Bank of America SWOT Analysis / Matrix

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SWOT analysis is a strategic planning tool that can be used by Bank of America managers to do a situational analysis of the company . It is a useful technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Bank of America is facing in its current business environment.

The Bank of America is one of the leading firms in its industry. Bank of America maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Bank of America to develop four types of strategies:

SO (strengths-opportunities) Strategies
WO (weaknesses-opportunities) Strategies
ST (strengths-threats) Strategies
WT (weaknesses-threats) Strategies

SWOT Matrix Strategies Objective

The core purpose of SWOT matrix is to identify the strategies that a company can utilize to exploit external opportunities, counter threats, and build on & protect Bank of America strengths, and eradicate its weaknesses.

Step by Step Guide to Bank of America SWOT Analysis

Strengths of Bank of America – Internal Strategic Factors

As one of the leading companies in its industry, Bank of America has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Bank of America are –

Strong distribution network – Over the years Bank of America has built a reliable distribution network that can reach majority of its potential market.
Automation of activities brought consistency of quality to Bank of America products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Good Returns on Capital Expenditure – Bank of America is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Highly skilled workforce through successful training and learning programs. Bank of America is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
Strong Free Cash Flow – Bank of America has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Highly successful at Go To Market strategies for its products.
Successful track record of developing new products – product innovation.

Weakness of Bank of America – Internal Strategic Factors

Weakness are the areas where Bank of America can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Bank of America has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Bank of America
There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
Limited success outside core business – Even though Bank of America is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
The profitability ratio and Net Contribution % of Bank of America are below the industry average.
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Bank of America needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.

Opportunities for Bank of America – External Strategic Factors

The market development will lead to dilution of competitor’s advantage and enable Bank of America to increase its competitiveness compare to the other competitors.
Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Bank of America in other product categories.
New trends in the consumer behavior can open up new market for the Bank of America . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Bank of America an opportunity to enter a new emerging market.
New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Bank of America. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Bank of America to drive home its advantage in new technology and gain market share in the new product category.
Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Bank of America’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.

Threats Bank of America Facing - External Strategic Factors

New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Bank of America in those markets.
The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
Imitation of the counterfeit and low quality product is also a threat to Bank of America’s product especially in the emerging markets and low income markets.
Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Bank of America
As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
Rising raw material can pose a threat to the Bank of America profitability.

Limitations of SWOT Analysis for Bank of America

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Bank of America
SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of Bank of America

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Bank of America managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Bank of America

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

References / Citations & Bibliography

M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)