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 – wage bills are increasing, there is increasing trade war between United States & China, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, technology disruption, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, 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 -
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.
Cross disciplinary teams
– Horizontal connected teams at the Erste Group Bank AG 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.
Learning organization
- Erste Group Bank AG 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 Erste Group Bank AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Erste Group Bank AG emphasize – knowledge, initiative, and innovation.
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.
Effective Research and Development (R&D)
– Erste Group Bank AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Erste Group Bank AG 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.
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.
Innovation driven organization
– Erste Group Bank AG is one of the most innovative firm in Regional Banks sector.
Diverse revenue streams
– Erste Group Bank AG is present in almost all the verticals within the Regional Banks industry. This has provided Erste Group Bank AG 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 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.
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.
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.
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 operating costs
– Compare to the competitors, Erste Group Bank AG 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 Erste Group Bank AG lucrative customers.
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.
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.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the Regional Banks industry, Erste Group Bank AG needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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.
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.
No frontier risks strategy
– From the 10K / annual statement of Erste Group Bank AG, 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.
High dependence on Erste Group Bank AG ‘s star products
– The top 2 products and services of Erste Group Bank AG 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 Erste Group Bank AG has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee of Erste Group Bank AG 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.
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 -
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.
Buying journey improvements
– Erste Group Bank AG 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.
Leveraging digital technologies
– Erste Group Bank AG 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.
Using analytics as competitive advantage
– Erste Group Bank AG 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 Erste Group Bank AG to build a competitive advantage using analytics. The analytics driven competitive advantage can help Erste Group Bank AG to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Erste Group Bank AG 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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
Environmental challenges
– Erste Group Bank AG 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. Erste Group Bank AG can take advantage of this fund but it will also bring new competitors in the Regional Banks industry.
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.
Consumer confidence and its impact on Erste Group Bank AG 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.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Erste Group Bank AG is facing in Regional Banks sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.