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Bank of America Corp. SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by Bank of America Corp. managers to do a situational analysis of the organization . It is an important technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Bank of America Corp. is facing in its current business environment.
The Bank of America Corp. is one of the leading organizatations in its industry. Bank of America Corp. maintains its prominent 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 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 enables the managers of the Bank of America Corp. 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 central purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Bank of America Corp. strengths, and eradicate its weaknesses.
Step by Step Guide to Bank of America Corp. SWOT Analysis
Strengths of Bank of America Corp. – Internal Strategic Factors
As one of the leading companies in its industry, Bank of America Corp. 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 Bank of America Corp. are –
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Superb Performance in New Markets – Bank of America Corp. 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 Corp. has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Highly skilled workforce through successful training and learning programs. Bank of America Corp. 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 dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Good Returns on Capital Expenditure – Bank of America Corp. is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Strong distribution network – Over the years Bank of America Corp. has built a reliable distribution network that can reach majority of its potential market.
- Highly successful at Go To Market strategies for its products.
Weakness of Bank of America Corp. – Internal Strategic Factors
Weakness are the areas where Bank of America Corp. 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.
- 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 Corp.
- 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 Bank of America Corp. is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- The profitability ratio and Net Contribution % of Bank of America Corp. are below the industry average.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Bank of America Corp. 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.
- 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.
- 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.
Opportunities for Bank of America Corp. – 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 Corp. to capture new customers and increase its market share.
- Government green drive also opens an opportunity for procurement of Bank of America Corp. products by the state as well as federal government contractors.
- 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 Corp. in other product categories.
- The market development will lead to dilution of competitor’s advantage and enable Bank of America Corp. to increase its competitiveness compare to the other competitors.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Bank of America Corp..
- 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.
- The new technology provides an opportunity to Bank of America Corp. to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Bank of America Corp.’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 Corp. Facing - External Strategic Factors
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- 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.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Bank of America Corp. in those markets.
- Liability laws in different countries are different and Bank of America Corp. may be exposed to various liability claims given change in policies in those markets.
- Imitation of the counterfeit and low quality product is also a threat to Bank of America Corp.’s product especially in the emerging markets and low income markets.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- 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.
Limitations of SWOT Analysis for Bank of America Corp.
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 Corp.
- 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 Corp.
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 Corp. 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 Corp.
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
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)
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