China Merchants Bank (3968) SWOT Analysis / TOWS Matrix / MBA Resources
Money Center Banks
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for China Merchants Bank (Hong Kong)
Based on various researches at Oak Spring University , China Merchants Bank is operating in a macro-environment that has been destablized by – increasing commodity prices, increasing government debt because of Covid-19 spendings, wage bills are increasing, 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, technology disruption,
talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of China Merchants Bank
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that China Merchants Bank can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the China Merchants Bank, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which China Merchants 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.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of China Merchants Bank can be done for the following purposes –
1. Strategic planning of China Merchants Bank
2. Improving business portfolio management of China Merchants Bank
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Money Center Banks sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of China Merchants Bank
Strengths of China Merchants Bank | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of China Merchants Bank are -
Effective Research and Development (R&D)
– China Merchants Bank has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – China Merchants Bank staying ahead in the Money Center Banks industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the China Merchants 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.
Operational resilience
– The operational resilience strategy of China Merchants Bank comprises – understanding the underlying the factors in the Money Center 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.
Low bargaining power of suppliers
– Suppliers of China Merchants Bank in the Financial sector have low bargaining power. China Merchants Bank has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps China Merchants Bank to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– China Merchants Bank has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. China Merchants 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.
Highly skilled collaborators
– China Merchants Bank has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Money Center Banks industry. Secondly the value chain collaborators of China Merchants Bank have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the Money Center Banks industry
– China Merchants Bank is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- China Merchants 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 China Merchants Bank is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at China Merchants Bank emphasize – knowledge, initiative, and innovation.
Organizational Resilience of China Merchants Bank
– The covid-19 pandemic has put organizational resilience at the centre of everthing China Merchants Bank does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Money Center Banks
– China Merchants Bank is one of the leading players in the Money Center Banks industry in Hong Kong. Over the years it has not only transformed the business landscape in the Money Center Banks industry in Hong Kong but also across the existing markets. The ability to lead change has enabled China Merchants Bank in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– China Merchants Bank 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 Money Center Banks industry. The technology infrastructure of Hong Kong 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.
Ability to recruit top talent
– China Merchants Bank is one of the leading players in the Money Center Banks industry in Hong Kong. It is in a position to attract the best talent available in Hong Kong. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of China Merchants Bank | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China Merchants Bank are -
Interest costs
– Compare to the competition, China Merchants Bank 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.
Products dominated business model
– Even though China Merchants Bank has some of the most successful models in the Money Center Banks industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. China Merchants Bank should strive to include more intangible value offerings along with its core products and services.
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 China Merchants Bank supply chain. Even after few cautionary changes, China Merchants Bank is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left China Merchants Bank vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners in Money Center Banks industry
– because of the regulatory requirements in Hong Kong, China Merchants 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 Money Center Banks industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, China Merchants Bank is slow explore the new channels of communication. These new channels of communication can help China Merchants Bank to provide better information regarding Money Center Banks products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of China Merchants Bank is dominated by functional specialists. It is not different from other players in the Money Center Banks industry, but China Merchants Bank needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help China Merchants Bank to focus more on services in the Money Center Banks industry rather than just following the product oriented approach.
High cash cycle compare to competitors
China Merchants Bank has a high cash cycle compare to other players in the Money Center 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.
Ability to respond to the competition
– As the decision making is very deliberative at China Merchants Bank, in the dynamic environment of Money Center Banks industry it has struggled to respond to the nimble upstart competition. China Merchants Bank has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ less understanding of China Merchants Bank strategy
– From the outside it seems that the employees of China Merchants Bank 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.
No frontier risks strategy
– From the 10K / annual statement of China Merchants Bank, it seems that company is thinking out the frontier risks that can impact Money Center 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.
Compensation and incentives
– The revenue per employee of China Merchants Bank is just above the Money Center 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.
China Merchants Bank Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of China Merchants Bank are -
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 China Merchants Bank 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, China Merchants Bank can use these opportunities to build new business models that can help the communities that China Merchants Bank operates in. Secondly it can use opportunities from government spending in Money Center Banks sector.
Building a culture of innovation
– managers at China Merchants Bank 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 Money Center Banks industry.
Creating value in data economy
– The success of analytics program of China Merchants Bank has opened avenues for new revenue streams for the organization in Money Center Banks industry. This can help China Merchants Bank to build a more holistic ecosystem for China Merchants Bank products in the Money Center Banks industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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. China Merchants Bank can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, China Merchants Bank 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 China Merchants Bank to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, China Merchants Bank is facing challenges because of the dominance of functional experts in the organization. China Merchants Bank can utilize new technology in the field of Money Center Banks industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for China Merchants 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 China Merchants Bank to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, China Merchants 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.
Loyalty marketing
– China Merchants 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Money Center Banks industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. China Merchants Bank 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. China Merchants Bank 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.
Better consumer reach
– The expansion of the 5G network will help China Merchants Bank to increase its market reach. China Merchants 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.
Developing new processes and practices
– China Merchants Bank can develop new processes and procedures in Money Center 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.
Threats China Merchants Bank External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of China Merchants Bank are -
Regulatory challenges
– China Merchants Bank 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 Money Center Banks industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, China Merchants 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 Money Center 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. China Merchants Bank 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 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Money Center Banks industry are lowering. It can presents China Merchants Bank with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Money Center Banks sector.
Easy access to finance
– Easy access to finance in Money Center Banks industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. China Merchants Bank can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. China Merchants Bank needs to understand the core reasons impacting the Money Center Banks industry. This will help it in building a better workplace.
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 China Merchants Bank.
Environmental challenges
– China Merchants Bank 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. China Merchants Bank can take advantage of this fund but it will also bring new competitors in the Money Center Banks industry.
Stagnating economy with rate increase
– China Merchants 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 Money Center Banks industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, China Merchants 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 China Merchants Bank prominent markets.
Increasing wage structure of China Merchants 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 China Merchants Bank.
Technology acceleration in Forth Industrial Revolution
– China Merchants Bank has witnessed rapid integration of technology during Covid-19 in the Money Center Banks industry. As one of the leading players in the industry, China Merchants Bank needs to keep up with the evolution of technology in the Money Center 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.
Weighted SWOT Analysis of China Merchants Bank Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at China Merchants 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 China Merchants 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 China Merchants 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 China Merchants 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 China Merchants Bank needs to make to build a sustainable competitive advantage.