Varengold Bank (VG8G) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Varengold Bank (Germany)

Based on various researches at Oak Spring University , Varengold Bank is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, there is backlash against globalization, etc

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Introduction to SWOT Analysis of Varengold Bank

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Varengold Bank can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Varengold Bank, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Varengold 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Varengold Bank can be done for the following purposes –
1. Strategic planning of Varengold Bank
2. Improving business portfolio management of Varengold Bank
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 Varengold Bank

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

The strengths of Varengold Bank are -

Digital Transformation in Regional Banks industry

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

Low bargaining power of suppliers

– Suppliers of Varengold Bank in the Financial sector have low bargaining power. Varengold Bank has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Varengold Bank to manage not only supply disruptions but also source products at highly competitive prices.

Superior customer experience

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

Highly skilled collaborators

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

Successful track record of launching new products

– Varengold Bank has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Varengold Bank has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

Operational resilience

– The operational resilience strategy of Varengold 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.

High brand equity

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

Learning organization

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

Effective Research and Development (R&D)

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

Sustainable margins compare to other players in Regional Banks industry

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

Ability to recruit top talent

– Varengold Bank 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.

Cross disciplinary teams

– Horizontal connected teams at the Varengold Bank 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.

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

The weaknesses of Varengold Bank are -

High bargaining power of channel partners in Regional Banks industry

– because of the regulatory requirements in Germany, Varengold 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.

Capital Spending Reduction

– Even during the low interest decade, Varengold Bank 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.

Need for greater diversity

– Varengold 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.

Products dominated business model

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

No frontier risks strategy

– From the 10K / annual statement of Varengold 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.

High cash cycle compare to competitors

Varengold Bank 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.

High dependence on Varengold Bank ‘s star products

– The top 2 products and services of Varengold Bank 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 Varengold Bank has relatively successful track record of launching new products.

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

Skills based hiring in Regional Banks industry

– The stress on hiring functional specialists at Varengold Bank 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.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Varengold Bank is slow explore the new channels of communication. These new channels of communication can help Varengold Bank to provide better information regarding Regional Banks products and services. It can also build an online community to further reach out to potential customers.

Compensation and incentives

– The revenue per employee of Varengold Bank 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.

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Varengold Bank Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Varengold Bank are -

Learning at scale

– Online learning technologies has now opened space for Varengold Bank 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.

Leveraging digital technologies

– Varengold 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.

Manufacturing automation

– Varengold Bank 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.

Low interest rates

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

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Varengold 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Varengold Bank to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Varengold Bank to hire the very best people irrespective of their geographical location.

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

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Varengold Bank can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Better consumer reach

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

Loyalty marketing

– Varengold 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.

Buying journey improvements

– Varengold Bank 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.

Creating value in data economy

– The success of analytics program of Varengold Bank has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help Varengold Bank to build a more holistic ecosystem for Varengold Bank products in the Regional Banks industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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

The threats of Varengold Bank are -

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Regional Banks industry are lowering. It can presents Varengold 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Varengold 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.

Technology acceleration in Forth Industrial Revolution

– Varengold Bank has witnessed rapid integration of technology during Covid-19 in the Regional Banks industry. As one of the leading players in the industry, Varengold Bank 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.

Stagnating economy with rate increase

– Varengold Bank 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.

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.

High dependence on third party suppliers

– Varengold Bank 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 Varengold Bank.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Varengold Bank 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 Varengold Bank prominent markets.

Increasing wage structure of Varengold Bank

– 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 Varengold Bank.

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

Shortening product life cycle

– it is one of the major threat that Varengold Bank 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 Varengold 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.

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 Varengold Bank in the Regional Banks sector and impact the bottomline of the organization.

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Weighted SWOT Analysis of Varengold Bank Template, Example

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

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