China Merchants Bank SWOT Analysis / Matrix

Essays, Term Papers & Research Papers

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

The China Merchants Bank is one of the leading organizatations in its industry. China Merchants Bank maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis.  SWOT analysis a highly interactive process and requires effective coordination among various departments within the organization 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 called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the China Merchants Bank 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 main purpose of SWOT matrix is to identify the strategies that a company can utilize to exploit external opportunities, counter threats, and build on & protect China Merchants Bank strengths, and eradicate its weaknesses.

Step by Step Guide to China Merchants Bank SWOT Analysis

Strengths of China Merchants Bank – Internal Strategic Factors

As one of the leading companies in its industry, China Merchants Bank has numerous strengths that enable 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 China Merchants Bank are –

• Superb Performance in New Markets – China Merchants Bank has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
• Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
• Automation of activities brought consistency of quality to China Merchants Bank products and has enabled the company to scale up and scale down based on the demand conditions in the market.
• Highly successful at Go To Market strategies for its products.
• Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
• Strong Brand Portfolio – Over the years China Merchants Bank has invested in building a strong brand portfolio. The SWOT analysis of China Merchants Bank just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
• Successful track record of developing new products – product innovation.
• Strong distribution network – Over the years China Merchants Bank has built a reliable distribution network that can reach majority of its potential market.

Weakness of China Merchants Bank – Internal Strategic Factors

Weakness are the areas where China Merchants Bank can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

• Limited success outside core business – Even though China Merchants Bank is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
• Not highly successful at integrating firms with different work culture. As mentioned earlier even though China Merchants Bank is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
• The profitability ratio and Net Contribution % of China Merchants Bank are below the industry average.
• 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. China Merchants Bank has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
• High attrition rate in work force – compare to other organizations in the industry China Merchants Bank has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
• 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 China Merchants Bank
• Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that China Merchants Bank is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.

Opportunities for China Merchants Bank – External Strategic Factors

• New trends in the consumer behavior can open up new market for the China Merchants Bank . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
• The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as China Merchants Bank to increase its profitability.
• Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of China Merchants Bank.
• Government green drive also opens an opportunity for procurement of China Merchants Bank products by the state as well as federal government contractors.
• 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 China Merchants Bank. 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 China Merchants Bank to drive home its advantage in new technology and gain market share in the new product category.
• Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided China Merchants Bank an opportunity to enter a new emerging market.
• 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.

Threats China Merchants Bank Facing - External Strategic Factors

• Imitation of the counterfeit and low quality product is also a threat to China Merchants Bank’s product especially in the emerging markets and low income markets.
• No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
• Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for China Merchants Bank   in those markets.
• Liability laws in different countries are different and China Merchants Bank may be exposed to various liability claims given change in policies 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.
• Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
• Rising raw material can pose a threat to the China Merchants Bank profitability.
• The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.

Limitations of SWOT Analysis for China Merchants Bank

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 China Merchants Bank
• 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 China Merchants Bank

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 China Merchants Bank 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 China Merchants Bank

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)