Marketing Financial Services of UBS - Term Paper Example

Marketing Financial Services Table of Contents Introduction 2 Strengths 2 Weaknesses 7 Opportunities 9 Threats 10 Conclusion 11 Reference 13 Introduction UBS ranks among the leading financial services firms in the world. In terms of market capitalization the bank ranks sixth across the globe. The bank provides asset management, wealth management and investment banking services for institutional, corporate as well as private clients across various global destinations. Previously UBS was known as Union bank of Switzerland. With the merger of Swiss Bank Corporation and Union Bank of Switzerland in the year 1998 this representative abbreviation was no more considered by the bank. With time the bank has been able to establish a good market position in Europe, US and Asia. The products and services offered by the bank range from fund management, stocks and annuities to mutual funds, asset management and health & life insurance schemes. The bank has built its portfolio based on tradition and acquisitions pursued over the years. UBS has successfully entrenched itself in the various business segments and its wide range of customer services are highly valued by the global clients (Thirkell-White, 2004). Strengths Umbrella brand strategy- It has been observed that ‘umbrella brands’ used by the firms, with multi-business operations, foster improved market penetration. An umbrella brand refers to the use of a common brand for various businesses. UBS has also adopted this concept of a single brand across all its businesses by abolishing the local brands in order to form a “global umbrella brand”. By leveraging the reputation and trust effects associated with a strong brand image a firm can make use of various growth opportunities. To make use of the growth synergies that comes along with it, Swiss based bank UBS recently moved towards an ‘umbrella brand’. The bank has three main businesses asset management, wealth management and investment banking; all of which work as one coherent unit thereby acting as one single form for its clients. The top management of the bank initiated the project relating to global brand strategy in 2001. In 2003 this led to the launch of an umbrella brand in the year 2003. The benefits associated with growth synergies formed the basis of adopting a single brand. UBS officials viewed that the adoption of ‘one brand for all its businesses could convey the bank’s core values to the clients more effectively and consistently. The bank seems to be reaping the benefits of this umbrella brand. The brand value of UBS has increased from US$6.5 billion in 2004 to US$8.7 billion in 2006. Besides this the customers increasingly affirm to the key attributes of the bank like “UBS is a global power-house”; “UBS takes time to understand us” and “UBS has superior expertise” (Knoll, 2008, p.164). The strength of UBS is reflected from the rise in its brand value over the years. As per the survey conducted by Business Week in 2007 the bank’s brand value is nearly $9.8 billion and it ranks among the top forty most valuable brands in the world. The brand value of the bank enhanced significantly by nearly 13% in the year 2007. This is very important in making customer recall and leads to improved market penetration. UBS has an international clientele base. The global nature of its business operations creates additional value for its customers by integrating the expertise and resources of its various business segments. Competitive advantages of UBS- The strength of a business strategy is based on the competitive advantages that it enjoys as compared to the rival firms. According to Porter competitive advantage lies at the centre of the performance delivered by a firm in a competitive market scenario. This means that competitive advantages imply product differentiation, low costs etc (University of Northern Iowa, n.d.). The present business mix of UBS is a by-product of many years of development, acquisitions and internal growth. UBS has consistently worked towards expanding the core businesses and reaching out to the clients across all the corners of the world. The bank is the leading wealth manager across the globe. In fact UBS is one of the only global firms with a focus on wealth management as a principal business activity. In categories like Bond Index and European Research the bank ranked first as per the rankings of League Table in 2001 and in International Equity and European Equity the bank ranked second. UBS has a competitive edge over its peers in terms of its long time Wealth Management and the political and economic stability of Switzerland. The attractive location of the region brings in a pool of talented and high skilled staff which forms the strength of it banking activities. The attractive compensation packages offered by UBS ensure a long stint of these multi-talented employees with the bank (Thunderbird School of Global Management, n.d.). Client centric approach- UBS Access bridges the gap between the investment managers and companies having a common set of goals. The bank acts as a link between the investors and corporate management by connecting them thorough conference calls, in groups or one-to-one (UBS-a, 2011). The wealth management business of the bank offers customized investment services to the clients. UBS has a global view of the financial markets combined with an expert knowledge of the factors influencing the investment trends. By making use of multiple information networks the bank offers the latest market data to form a comprehensive idea of the markets. The interactive tools provided by the bank facilitate a short term as well as a long term analysis of the stock, currencies, global indices. The investment research facilities of the bank provide a competitive advantage in understanding the market events (UBS-b, 2011). The bank has the reputation of keeping the clients as a central focus of all its activities. UBS integrated its resources across various business segments like wealth management and investment banking to design and develop unique financial products for its ultra high net-worth investors. Hitherto these products had features that were limited to the institutional investors. Such innovative practices are a part of the business model of the investment bank. As a part of the bank’s umbrella strategy or one bank concept UBS continuously thrives towards making innovations through the cross-leverage of information across its various businesses (Knoll, 2008, p.169). Core competencies- UBS is a top rated investment banking and securities firm and also features among the largest asset managers in the world. The bank is the leader in commercial and retail banking in Switzerland. The experienced professional employees of UBS form an integral part of the company’s assets. The IT department of the bank supports its various products, services and business operations working jointly with the bank’s operations staff. These teams are engaged in developing software that facilitates improved trading and sales processes (WetFeet, 2009). The IT Infrastructure of the bank, with strength of 4000, keeps the bank’s infrastructure’s humming making possible the quick dissemination of vital information among the employees across the world. The software designed by the employees improves the investment bank’s internal processes and serve the clients. The IT applications enable the recording and tracking of financial information, market monitoring and enhance efficiency in areas like HR, communications and auditing (WetFeet, 2009, p.41). Weaknesses Despite of all this UBS suffered significant losses in the recent financial crisis. The assets of the bank comprised of huge amount of sub-prime debt in its investment banking division. This is said to contribute to the deteriorating results of the company. When the crisis originated the bank reported nearly USD 60 billion of credit losses leading to a steep fall in the share price. The shares of the bank plummeted from 75 CHF in the beginning of 2007 to merely 8 CHF in the first quarter of 2009 (Thunderbird School of Global Management, n.d.). The financial market upheaval in 2008 was worse as per historical standards and UBS reported huge losses on its legacy risk positions. In order to reduce the risk exposure the bank initiated a number of measures that include the disposal of its illiquid positions to the Swiss National Bank. Despite this the bank has various positions that are considered to be highly risky. Other than this the bank is vulnerable to counterparty risks that can be worsened by the market crisis and the financial market instability. Besides the impact of the credit turmoil the bank is grappling with severe legal pressure from US and European Union on money laundering and tax evasion. In 2009 US IRS and UBS initiated an agreement to settle the issues relating to tax-evasion. AS a part of his UBS will have to disclose the identities of several American clients who have stacked money in the offshore accounts in order to evade US taxes. IRS is of the view that UBS has aided the wealthy Americans to hide a sum of approximately USD 18 billion (Thunderbird School of Global Management, n.d.). The client base of the company has lost the trustworthiness that was once there as is reflected from the departure of its clients’ assets. The one time ‘faithful’ clients of UBS have turned away from the bank in fear of the worst. To aggravate the situation the highly talented and multi-skilled employees have left the bank to join other Swiss banks (Thunderbird School of Global Management, n.d.). But all this has not deterred the bank. It has adopted measures to restore its past glory. Despite the severity of the situation the bank is expected to bounce back and bring back strategic thinking and austerity to the business. On operational front the bank has to work towards changing the financial products it offers to the clients in the form of sophistication and greater transparency. The bank must focus on core business through improved corporate governance and leadership. The bank must not just concentrate on confidentiality aspect but rather this should be extended to offering expert advices of managing wealth in tax compliant way as well (Thunderbird School of Global Management, n.d.). Opportunities UBS is reputed for its strength in areas like sales, research and trading. This is expected to facilitate rapid growth in asset management, fund management and commodity trading. Within the sphere of investment banking the growth areas include leveraged finance, commodities, structured credit and real estate finance. The investment bank has already established itself in major financial markets and also has significant presence in the emerging economies. The emerging markets offer tremendous untapped opportunities. There is scope for deeper market penetration. Moreover the cultural diversity and the skilled man-force of the bank will enable it to exploit the opportunities in such markets. Other than this the regulatory norms in the emerging economies is less stringent which will enable the investment bank to operate freely without any unnecessary intervention by the regulatory bodies. The growing wealth of the economies is expected to create demand for investment and fund management. UBS can tap these opportunities. The global presence of the bank and its international reputation is likely to work in its favour in dealing with the new group of investors (UBS-c, 2011). UBS has a base in Russia where it had been operating over the last ten years. The bank manages a sizeable proportion of the region’s equities market and local investment banking and is currently trying to build up its foreign exchange and fixed income businesses to exploit the local opportunities. Besides this the bank is present in key business locations and is conversant with the local know-how. This places the bank in an advantageous position as it can capitalise on the business opportunities existing in countries like Middle East. UBS has an office in Dubai International Financial Centre offering it the platform for expansionary opportunities (UBS-c, 2011). The market size offers an important source of opportunity to a business. The firms can take advantage of an emerging trend in the market to expand its business and reach out to a wider audience (Mello, 2003, p.41). Threats Threats prevent or come in the way of smooth conduct of business activities. A firm cannot eliminate it rather it can at best be mitigated or avoided. Changes in law or loss of customers interest is a serious threat for a business (Florida International University, n.d.). The market conditions also pose a serious threat to a business activity. Like the performance of a financial services firm depends on the conditions prevailing in the economic environment. A negative business environment can have an adverse impact on the business activities. The conditions that facilitate business prosperity are economic growth, transparent capital markets, political stability and positive market sentiment. A downturn in the economy or a financial crisis or an inflationary condition can affect the bank revenues negatively. This may make it difficult for the bank to adjust the costs in view of the deteriorating business and market conditions (UBS-d, 2009). A downturn is a result of various factors like changes in fiscal or monetary policy, natural disasters, trade imbalances, war, civil unrest or terrorism. As the financial markets across the world are closely integrated and interconnected the events happening at the local as well as regional level can have a ripple effect across the countries. A disruption in the developing economies or fall of any important market participant can lead to a crisis like situation. The growing presence of UBS in the emerging economies makes it vulnerable to risks (UBS-d, 2009). The business of the bank has been affected by extreme and adverse developments in a number of ways and is likely to have a negative impact on the business of the firm. A reduction in the level of business activity affects fees, margins, commissions from its business transactions. A downturn in the market will lower the valuation and volume of the assets managed by the investment bank thereby lowering the performance based fees derived from asset management. If the countries in which the bank operates imposes restrictions on across the border payments or in the event of capital controls the investment bank may incur losses on counterparty default, may be denied access it, s to the assets owned by it or may face impediments in risk management. These developments can impact the performance of the Group as well as its various business units. This gives rise to the risk of impairment in the “carrying value of the good-will” (UBS-d, 2009). Any significant changes in the rates of interest, level of foreign exchange, equity prices and adverse market events can affect the investment bank’s revenues. The recent events have shown that UBS is often unable to check losses arising on account of extreme market events that cannot be anticipated by its risk management systems and tools and results in severe losses (UBS-d, 2009). Conclusion The global presence of UBS has worked to its advantage but this brings along the risk associated with international exposure. The cultural diversity and the highly talented workforce of the bank is an asset that has enabled it get a grip over the local know-how contributing to the prosperity of the business across various regions. The international presence of the bank and an extensive IT framework has facilitated better communication across the various business segments, enabling it to make gains from crucial market information. This also makes the bank vulnerable to any adverse events in a country. The bank has suffered tremendously in the recent credit crisis. It is important that the bank concentrates on its core business activities and develops expertise in estate planning and tax related matters. Reference Florida International University. No Date. Challenges/Threats. The SWOC Process. Available at: http://carta.fiu.edu/SWOC%20Analysis%20Definitions%20for%20Units.pdf [Accessed on February 10, 2011]. Knoll, S. 2008. Cross-Business Synergies: A Typology of Cross-Business Synergies and a Mid-range Theory of Continuous Growth Synergy Realization. Gabler Verlag. Mello, S. 2003. Customer-Centric Product Definition: The Key to Great Product. PDC Professional Publishing. Thirkell-White, J. 2004. UBS: brand building in a global market. World Advertising Research Centre. Available at: http://www.prophet.com/downloads/articles/UBS_case_study_Admap.pdf [Accessed on February 10, 2011]. Thunderbird School of Global Management. No Date. Can UBS Survive The Crisis? Lessons to Be Learnt. Thunderbird Student Voices. Available at: http://knowledgenetwork.thunderbird.edu/students/2010/07/12/ubs/ [Accessed on February 10, 2011]. UBS-a. 2011. Opening the right doors. UBS Access. Available at: http://www.ibb.ubs.com/mc/access/ [Accessed on February 10, 2011]. UBS-b. 2011. Supporting every investment strategy. Individuals. Available at: http://www.ibb.ubs.com/individuals/ [Accessed on February 10, 2011]. UBS-c. 2011. Growth areas. UBS in Europe, the Middle East and Africa. Available at: http://www.ubs.com/1/e/career_candidates/exp_professionals/regional_footprint/emea.html#growth_areas [Accessed on February 10, 2011]. UBS-d. 2009. Risk factors. Available at: http://www.ubs.com/1/e/investors/annual_reporting2008/spr2008/0004.html [Accessed on February 10, 2011]. University of Northern Iowa. No Date. Competitive Advantages. Strategic Elements of Competitive Advantage. Available at: http://www.uni.edu/~schragec/GloMarketing%2015.pdf [Accessed on February 10, 2011]. WetFeet. 2009. Ubs 2009. WETFEET, INC. Read More