Bank of China (601988) SWOT Analysis / TOWS Matrix / MBA Resources
Regional Banks
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Bank of China (China)
Based on various researches at Oak Spring University , Bank of China is operating in a macro-environment that has been destablized by – geopolitical disruptions, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , wage bills are increasing, increasing energy prices, cloud computing is disrupting traditional business models,
challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Bank of China can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Bank of China, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Bank of China 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 Bank of China can be done for the following purposes –
1. Strategic planning of Bank of China
2. Improving business portfolio management of Bank of China
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 Bank of China
Strengths of Bank of China | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Bank of China are -
Diverse revenue streams
– Bank of China is present in almost all the verticals within the Regional Banks industry. This has provided Bank of China 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.
Innovation driven organization
– Bank of China is one of the most innovative firm in Regional Banks sector.
Analytics focus
– Bank of China 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 Regional Banks industry. The technology infrastructure of China 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.
Cross disciplinary teams
– Horizontal connected teams at the Bank of China 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.
Training and development
– Bank of China 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.
High switching costs
– The high switching costs that Bank of China 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)
– Bank of China has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Bank of China 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.
Operational resilience
– The operational resilience strategy of Bank of China 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.
Strong track record of project management in the Regional Banks industry
– Bank of China 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 Regional Banks
– Bank of China is one of the leading players in the Regional Banks industry in China. Over the years it has not only transformed the business landscape in the Regional Banks industry in China but also across the existing markets. The ability to lead change has enabled Bank of China in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Regional Banks industry
- digital transformation varies from industry to industry. For Bank of China digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Bank of China 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.
Highly skilled collaborators
– Bank of China has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Regional Banks industry. Secondly the value chain collaborators of Bank of China have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Bank of China | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Bank of China are -
Skills based hiring in Regional Banks industry
– The stress on hiring functional specialists at Bank of China 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.
Employees’ less understanding of Bank of China strategy
– From the outside it seems that the employees of Bank of China 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 strategic competitive environment developments
– As Bank of China is one of the leading players in the Regional Banks industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Regional Banks industry in last five years.
Capital Spending Reduction
– Even during the low interest decade, Bank of China 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 Regional Banks industry using digital technology.
High cash cycle compare to competitors
Bank of China has a high cash cycle compare to other players in the Regional Banks industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Low market penetration in new markets
– Outside its home market of China, Bank of China needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– From the 10K / annual statement of Bank of China, 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.
Ability to respond to the competition
– As the decision making is very deliberative at Bank of China, in the dynamic environment of Regional Banks industry it has struggled to respond to the nimble upstart competition. Bank of China has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Bank of China is dominated by functional specialists. It is not different from other players in the Regional Banks industry, but Bank of China needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Bank of China to focus more on services in the Regional Banks industry rather than just following the product oriented approach.
Need for greater diversity
– Bank of China 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.
Products dominated business model
– Even though Bank of China 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. Bank of China should strive to include more intangible value offerings along with its core products and services.
Bank of China Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Bank of China are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Bank of China can use these opportunities to build new business models that can help the communities that Bank of China operates in. Secondly it can use opportunities from government spending in Regional Banks sector.
Loyalty marketing
– Bank of China 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.
Learning at scale
– Online learning technologies has now opened space for Bank of China 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.
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. Bank of China can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Bank of China 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.
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 Bank of China in the Regional Banks industry. Now Bank of China 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, Bank of China is facing challenges because of the dominance of functional experts in the organization. Bank of China 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Bank of China can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Bank of China 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.
Creating value in data economy
– The success of analytics program of Bank of China has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help Bank of China to build a more holistic ecosystem for Bank of China products in the Regional Banks industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Bank of China to increase its market reach. Bank of China 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.
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. Bank of China can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Bank of China 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.
Threats Bank of China External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Bank of China are -
Stagnating economy with rate increase
– Bank of China 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Bank of China in Regional Banks industry. The Regional Banks 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.
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.
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.
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. Bank of China can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Bank of China 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.
Shortening product life cycle
– it is one of the major threat that Bank of China is facing in Regional Banks sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Bank of China 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 Bank of China.
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 Bank of China business can come under increasing regulations regarding data privacy, data security, 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 Bank of China in the Regional Banks sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Bank of China 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.
Regulatory challenges
– Bank of China 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.
Weighted SWOT Analysis of Bank of China Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Bank of China 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 Bank of China 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 Bank of China 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 Bank of China 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 Bank of China needs to make to build a sustainable competitive advantage.