Business Management, Company Analysis

Bank of America SWOT Analysis (Internal & External Strategic Factors)

Updated on Updated on by Lesley White
Bank of America SWOT Analysis, Strengths, Weaknesses, Opportunities, Threats, competitive advantages, financial services business management case
Live satellite feed of military reenlistment at the Bank of America Stadium in Charlotte, North Carolina in October 2011. A SWOT analysis of Bank of America depicts a business situation involving growth opportunities, although the company must enhance its strengths, reduce its weaknesses, and protect its operations from threats, especially cyber attacks. (Public Domain Image)

Bank of America’s performance in maximizing the benefits of its competitive advantages depend on external and internal factors, such as the ones determined in this SWOT analysis of the business. The SWOT analysis framework considers the strengths, weaknesses, opportunities, and threats that affect the banking company’s business performance. Bank of America’s internal strategic factors (strengths and weaknesses) determine the company’s capabilities or inability to perform and achieve its goals and strategic objectives. On the other hand, the company’s external strategic factors (opportunities and threats) influence the business based on the condition of the financial services industry. The SWOT analysis factors influence the achievement of Bank of America’s corporate mission statement and corporate vision statement, which aim for leadership and operational effectiveness that benefits clients. The company currently has a competitive position as one of the biggest banking institutions in the world. This industry position is related to how Bank of America’s corporate decisions are shaped to effectively address the internal and external factors discussed in this SWOT analysis.

This SWOT analysis of Bank of America Corporation reveals the internal factors and external factors that affect the company’s operational effectiveness and strategic success in addressing competition involving various banking and financial services businesses. The competitive power of Citigroup, Wells Fargo, and JPMorgan Chase are significant in the external business environment. In the industry environment reflected in this SWOT analysis, Bank of America strives to become a global industry leader, with emphasis on effectiveness in providing value to customers. To provide valuable financial services, the company maximizes its strengths and minimizes its weaknesses (internal strategic factors) through innovative strategic solutions within its business organization. However, Bank of America must also develop solutions to the external strategic factors (opportunities and threats) included in this SWOT analysis.

Bank of America’s Strengths and Weaknesses (Internal Analysis)

Strengths (Core Competencies/Competitive Advantages):
1. High value of Bank of America brand
2. Considerable international presence
3. Large organizational size and scale, including multinational business operations
4. Wide scope of financial services
Weaknesses:
1. Dependence on current IT trends, equipment manufacturers, and software developers
2. Vulnerabilities based on dependence on the U.S. financial services market
3. Low degree of business diversification
  • This SWOT Analysis table is best viewed on an HTML5-compatible browser.

Strengths. Bank of America’s brand has high value, based on the company’s current standing as one of the most popular banks in the world. In this SWOT analysis, such business strength relates to how the company builds its brand despite the hindering effects of competition in the financial services market. For example, Bank of America uses its corporate culture as a factor in the quality of services that make the company’s brand image popular. On the other hand, a large organizational size and scale are one of the strengths based on the company’s long history of penetrating the financial services market. This strength links the strategic factors in this SWOT analysis to Bank of America’s generic competitive strategy and intensive strategies for growth, which aim at gaining more customers, such as depositors in current markets. In the SWOT framework, this business strength leads to economies of scale that make the enterprise competitive, especially against smaller banks. In addition, Bank of America’s strengths include its wide scope of banking and financial services, such as loans, asset management, and investment banking. In the SWOT analysis framework, this internal factor is a strength that attracts clients on the basis of product variety and related conveniences of service aggregation from a single financial service provider.

Weaknesses. Considering technological trends, Bank of America depends on information technologies. In the SWOT analysis framework, this internal factor is an intrinsic weakness linked to financial services market trends. Dependence on IT is a weakness that limits Bank of America’s performance according to the limitations of the company’s IT resources and capabilities. Nonetheless, even with insignificant control on the technologies available in the market, the company controls the software development processes used for its online/mobile banking services. Thus, this technological weakness included in the SWOT analysis is not unsolvable, but requires that Bank of America maintain innovative strategies to maximize the value and contribution of its IT assets to competitive advantages. On the other hand, the banking company suffers from the weakness of its revenues being generated mainly in the United States. In the SWOT analysis framework, this internal factor is a weakness because it makes Bank of America especially exposed to risks and strategic issues in the American financial services market. In relation, the company suffers from a low degree of diversification, as the business focuses mainly on financial service operations. This SWOT analysis of Bank of America Corporation considers this internal strategic factor a weakness because it equates to high exposure to risks in the financial services market, particularly in the United States.

Bank of America’s Opportunities and Threats (External Analysis)

Opportunities:
1. Growth through market penetration in international banking/financial services operations
2. Growth through product development
3. Business growth and risk reduction through diversification
Threats:
1. Competition with firms of various types and sizes
2. Cyber attacks and IT security breaches related to Internet/mobile banking
3. Adverse effects of cryptocurrencies
  • This SWOT Analysis table is best viewed on an HTML5-compatible browser.

Opportunities. Bank of America grows through market penetration, although this intensive growth strategy is applied mostly in the company’s operations in the United States. Thus, this SWOT analysis identifies market penetration as an opportunity to grow the banking business beyond the U.S. market. For example, Bank of America can intensify its market penetration efforts in urban centers of developing countries. Through this external strategic factor, the company can grow based on the economic growth and corresponding financial services market expansion of high-growth countries. In addition, this SWOT analysis of Bank of America Corporation identifies growth through product development as an opportunity linked to the company’s product portfolio. The company can enhance or add new products (financial services) to increase its revenues. Furthermore, the opportunity to grow through diversification is included in this SWOT analysis, pertaining to adding new businesses that may be related to Bank of America’s current business. This external factor also comes with risk reduction because risk concentration decreases as the company establishes new businesses in addition to its current operations in the banking and financial services industry. In exploiting the opportunities identified in this SWOT analysis, Bank of America’s corporate structure must change according to new business operations and corresponding strategic management, resources, and regulatory requirements.

Threats. Competition is a major threat against Bank of America. In the SWOT analysis framework, this external factor threatens to reduce the market share of the company and its subsidiaries, such as Merrill (formerly Merrill Lynch), BofA Securities (formerly Bank of America Merrill Lynch, and Bank of America Private Bank (formerly U.S. Trust). The aggressiveness of large competitors, such as Citigroup and Wells Fargo present a major strategic challenge. On the other hand, the use of information technologies for online transactions make Bank of America exposed to cyber attacks. This SWOT analysis considers such technology-based external factor a major threat, based on the current trend of increasing online banking transactions. Considering business dependence on IT resources and capabilities, cyber threats affect the VRIO/VRIN resources and capabilities identifiable through a value chain analysis of Bank of America Corporation. Moreover, Cryptocurrencies threaten commercial banks and investment banks. In this SWOT analysis, this external strategic factor is a risk factor in financial systems, which are rigid because of current regulations and governmental control on banking institutions like Bank of America.

Key Points on SWOT Analysis of Bank of America Corporation

This SWOT analysis lists strategic challenges that arise from the internal factors and external factors relevant to Bank of America Corporation. The identified strengths are related to branding and economies of scale, which are linked to the banking company’s generic strategy for competitive advantage. The utilization of these business strengths require strategic solutions to address competitive forces, which can be determined through a Porter’s Five Forces analysis of Bank of America Corporation. The SWOT analysis also pinpoints a number of weaknesses that render possible vulnerability to issues and risks involved in financial services. For example, Bank of America’s information technologies, dependence on the U.S. market, and low diversification are strategic challenges or barriers to success. These internal factors require effective strategic plans and solutions that competitively position the company as a leading provider of financial services.

The opportunities identified in this SWOT analysis of Bank of America Corporation involve business development and expansion. Diversification, product development, and international market penetration are opportunities to improve the company’s performance and business strengths against competitors like Wells Fargo and Citigroup. However, in exploiting these opportunities, Bank of America needs to boost its capabilities to protect its business against competition and technology-based threats. For example, the company needs to continually improve its IT security capabilities to address threats of cyber attacks in online banking. Based on these external factors, this SWOT analysis depicts an industry environment where Bank of America can grow, but in a cautious manner that ensures security and business core competencies.

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