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Bank of America Merrill Lynch SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Bank of America Merrill Lynch managers to do a situational analysis of the firm . It is a useful technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Bank of America Merrill Lynch is facing in its current business environment.
The Bank of America Merrill Lynch is one of the leading firms in its industry. Bank of America Merrill Lynch maintains its dominant position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly 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 enables 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 enables the managers of the Bank of America Merrill Lynch 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 an organization can utilize to exploit external opportunities, counter threats, and build on & protect Bank of America Merrill Lynch strengths, and eradicate its weaknesses.
Step by Step Guide to Bank of America Merrill Lynch SWOT Analysis
Strengths of Bank of America Merrill Lynch – Internal Strategic Factors
As one of the leading companies in its industry, Bank of America Merrill Lynch 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 Merrill Lynch are –
- Good Returns on Capital Expenditure – Bank of America Merrill Lynch is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Superb Performance in New Markets – Bank of America Merrill Lynch 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.
- Strong Free Cash Flow – Bank of America Merrill Lynch has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Strong distribution network – Over the years Bank of America Merrill Lynch has built a reliable distribution network that can reach majority of its potential market.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Highly skilled workforce through successful training and learning programs. Bank of America Merrill Lynch 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 Brand Portfolio – Over the years Bank of America Merrill Lynch has invested in building a strong brand portfolio. The SWOT analysis of Bank of America Merrill Lynch just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Highly successful at Go To Market strategies for its products.
Weakness of Bank of America Merrill Lynch – Internal Strategic Factors
Weakness are the areas where Bank of America Merrill Lynch 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.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Bank of America Merrill Lynch is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
- 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 Merrill Lynch
- Limited success outside core business – Even though Bank of America Merrill Lynch is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- High attrition rate in work force – compare to other organizations in the industry Bank of America Merrill Lynch has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- The profitability ratio and Net Contribution % of Bank of America Merrill Lynch 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 Merrill Lynch 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 Merrill Lynch – External Strategic Factors
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Bank of America Merrill Lynch to capture new customers and increase its market share.
- 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 Merrill Lynch. 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 trends in the consumer behavior can open up new market for the Bank of America Merrill Lynch . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- 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.
- 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 Merrill Lynch in other product categories.
- The market development will lead to dilution of competitor’s advantage and enable Bank of America Merrill Lynch to increase its competitiveness compare to the other competitors.
- 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 Merrill Lynch to drive home its advantage in new technology and gain market share in the new product category.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Bank of America Merrill Lynch’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 Merrill Lynch Facing - External Strategic Factors
- 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.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Rising raw material can pose a threat to the Bank of America Merrill Lynch profitability.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- 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 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 Merrill Lynch
Limitations of SWOT Analysis for Bank of America Merrill Lynch
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 Merrill Lynch
- 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 Merrill Lynch
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 Merrill Lynch 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 Merrill Lynch
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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SWOT Worksheet & Template
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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)
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