UniCredit (CRIG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for UniCredit (Germany)

Based on various researches at Oak Spring University , UniCredit is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, there is backlash against globalization, supply chains are disrupted by pandemic , increasing transportation and logistics costs, cloud computing is disrupting traditional business models, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc

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Introduction to SWOT Analysis of UniCredit

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

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

The strengths of UniCredit are -

Highly skilled collaborators

– UniCredit 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 UniCredit have helped the firm to develop new products and bring them quickly to the marketplace.

Diverse revenue streams

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

Ability to recruit top talent

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

Innovation driven organization

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

High switching costs

– The high switching costs that UniCredit 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.

Digital Transformation in Regional Banks industry

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

Learning organization

- UniCredit 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 UniCredit is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at UniCredit emphasize – knowledge, initiative, and innovation.

High brand equity

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

Ability to lead change in Regional Banks

– UniCredit is one of the leading players in the Regional Banks industry in Germany. Over the years it has not only transformed the business landscape in the Regional Banks industry in Germany but also across the existing markets. The ability to lead change has enabled UniCredit in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Sustainable margins compare to other players in Regional Banks industry

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

Superior customer experience

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

Effective Research and Development (R&D)

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

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

The weaknesses of UniCredit are -

Need for greater diversity

– UniCredit 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.

High operating costs

– Compare to the competitors, UniCredit has high operating costs in the Regional Banks industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract UniCredit lucrative customers.

Capital Spending Reduction

– Even during the low interest decade, UniCredit 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 dependence on UniCredit ‘s star products

– The top 2 products and services of UniCredit still accounts for major business revenue. This dependence on star products in Regional Banks industry has resulted into insufficient focus on developing new products, even though UniCredit has relatively successful track record of launching new products.

Lack of clear differentiation of UniCredit products

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

Interest costs

– Compare to the competition, UniCredit 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 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 UniCredit supply chain. Even after few cautionary changes, UniCredit is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left UniCredit vulnerable to further global disruptions in South East Asia.

Products dominated business model

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

Aligning sales with marketing

– From the outside it seems that UniCredit 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 UniCredit can leverage the sales team experience to cultivate customer relationships as UniCredit is planning to shift buying processes online.

High cash cycle compare to competitors

UniCredit 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.

Slow decision making process

– As mentioned earlier in the report, UniCredit 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. UniCredit 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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UniCredit Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of UniCredit are -

Redefining models of collaboration and team work

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

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

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, UniCredit can use these opportunities to build new business models that can help the communities that UniCredit operates in. Secondly it can use opportunities from government spending in Regional Banks sector.

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. UniCredit 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. UniCredit 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.

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

Buying journey improvements

– UniCredit 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.

Learning at scale

– Online learning technologies has now opened space for UniCredit 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.

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 UniCredit 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, UniCredit 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.

Better consumer reach

– The expansion of the 5G network will help UniCredit to increase its market reach. UniCredit 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.

Manufacturing automation

– UniCredit 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 UniCredit can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Loyalty marketing

– UniCredit 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.

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

The threats of UniCredit are -

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 UniCredit.

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. UniCredit needs to understand the core reasons impacting the Regional Banks industry. This will help it in building a better workplace.

Stagnating economy with rate increase

– UniCredit 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.

Environmental challenges

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

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 UniCredit business can come under increasing regulations regarding data privacy, data security, etc.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for UniCredit 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.

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. UniCredit 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.

Technology acceleration in Forth Industrial Revolution

– UniCredit has witnessed rapid integration of technology during Covid-19 in the Regional Banks industry. As one of the leading players in the industry, UniCredit needs to keep up with the evolution of technology in the Regional Banks 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.

Shortening product life cycle

– it is one of the major threat that UniCredit is facing in Regional Banks sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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. UniCredit can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Consumer confidence and its impact on UniCredit 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.

Regulatory challenges

– UniCredit 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, UniCredit 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.

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Weighted SWOT Analysis of UniCredit Template, Example

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

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