Erste Group Bank AG (ERST) SWOT Analysis / TOWS Matrix / MBA Resources
Regional Banks
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Erste Group Bank AG (Germany)
Based on various researches at Oak Spring University , Erste Group Bank AG is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, there is backlash against globalization, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy,
challanges to central banks by blockchain based private currencies, increasing energy prices, etc
Introduction to SWOT Analysis of Erste Group Bank AG
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Erste Group Bank AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Erste Group Bank AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Erste Group Bank AG 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 Erste Group Bank AG can be done for the following purposes –
1. Strategic planning of Erste Group Bank AG
2. Improving business portfolio management of Erste Group Bank AG
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 Erste Group Bank AG
Strengths of Erste Group Bank AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Erste Group Bank AG are -
Digital Transformation in Regional Banks industry
- digital transformation varies from industry to industry. For Erste Group Bank AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Erste Group Bank AG 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.
Organizational Resilience of Erste Group Bank AG
– The covid-19 pandemic has put organizational resilience at the centre of everthing Erste Group Bank AG does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Erste Group Bank AG 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 Germany 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.
Sustainable margins compare to other players in Regional Banks industry
– Erste Group Bank AG has clearly differentiated products in the market place. This has enabled Erste Group Bank AG to fetch slight price premium compare to the competitors in the Regional Banks industry. The sustainable margins have also helped Erste Group Bank AG to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Erste Group Bank AG 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 Erste Group Bank AG have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Erste Group Bank AG 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.
Ability to lead change in Regional Banks
– Erste Group Bank AG 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 Erste Group Bank AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Erste Group Bank AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Erste Group Bank AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy of Erste Group Bank AG 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.
Innovation driven organization
– Erste Group Bank AG is one of the most innovative firm in Regional Banks sector.
Ability to recruit top talent
– Erste Group Bank AG 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.
Strong track record of project management in the Regional Banks industry
– Erste Group Bank AG 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 Erste Group Bank AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Erste Group Bank AG are -
High cash cycle compare to competitors
Erste Group Bank AG 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 Germany, Erste Group Bank AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ less understanding of Erste Group Bank AG strategy
– From the outside it seems that the employees of Erste Group Bank AG 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.
Capital Spending Reduction
– Even during the low interest decade, Erste Group Bank AG 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.
Increasing silos among functional specialists
– The organizational structure of Erste Group Bank AG is dominated by functional specialists. It is not different from other players in the Regional Banks industry, but Erste Group Bank AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Erste Group Bank AG to focus more on services in the Regional Banks industry rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Erste Group Bank AG 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.
Skills based hiring in Regional Banks industry
– The stress on hiring functional specialists at Erste Group Bank AG 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.
Products dominated business model
– Even though Erste Group Bank AG 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. Erste Group Bank AG should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners in Regional Banks industry
– because of the regulatory requirements in Germany, Erste Group Bank AG 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.
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 Erste Group Bank AG supply chain. Even after few cautionary changes, Erste Group Bank AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Erste Group Bank AG vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Erste Group Bank AG 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. Erste Group Bank AG 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.
Erste Group Bank AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Erste Group Bank AG are -
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 Erste Group Bank AG in the Regional Banks industry. Now Erste Group Bank AG can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Erste Group Bank AG to increase its market reach. Erste Group Bank AG 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.
Creating value in data economy
– The success of analytics program of Erste Group Bank AG has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help Erste Group Bank AG to build a more holistic ecosystem for Erste Group Bank AG products in the Regional Banks industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Erste Group Bank AG is facing challenges because of the dominance of functional experts in the organization. Erste Group Bank AG 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.
Learning at scale
– Online learning technologies has now opened space for Erste Group Bank AG 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Erste Group Bank AG 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 Erste Group Bank AG to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Erste Group Bank AG 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.
Building a culture of innovation
– managers at Erste Group Bank AG 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 Regional Banks industry.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Erste Group Bank AG 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.
Loyalty marketing
– Erste Group Bank AG 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.
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. Erste Group Bank AG 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. Erste Group Bank AG 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Erste Group Bank AG can use these opportunities to build new business models that can help the communities that Erste Group Bank AG operates in. Secondly it can use opportunities from government spending in Regional Banks sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Erste Group Bank AG 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 Erste Group Bank AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Erste Group Bank AG are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Erste Group Bank AG 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 Erste Group Bank AG prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Erste Group Bank AG 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.
Stagnating economy with rate increase
– Erste Group Bank AG 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 Erste Group Bank AG 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.
Technology acceleration in Forth Industrial Revolution
– Erste Group Bank AG has witnessed rapid integration of technology during Covid-19 in the Regional Banks industry. As one of the leading players in the industry, Erste Group Bank AG 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.
Increasing wage structure of Erste Group Bank AG
– 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 Erste Group Bank AG.
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. Erste Group Bank AG 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.
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 Erste Group Bank AG in the Regional Banks sector and impact the bottomline of the organization.
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 Erste Group Bank AG.
High dependence on third party suppliers
– Erste Group Bank AG 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Regional Banks industry are lowering. It can presents Erste Group Bank AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Regional Banks sector.
Regulatory challenges
– Erste Group Bank AG 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.
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. Erste Group Bank AG 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 Erste Group Bank AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Erste Group Bank AG 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 Erste Group Bank AG 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 Erste Group Bank AG 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 Erste Group Bank AG 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 Erste Group Bank AG needs to make to build a sustainable competitive advantage.
