can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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 China Construction Bank 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.
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. China Construction Bank 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. China Construction Bank 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, China Construction Bank 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 China Construction Bank to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– China Construction Bank 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, China Construction Bank can use these opportunities to build new business models that can help the communities that China Construction Bank operates in. Secondly it can use opportunities from government spending in Regional Banks sector.
Use of Bitcoin and other crypto currencies for transactions in Regional Banks industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for China Construction Bank in the Regional Banks industry. Now China Construction Bank can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, China Construction Bank 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.
Threats China Construction Bank External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of China Construction Bank are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Regional Banks industry are lowering. It can presents China Construction Bank with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Regional Banks sector.
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. China Construction Bank needs to understand the core reasons impacting the Regional Banks industry. This will help it in building a better workplace.
Environmental challenges
– China Construction Bank 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. China Construction Bank can take advantage of this fund but it will also bring new competitors in the Regional Banks industry.
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.
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 China Construction Bank business can come under increasing regulations regarding data privacy, data security, etc.
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. China Construction Bank can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Shortening product life cycle
– it is one of the major threat that China Construction Bank is facing in Regional Banks sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 China Construction Bank in the Regional Banks sector and impact the bottomline of the organization.
Consumer confidence and its impact on China Construction Bank demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Regional Banks industry and other sectors.
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 China Construction Bank.
Regulatory challenges
– China Construction Bank needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Regional Banks industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, China Construction Bank 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.
Weighted SWOT Analysis of China Construction Bank Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at China Construction Bank needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of China Construction Bank is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of China Construction Bank is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of China Construction Bank to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that China Construction Bank needs to make to build a sustainable competitive advantage.
