SWOT Analysis of Bank of America - Case Study Example

SWOT ANALYSIS OF BANK OF AMERICA Identify the company’s mission, vision, and primary stakeholders. A bank’s mission ment andits publicized vision and strategies should give an insight of company’s values and how it intends to work for its different stakeholders. The Bank of America (BoA) defines its mission as meeting the financial needs of people, institutional investors and businesses, to create long term value for shareholders, to serve the customers and clients by the best employees and serve the community as large. In its mission statement, BoA has identified its responsibilities towards all its stakeholders which include the shareholders, the customers and the clients, its employees, the institutional investors, government, the community and the society in which it operates. BoA’s vision is to become the World’s finest financial service company. At the heart of BoA’s mission statement lays its core values and strategies which highlights how it intends to achieve its mission. BoA believes in doing the right thing for its stakeholders, work in teams while developing trust, focusing on achieving results and respecting each others differences and becoming leaders to build a better future. (Editors) 2. Identify the five (5) forces of competition and how it impacts the company. The first force of Porter’s five forces is threat of new entrants. Banking and financial services industry in general faces severe competition. Being a multinational bank operated worldwide, BoA faces tough competition. The potential of absolutely ‘new’ entrants in the banking sector is low as operating a bank is a highly regulated business which requires vast amount of investment. However already established banks worldwide can very easily enter regions and compete with each other which makes competition quite tough for BoA in many regions. (Schmidt. 2010; Henry. 2008) The second force to determine competition in the industry is competition form established rivals. In BoA’s case this seems to be high too as due to globalization in the financial institution the competition has become tougher within already established companies. All the US based and international institutions are trying to win the market share and strengthen their customer base. (Schmidt. 2010; Henry. 2008) The third Porter’s force is competition from substitutes. This seems to be reasonably low for the financial institutions as they offer services like wealth management, investment banking, insurance, loans, advisory etc that have no substitutes. (Schmidt. 2010; Henry. 2008) The power of customer and the power of supplier are the fourth and fifth forces of Porter’s model. The power of supplier seems to be weak in BoA’s case as there are no significant suppliers in the financial services sector. The power of customers is high as in most of the businesses due to increased globalization and competition the customers can now exercise greater influence on the pricing and need of new offers which can accelerate competition. However in an industry like financial services providers where the intervention of government and other regulators is high the companies are restricted to a certain level. (Schmidt. 2010; Henry. 2008) 3. Create a SWOT analysis for the company identifying the major strengths, weakness, opportunities, and threats. BoA’s presence world wide gives it a wider geographical coverage to avail opportunities. Its geographical spread enables it to serve various markets, business segments and needs of customers all around the world. BoA deals in various products which is an additional strength that serves millions of customers all around the world through its strong network. Product diversification- offering services like retail banking, investment banking, cards, capital and wealth management along with continuous product development and keeping pace with latest technology and promoting learning and innovation have been major strengths of the company. Additionally it operates a very strong risk management system which is a plus point for any financial institution as neutral risk taking policies are a sign of safer smoother execution of the business along with higher customer trust. BoA has continued to give strong financial returns to its customers showing the continuous growth and success of the business. Its increasing financial returns are also a sign of strong prosperous financial institution. Being a global institution with wide geographical spread can have certain weaknesses too. It is difficult to regulate and implement a sound control system in large organizations. The coordination can lack among various regions and the decentralized structure can have its own disadvantages which can ultimately affect the performance of the group. Human resource can be an issue in such a large group too. BoA employs 288,000 employees all around the world, managing such a large work force can be difficult. Grabbing opportunities and utilizing them in combination with its strengths has been highlighted in BoA’s performance reports. There are many opportunities found in the larger macro environment like wider geographical coverage gives more opportunities to increase business by capturing market share and focusing in the high demand market segment. This even gives the opportunity to BoA to expand its product range offered to its existing customers and launch new products in collaboration with advanced technology to capture greater market share. Futher, BoA operates in emerging nations where there is an increasing demand of financial services and greater opportunity to win new market. Operating all around the world brings many problems for BoA along with the advantages. The most critical issue in operating a multinational is of dealing with governments and regulators of the region in which it operates. This if not adhered well can lead to many problems for the company. Secondly, every economy and region requires different tactics to operate. It maybe possible that in a particular region BoA has to operate with a strategy that is different from its regular strategies all around the world. (Henry. 2008) 4. Based on the SWOT analysis, recommend how the company may capitalize on its strengths and opportunities, and minimize its weaknesses and threats. BoA has a large network spread all around the world. The company can use its strengths to widen its customer base and increase customer loyalty by providing customers more options to develop their relationship with them by offering variety of services. BoA can further work on the development of technology and incorporate them in their services to offer an experience which is different. With the use of technology BoA can indentify areas of cost reduction too and automation of processes which can be beneficial for the company. BoA can also establish itself in more emerging nations of Africa and Asia for e.g as they are growing markets with high potential of business while utilizing its large network and its operations as a multinational. A decentralized structure with autonomous units and a centralized head quarters for the region can be helpful in operating as a multinational as this can help in better coordination within the region and across the world along with better understanding of operations. 5. Discuss the various levels and types of strategies the firm may use to maximize its competitiveness and profitability BoA as part of its corporate strategy can focus in diversification of related products and services. It already offers a wide portfolio of services to its clients which shows it has already opted in the diversification of many products and services in the banking and financial services sector. Additionally, BoA on corporate level, also needs to focus how to enter a particular market either by a merger, acquisition, expansion or any other way, what areas and regions to operate in will also be a part of BoA’s strategy. As part of their business and operational strategy BoA will decide how to compete in a particular region. This can include adopting any three of the strategies of cost, differentiation or focus. By adopting cost strategy the company can compete by reducing its costs and ultimately its prices. The aim should be to reduce cost without any effect on the services offered. This could be done by introducing more automation in the processes and eliminating the need for physical offices by establishing a strong internet banking and financial services network. BoA can also choose to offer unique products and services to its customers for e.g new cards, insurance policies with greater benefits offered than any other institution etc. A differentiation strategy is always beneficial as it can get premium prices from the customers. Additionally, it can focus on a particular market and segment and offer services for that segment, for e.g. it can introduce to provide special kind of loans on discounted rates for certain universities in the education sector. 6. Determine the recent corporate governance issues that are currently affecting the companys decisions and report how the company is or should be handling the issues. BoA, like any public listed company ensures strict compliance to corporate governance regulations. It is absolutely essential for the investors to have transparent information about the operations and financials of the company, the management at BoA ensures it operates a sound control system in order to produce reliable financial and operational information which can be made available to the shareholders and investors. One way it has adhered to corporate governance is by showing commitment to highest ethical standards by taking many initiatives which benefits the society at large. The board of directors gives a careful oversight of the company’s operations and ensures the company is constantly improving and ensuring its compliance with all rules, laws and regulations. (Gup. 2007) References Henry, A. (2008). Understanding strategic management. Oxford: Oxford University Press. Schmidt, B. B. (2010). The dynamics of M&A strategy: Mastering the outbound M&A wave of Chinese banks. Frankfurt am Main: Lang. Vault. (2006). Vault/SEO Guide to Investment Bank Diversity Programs 2007. Vault Reports Inc. Gup, B. E. (2007). Corporate governance in banking: A global perspective. Cheltenham, UK: Edward Elgar. Bank of America. Annual Report 2010. Retrieved March 6, 2012. http://media.corporate-ir.net/media_files/irol/71/71595/reports/2010_AR.pdf Read More