Business analysis and strategy ppt
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PrinciplesofManagementTouchstone4Sample.pptxTouchstone SWOT Analysis Presentation
SWOT Analysis of U.S. Bank
T. Student
Principles of Management
Sophia University
July 7, 2021
Executive Summary
Key Recommendations
- Increase competitive position by purchasing Union Bank from MUFG and look for additional acquisitions
- Invest aggressively in cyber security tools and strategies
- Pursue an aggressive budget and marketing effort with regard to online and social media promotions and advertising
The purpose of this presentation and analysis is to examine the U.S. Bank’s current competitive situation and recommend strategies it can pursue to improve its competitiveness and performance.
Numerous issues with regard to U.S. Bank’s strengths, weaknesses, opportunities and threats (SWOT) will be reviewed.
A macroenvironmental analysis using the PESTEL framework will be outlined and a micro-Industry analysis and observations using Porter’s five force model will also be provided.
Along with recommendations dealing with organizational design and ethical consideration, the presentation will be wrapped up with the following key, strategy recommendations:
Increase competitive position by purchasing Union Bank from MUFG and look for additional acquisitions
By purchasing a similar regional bank such as MUFG, US Bank can increase their footprint on the West Coast. It will give the bank “the scale to compete with the largest consumer banks in California.” If the deal is consummated, it will “give U.S. Bank about $664 billion in assets and solidify its status as the fifth-largest retail bank in the country” (McCaffrey, O., Sebastian, D., 2021). Continuing this expansion strategy over the next several years is recommended to increase the banks’ competitive position.
Invest aggressively in cyber security tools and strategies
This will better protect the bank and its customers and will take advantage of society’s rapid transition to virtual banking. It will also help resolve the consent order related to “unsafe or unsound practices related to technology and operational risk management” (McCaffrey, O., Sebastian, D., 2021)
Pursue an aggressive budget and marketing effort with regard to online and social media promotions and advertising
As the economy emerges from its recent stagnation from the pandemic of 2020-2021, growth in all banking lines of business should pick up and present unique opportunities for customer acquisition and increased transactions. Increasing the bank’s social media promotion budget and presence will also play a significant role in its overall growth, acquisition and expansion strategy.
Organizational Background
- History of the Organization
- Major Products and Services Offered
- Markets Being Served
History of the Organization
U.S. Bank was founded in 1863 and remains “committed to serving its millions of retail, business, wealth management, payment, commercial, corporate, and investment customers across the country and around the world as a trusted and responsible financial partner (U.S. Bankcorp Annual Report, 2020, p. 20).
According to the most recent 10-K report, “U.S. Bancorp is a multi-state financial services holding company headquartered in Minneapolis.” It has significant deposits of roughly $443 billion. “It is one of the largest providers of corporate and purchasing card services and corporate trust services in the United States” (10-K, 2020, pp. 2-3).
Major Products and Services Offered
The company currently offers the following products and services: “Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support” (10-K, 2020, p. 3).
Markets Being Served
U.S. Bank is a Minneapolis-based entity with branches in roughly 25 states. It occupies a segment in the U.S. banking market, operating in the West and Midwestern United States.
Internal Strengths
- Flexibility and Innovation
- Solid financial resources and reserves
- Broad Product Range
- Strong corporate social responsibility and ethics
Flexibility and Innovation
During the pandemic of 2020-2021 the company was especially flexible with both its employees and customers. “More than 77% of the bank’s transactions and more than half of loan applications” are now online (U.S. Bankcorp Annual Report, 2020, p. 8).
Solid financial resources and reserves
The bank has over $554 billion in assets and is a major player in the banking market of the Western and Midwestern United States (U.S. Bankcorp Annual Report, 2020, p. 20).
U.S. bank did well in the annual stress test required by the federal government (U.S. Bankcorp Annual Report, 2020, pp. 7 & 57).
Broad product range
The company has invested in technology solutions to make banking easier and safer for customers, including integration of the Akoya Data Access Network (U.S. Bankcorp Annual Report, 2020, p. 15).
Strong corporate social responsibility and ethics
The bank has worked to reduce its “operational greenhouse gas emissions through investments in advancing solar energy, partnerships with local utilities to purchase renewable energy, and improving the energy efficiency of our buildings” (U.S. Bankcorp Annual Report, 2020, p. 12)
The bank has been rated as one of world’s most ethical companies as evidenced by their spot on the Ethisphere Institute’s World’s Most Ethical Companies list (U.S. Bankcorp Annual Report, 2020, p. 20). The chief diversity officer moved onto the managing committee, joining the team of senior leaders (U.S. Bankcorp Annual Report, 2020, p. 10).
Internal Weaknesses
- Regional status and inability to fully compete with larger banks
- Decreasing revenues from several lines of business
- Security and risk management vulnerabilities
- Limited online advertising and social media success
Regional status and inability to fully compete with larger banks
As a regional bank that occupies a segment of the U.S. banking market, it primarily operates in the West and Midwestern United States.
Decreasing revenues from several lines of business
The 2020 annual report shows declining revenues from several lines of business, including Wealth Management and Investment Services, Corporate and Commercial Banking, and Payment Services (U.S. Bankcorp Annual Report, 2020, pp. 60-61).
Security and risk management vulnerabilities
A planned acquisition includes “a consent order with the Office of the Comptroller of the Currency to address unsafe and unsound practices related to technology and operational risk management” (McCaffrey, O., Sebastian, D., 2021).
Limited online advertising and social media success
The bank’s online budget and presence appears to be muted and social media marketing is limited compared to key competitors.
External Opportunities
- Expand market footprint or enter new markets
- Vertically integrate (upward or downward)
- Serve new customer segments and attract new customers
- Build more engaging social media content and connection with brand
Expand market footprint or enter new markets
Bank mergers are currently at a high point since the last financial crisis and pressure is building for banks to scale up their operations to better compete during the expected period of coming economic growth (McCaffrey, 2021).
Vertically integrate (upward or downward)
Tempting finance-related opportunities to acquire or joint-venture with service providers, mortgage companies or similar entities may unfold. Scanning the market for such opportunities should be a priority.
Serve new customer segments and attract new customers
The bank can leverage its growth and merger with Union Bank to increase business in its Wealth Management and Investment Services, Corporate and Commercial Banking, and Payment Services. With increased size and market clout, it should be able to take more business from competitors (McCaffrey, O., Sebastian, D., 2021).
Build more engaging social media content and connection with brand
Increasing the bank’s social media promotion budget and presence will play a significant role in its overall growth, acquisition and expansion strategy.
External Threats
- Increasing Cybersecurity risks
- Changing buyer needs and tastes
- Uncertain market conditions
- Rising costs
Increasing Cybersecurity risks
As noted in weaknesses above, a planned acquisition includes “a consent order with the Office of the Comptroller of the Currency to address unsafe and unsound practices related to technology and operational risk management” (McCaffrey, O., Sebastian, D., 2021). This is also a treat that should be addressed through an increased IT budget, staffing and technology investments.
Changing buyer needs and tastes
As noted under Strengths, “about 56 percent of our loan sales and roughly 77 percent of our transactions now take place in a digital way” (U.S. Bankcorp Annual Report, 2020, p. 3). Failure of the Bank to continue to aggressively scale its digital services and profile could result in lost business.
Uncertain market conditions
Although the recession induced by the pandemic of 2020-2021 appears to be subsiding and market growth in the finance sector appears to be headed for significant gains, there remains a degree of economic uncertainty. How the bank deals with this uncertainty will be important.
Rising costs
Inflation is picking up and overheads costs, especially for labor, are increasing. Staffing has become problematic in some areas and more flexible work arrangements necessary. How the bank deals with these headwinds will be a key success factor going forward.
Macroenvironment Analysis: PESTEL
- Political
- Economic
- Social
- Technological
- Environmental
- Legal
Political:
The federal government is coming out with possible new regulations requiring banks to track and report more individual taxpayer information. This will increase the bank’s reporting and compliance costs.
(2) There is a possible emerging trend of increased federal government control over the banking sector in general which must be watched closely.
Economic:
The economy is predicted to grow significantly in the near term, creating significant opportunities for the banking sector.
(2) A predicted increase in both inflation and interest rates is going to have an impact on the banking industry. How the bank navigates this will have an impact on profits and overall financial performance.
Social:
The pandemic accelerated changes in the way most of the population conducts banking transactions. Banks must adjust to this or be left behind. For example, over 77% of the bank’s transactions and over half of loan applications are now online (U.S. Bankcorp Annual Report, 2020, p. 8).
(2) Society’s move toward greater diversity, equity and inclusion is a major, long-term trend that the bank cannot ignore. The bank has responded well to date and is included as one of the “Top 50 Companies for Diversity” (U.S. Bankcorp Annual Report, 2020, page 10). The Bank must continue to invest in this area.
Technological:
Cybersecurity is increasing in significance and scale and investing in it is not optional. The ramifications of a major hack or security breach are considerable.
(2) Mobile banking is increasingly becoming the norm and the bank must continue to focus on this as a technology priority. For example, the bank’s mobile app, “was ranked No. 1 in customer service features by Business Insider Intelligence” and “is more than just a transaction tool. By year-end, the bank provided more than 1.6 billion financial insights to U.S. Bank Mobile App users” (U.S. Bankcorp Annual Report, 2020, page 8).
Environmental:
Corporate Social Responsibility is increasingly being expected by customers, vendors, stock holders and other stakeholders in the organization.
(2) Banks and all corporations are increasingly being expected to implement sustainability practices and U.S. Bank is no exception. Recognizing this, the bank has “worked diligently to reduce our operational greenhouse gas emissions through investments in advancing solar energy, partnerships with local utilities to purchase renewable energy, and improving the energy efficiency of our buildings” (U.S. Bankcorp Annual Report, 2020, page 12).
Legal:
Health and safety issues are significant legal issues which the bank must continue to adjust to as new laws and state or federal government mandates are issued.
(2) Federal government regulatory requirements must remain a focus of attention for the bank as new laws and regulatory trends emerge. “Banking and other financial services statutes, regulations and policies are continually under review by the United States Congress, state legislatures and federal and state regulatory agencies” (10-K, 2020, page 6).
Micro Industry Analysis: Porter’s Five Forces
- Bargaining power of buyers
- Bargaining power of suppliers
- Threat of new entrants
- Threat of substitutes
- Rivalry among existing competitors
Bargaining power of buyers
I would rate this force as strong. Banks are constantly competing for the business of their customers and potential customers. This is especially true in the retail banking side of the business.
(2) Both the Wealth Management and Investment Services and the Corporate and Commercial Banking are very lucrative and the focus of intense competition.
Bargaining power of suppliers
I would rate this force as being moderate. As technology is playing an increasingly significant role in bank operations, compliance and security, the internet, computing and cloud providers that banks contract with may have increasing leverage, especially in terms of pricing.
(2) The Federal Reserve (Fed) is a supplier of sorts and has a significant impact on banks. The Fed’s policies on interest rates, reserves and other strategies can impact profitability.
Threat of new entrants
I would rate this force as weak. It is somewhat unlikely that new banks with the size of U.S. Bank will be created over the next few years.
(2) Some high-profile Technology companies have the resources to create a bank of this size or larger if they were to move into the banking sector.
Threat of substitutes
I would rate this force as moderate or weak at this time. The threat of crypto currencies and crypto exchanges supplanting some services provided by banks is a remote possibility.
(2) Credit Unions and other entities that offer banking-type services remain a muted competitive threat.
Rivalry among existing competitors
I would rate this force as being very strong. There are numerous rivals, including local and regional competitors, and they are all competing for a larger piece of the market. The strength of this force is evidenced by U.S. Bank’s planned purchase of Union Bank so it can increase its footprint on the West Coast. It will give the bank “the scale to compete with the largest consumer banks in California” (McCaffrey, O., Sebastian, D., 2021).
(2) Merger activity has been strong for several years and “the overall value is higher than it was two years ago.” It is worth noting that “smaller banks have also struggled to compete with the high-end digital offerings and technology of the megabanks” (McCaffrey, 2021).
Generic Strategy Recommendations
- Complete the purchase of Union Bank and look for additional acquisitions
- Invest aggressively in cyber security tools and strategies
- Pursue and aggressive budget and marketing effort with regard to online and social media promotions and advertising
Complete the purchase of Union Bank and look for additional acquisitions
By purchasing a similar regional bank such as MUFG, US Bank can increase their footprint on the West Coast. It will give the bank “the scale to compete with the largest consumer banks in California.” If the deal is consummated, it will “give U.S. Bank about $664 billion in assets and solidify its status as the fifth-largest retail bank in the country” (McCaffrey, O., Sebastian, D., 2021). Continuing this expansion strategy over the next several years is recommended to increase the banks’ competitive position.
Invest aggressively in cyber security tools and strategies
This will better protect the bank and its customers and will take advantage of society’s rapid transition to virtual banking. It will also help resolve the consent order related to “unsafe or unsound practices related to technology and operational risk management” (McCaffrey, O., Sebastian, D., 2021)
Pursue an aggressive budget and marketing effort with regard to online and social media promotions and advertising
As the economy emerges from its recent stagnation from the pandemic of 2020-2021, growth in all banking lines of business should pick up and present unique opportunities for customer acquisition and increased transactions. Increasing the bank’s social media promotion budget and presence will also play a significant role in its overall growth, acquisition and expansion strategy.
Organizational Design Recommendations
- Fit between recommended strategy and structure
- Consolidation of Union Bank operations and sites
Fit between recommended strategy and structure
The bank appears to be pursuing a focused low-cost business strategy. The bank is intent on competing in the area of price but is also focused on a limited segment of the overall U.S. banking market. The bank is, however, scaling up to compete with the largest consumer banks in California” (McCaffrey, O., Sebastian, D., 2021)
Consolidation of Union Bank operations and sites
The consolidation and merger with Union Bank operations should not substantially alter the current organizational structure and design. U.S. Bank will obviously want to eliminate Union Bank sites close to their own banking sites. They should also seek to eliminate functional and organizational redundancies to cut costs and create other efficiencies as Union Bank operations are absorbed by U.S. Bank. The overall organizational structure and design, however, should remain the same.
Ethical Considerations
- Renewed focus on equity and inclusion
- The bank’s chief diversity officer
- Sustainability practices
Renewed focus on equity and inclusion
A renewed focus on equity and inclusion will be an important element in the recommended acquisition strategy and will allow the bank to more quickly and easily integrate newly acquired entities. It will also be a key promotion element in an aggressive social media marketing effort to attract diverse customers, institutional clients and investors.
The bank’s annual report indicates that the last twelve months has “brought about a recommitment to diversity, equity and inclusion, as the call for a renewed focus on social justice hit home in Minneapolis, our headquarters market.” The bank is on several diversity lists, including “Top 50 Companies for Diversity” (U.S. Bankcorp Annual Report, 2020, p. 10).
The bank’s chief diversity officer
This person has joined other senior bank leaders reporting to the CEO (U.S. Bankcorp Annual Report, 2020, p. 10).
Having the diversity officer involved at this level will enhance the implementation of the recommended strategies. He will be in a position to enhance the effectiveness of the strategies by helping to include the bank’s ethical practices and initiatives.
Sustainability practices
Sustainability will also be important to the recommended acquisition strategy as it integrates newly acquired entities. In addition, it will be an important promotion element in an aggressive social media marketing effort to attract diverse customers, institutional clients and investors. Many of these potential stakeholders will be looking at the bank’s sustainability practices when deciding to do business with U.S. Bank.
For ten years the bank has “worked diligently to reduce its operational greenhouse gas emissions through investments in advancing solar energy, partnerships with local utilities to purchase renewable energy, and improving the energy efficiency of its buildings” (U.S. Bankcorp Annual Report, 2020).
References
Kotler, P., & Keller, K. L. (2016). Marketing management (15th ed.). Upper
Saddle River, NJ: Pearson Education Inc.
McCaffrey, O. (2021, September 28). Bank Mergers Are on Track to Hit Highest Level
Since the Financial Crisis. The Wall Street Journal.
McCaffrey, O., Sebastian, D. (2021, September 21). U.S. Bancorp to Buy MUFG Union
Bank for About $8 Billion. The Wall Street Journal.
Open Source (2019), Principles of Management, OpenStax, Houston, TX, Rice
University.
U.S. Bankcorp Annual Report. (2020). United States Security and Exchange
Commission. 2020 USB Annual Report bannerless 02192021_ADA (usbank.com)
U.S. Bankcorp Form 10-K. (2020). United States Security and Exchange Commission.
https://ir.usbank.com/node/44711/html
Questions
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