Corporate Strategy of Black Rock Inc - Essay Example

? Black Rock Inc Corporate Strategy Corporate strategy Black Rock Inc. Black Rock Incorporated is a New York investment based company. The investment services are offered to retail clients, long term finance companies, financial institutions and other organizations that might want investment and or risk assessment and management services. Black Rock Inc. is rated as the largest investment organization with international status. The organization was founded in 1988, and it has grown in clients, size and employees ever since. The firm has helped many investors build diverse portfolios that have showed strong and consistent returns. The company has employed more than ten thousand professionals in 27 countries globally. The company enjoys considered client base that include insurance companies, corporations, sovereign wealth funds, banks, pension companies and endowment foundations. The company offered integrated services to its clients including enterprise management, strategic advisory services and risk management services. The company has more than US $ 3.67 trillion in fixed income securities, real estates, equity funds and alternative investments (Grind 40). Business model development Black Rock Inc has implemented an excellent business model. The company recognizes the changing business environment requires innovative products. The company has a global scale approach to its operations and enables clients have a local reach to its services. The company is also client-focused since it provides integrated services to its client portfolio. The business model is aimed at facilitating efficiency, enhancing teamwork across the globe and offering tailor-made products that meet the client needs. Organisational culture One of the core assets of the organisation is an organisational culture that is aimed at meeting client needs. The company has built a culture of innovative financial services, risk management initiatives and high customer service. Marketing and sales The company has a diversified market and client portfolio. The company is committed to meeting the investment needs of both taxable and tax-exempt investors globally. The company has been able to expand the market share due to its creativity and flexibility in serving the clients. The company adds value to client solutions by the constant evolution of new product offerings. Through offshore funds, unit trusts and managed accounts, the company has been able to meet the unique needs of each client in the world. Human resources The company has invested in highly qualified risk management analysts and other key staff. For instance, the company has recently recruited experienced staff from some of the major competitors. The risk and quantitative analysis teams utilize a global and integrated approach in analysis of the market risks while also maintaining a regional orientation. The human resources are able to use the best practices in investments and risk management activities. Distribution and logistics The company has office locations in about 27 countries. The company has also enhanced the global reach through offering investment opportunities through the internet. The company has established partnerships with other financial intermediaries in order to increase the client base. Porter’s Five Forces Supplier power Maintaining of a good relationship with current clients is very important for Black Rock Inc. Current clients usually refer new clients due to their satisfaction with services that they receive from an organization. The company recognizes this and has invested on building long term relationships with their clients. One of the critical assets of the company is a good reputation that is maintained by the investor relations segment of the business (Schermerhorn 2010). Black rock Inc has been able to gain a high ranking among potential employees through its performance in the industry. Therefore, the company gets a highly qualified pool of applicants to choose from when hiring employees. The employees are then trained on the importance of good relationships with clients for the benefit of the company. The company ensures that all the employees; especially the client relationship representatives are fully aware of the objectives of the organization. The relationship executives and managers in the company ensure that the investment needs of the clients of the organization are well looked after. The company also hires individuals from diverse cultures and backgrounds. This diversity is a positive aspect in attracting clients from diverse backgrounds (Hit, Ireland and Hoskisson 2011). Buyer power Investment and institutions have many options of investment firms that they can choose from. However, Black Rock Inc has been able to remain a top choice for clients through high quality services and advertisements that it offers. The client relationship executives that have been hired by the organization are also highly qualified and offer clients the latest financial information that they need to make informed decisions. An increase in the volume and flow of information through the internet and other forms of media has resulted in an increase in the number of clients for the organization (Peng 2009). The buyers’ power is high due to the need of high return and many investment opportunities available in the market. Substitutes Other financial institutions in the market are always conducting market research to come up with new attractive financial products and services (Norton 2008). The financial products and services that are introduced into the market might become popular in comparison to those offered by Black Rock Inc. A new company might decide to target an unexploited niche in the market such as low and middle income earners (Hill and Jones 2010). The number of substitutes is high thus the company must differentiate the services and guarantee superior returns to client’s investments. Competitive Rivalry Black Rock Inc has to bear with competition from investment and micro financial institutions that offer similar products and services (Phadtare 2011). Some of these institutions do not have to comply with strict audit and regulations from the government. The company has attained competitive edge through high customer service, differentiated products and consistent high returns to clients. Barriers to entry Financial institutions have to spend a lot of time before they can gain stable market standing. There are well established banking and other financial institutions that already exist in the market. The barriers of entry in the financial services market are high due to strict business registration process and high capital outlay required (Lorat 2009). PESTLE Political Factors The attitude of the government towards financial investment companies has contributed to greater auditing and regulation (Hax 2010). This has been contributed to recent collapse of investment funds such as Amaranth Advisors resulting in the loss of savings and retirement funds for many American nationals. The government has implemented measures to protect its nationals through putting strict measures in place. Economic factors Previous success of Black Rock Inc helped the organization gain funds to acquire and merge with other investment companies such as Barclays Global. This merging helped Black Rock gain international recognition as one of the largest and reliable investment companies in the world. High inflation and unemployment rates have contributed to lower revenues for the company than expected. However, with the improvement of the risk management in the company, it is expected that the company will make higher profits in the future. The company has adopted with market changes. In 2008, the company made 50% of its revenue from advising clients on equities to invest in. Only 21% of the company’s income was gained from fixed income. This is contrast to 2005 and 2006 when the income from advising investors was 34% and 20% respectively. Harsh economic business environment will lead reduction of the company’s earnings since low business activity is expected to be witnessed. Social factors A high number of literate people in the society have contributed to a higher number of investors. This generation of individuals has access to information on financial markets in comparison to the baby boomers generation (Roy 2009). Individuals know of the high potential gains that they stand to make in the market. This knowledge and awareness has contributed to a relatively high number of investors for Black Rock Inc. Technological Factors Introduction of new hardware and software into the market has contributed to higher investments for Black Rock Inc. Diverse applications on phones have contributed to more information sharing among potential and current clients. Availability and development of technology has also contributed to higher trading for the organization since employees can log into their work systems and get the latest information on financial markets and conduct trading (Bohm 2009). Legal Factors The company has to abide by set laws on money invested by individuals and institutional clients. The laws have been put in place to ensure that the funds that are invested are put into the right work; to ensure a return on investments. The company has a legal and compliance department that constantly monitors the changes in the regulatory environment. The recent changes in investment regulatory framework will increase the litigation and legal proceedings in the future. The company has complied with accounting policies, tax and financial reporting requirements (Bamford and West 2010). Environmental factors So far, Black Rock Inc has engaged in ethical practices as far as investment and trading is concerned. This has created and maintained long term relationships with the members of the community. Community initiatives such as College Success, Juma, Robert Toigo Foundation, Sponsors for Educational Opportunity and The Forte Foundation have contributed to the growth of a positive attitude of the organization by the members of the community. Black Rock Inc is at a mature company growth stage. It has several strategies to help it continue growing and maintain stability in the financial services and investment industry. In 2005, the company merged with Merrill Lynch in order to expand business outlets and client base. The company has opened up new branches to increase networking and revamped current branches to try and increase customers. Black rock Inc has also used its market leading position to reach greater heights especially using the media. In 2009, Black Rock Inc. acquired Barclays Global Investors; increasing their market presence in the financial services sector. Currently, the company has offices in the United States of America, Australia, Europe, and Asia Pacific (Tsiakkiros 108) Internal analysis Strengths Black rock Inc has a well established name in the industry through years of well informed, thoroughly researched and successful returns on investments. Clients that have used risk assessment and investment services of the company speak highly of it. Good reference from current and past clients is a positive attribute as it cuts down on money that has to be spent on advertising (Henry 2008). The organization can therefore spend most of their money on expansion. Black Rock Inc also has a wide range of products and services that are offered to clients especially in comparison to other companies that offer similar services in the industry. The organization has equity associated securities whose returns are usually reliable and timely. This credit rating reliability coupled with the high quality client relationship offered to clients places the organization at a competitive advantage. The company has been able to make returns on the investments made in all its global outlets. This has built and maintained customer confidence in the organization (Griffin 2012). Weaknesses Black Rock Inc. has still not caught up with the competitive edge that is given by industry players such as Goldman Sachs especially in securities investment. Therefore, the organization might spend too much time trying to create strategy to defeat industry players instead of increasing clients’ base and profitability. The brand name Black Rock Inc has never been a worldwide ‘hit’ in comparison to a name such as ‘Barclays’. Therefore, the company still has a long way to go to ensure that they remain relevant in the industry. The company’s security department that deals with investing for institutions has been cited as performing below par. Unfortunately, this could be one of the most profitable divisions of the organization. Black Rock Inc might lose some of their current institutional clients if they feel that they stand to make minimal returns. The current and potential clients of the company might also feel that there is no stability for their funds and be tempted to move elsewhere. The poor performance of the equity securities has also contributed to an attrition of the brand name for the company (Bangs 2002). External analysis Opportunities The company has the opportunity to raise their investment banking division through various corporate strategies. Black Rock Inc has already embarked in one such strategy by offering jobs to experienced brokers from Wall Street. These individuals hold qualifications that would be of use in making high returns on investments. The hired Wall Street professionals are also well equipped in offering clients advice on the best investments that they can make depending on their risk, time, investment returns expectations (Fine 2009). The company can gain market share by increasing the value of the services through offering client financial education and advisory services. Threats There has been collapse of many investment companies in the past two decades. The government has therefore introduced stringent measures to regulate such companies. There are many pension schemes that incest in investment companies such as Black Rock Inc. The government periodically audits the financial statements of organizations such as Black Rock to ensure that they do not use investors’ funds on ponzi schemes or embezzle their money (Wet Feet Incorporated 2008). The security of most financial markets is not guaranteed. Managers at Black Rock Inc have to make wise investment decisions that contribute to high returns and retain clients’ funds. There are many investment funds companies that lost a high percentage of clients’ money through the subprime mortgage crisis during and after the 2008 global recession (Ferrell and Hartline 2011). Industry life cycle Financial industry is at the maturity stage. The products offered to the consumers are more standardized thus all market players have lowered their profit margins in order to gain market share. The cash flows from the firms are more consistent but the recent financial crisis and economic slow down negatively affected the profitability of most of the firms. The return on equity across the industry is average. Black Rock will have to differentiate its products and services and also reduce the operating costs in order to increase profitability. The company should emphasis on the use of electronic bill payment platforms and internet banking in order to reduce the operating costs. Business cycle The company (Black Rock Inc) recorded $ 9,081 in revenues in the financial year that ended December 2011 signalling an increase of 5.4 % from the previous year. The operating profits were also increased by 8.4 % from 2010 to $ 3,249 million in 2011. The net profits were also high by 13.3 percent in 2011 to reach $ 2, 337 million. Conclusion Black Rock Inc can be classified under the stability and maturity stage of growth. In this stage, organizations usually experience a decline market share due to stiff competition in the industry. The company’s revenues are not as high as they should be for a company with potential and resources as Black Rock. Some of the instability for the company has been contributed by uncertainty after merging and acquiring other financial investment companies. In the wake of the economic crisis, there are a reduced number of individuals and institutional clients that are investing their funds with investment companies. References Wet Feet Incorporated. 2008. 25 Top Financial services Firms. California. Tsiakkiros A (2002) "Strategic planning and education: The case of Cyprus", The International Journal of Educational Management Bradford 2002. Vol 1(3): 12-117. Bohm, A. 2009. The SWOT analysis. Muchen. Verlag. Fine, L.G. 2009. The SWOT analysis: using your strength to overcome weaknesses, using opportunities to overcome threats. London. Sage. Ferrell, O.C and Hartline, M.D. 2011. Marketing strategy. Mason. Cengage Learning. Henry, A. 2008. Understanding strategic management. New York. Oxford University Press. Hill, C.W and Jones, G.R. 2010. Strategic management theory: an integrated approach. Boston. 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Strategic management: competitiveness & globalization concepts. Mason. Cengage Learning. Grind, Kristen. The Wall Street Journal. April 12, 2012. Black Rock’s Street Shortcut. Retrieved 1st Dec 2012 from http://online.wsj.com/article/SB10001424052702303624004577338153082722544.html. Read More