Introduction
It is in the 21st century that the business community is facing the stiffest competition in spite of the transformative advent of technology. Even though globalization has created many opportunities that allow companies to expand to other regions, it has presented the challenge of stiff competition since firms are no longer barred from seeking to operate from other countries. To withstand the unique challenge, companies have to keep checking their external and internal environment, assess their strategies, and other impactful factors. In light of this atmosphere, it is imperative to assess the internal and external environment of JPMorgan Chase while offering relevant recommendationsn ways to address the changing situation.
Impact Mission, Vision, And Primary Stakeholders On Its Overall Success
The success trend that has been witnessed at JP Morgan Chase bank over the years is attributable to the company’s mission, vision, and primary stakeholders, specifically the employees and customers. According to Kotter (2012), a company’s mission and vision usually set a specific culture which is subsequently embraced by employees. If such a culture is strong, it not only improves the business performance but also motivates the workers while making them loyal. Consequently, the workers serve customers satisfactorily, thus elevating the brand image of a company. Interestingly, the above claims have been manifested in the case of JP Morgan Chase bank. The company’s vision statement is "At JPMorgan Chase, we want to be the best financial services company in the world. Because of our great heritage and excellent platform, we believe this is within our reach" and it its mission statement is “to be the best financial services company in the world”.
(JP Morgan, 2013). To achieve such a high standard and to help the business grow tremendously, the company has motivated employees to work excellently.
In fact, the company’s ecent growth and success trends would not be possible without its strong mission, vision, and primary stakeholders, especially the employees and customers. For instance, the company was ranked first among the companies that embraced diversity in the US (Pramuk, 2016). Additionally, JP Morgan (JPM bank) has been reporting an exponential increase of profitability and revenue as evidenced by the 2016 annual report that showed the company’s net revenue increased from $93 million in 2015 to $95, 668 in 2016; the loan book grew to $894, 765 from $837 million in 2015 and more customers continued to deposit at the bank (“Annual Report”, 2016). In essence, the overall success at JPM bank is due to a motivating vision and mission which ignite the passion for customer care among the employees whose prowess and commitment usually culminate in customer satisfaction and loyalty.
Five forces of competition
Notwithstanding the tremendous success and incredible resilience the JPM bank has demonstrated in years, it faces the inevitable five forces of competition.
Supplier power
The industry in which JPM bank operates is shaped by the low supplier power in almost every area. The corporation ensures costs and efficiencies in the process of supply. Low supplier power increases profit and this is achieved through educating buyers on the product, ensuring availability of substitutes and creating low forward integration. The management creates a strong supply chain which makes the company to survive and strive in the competitive markets. The flow of services is done by implementing a systems approach which provides the framework on business requirements. The company ensures effective internal operation and quality customer services.
Buyer’s power
Nonetheless, it is different with buyer power as there many options from which customers can choose. Additionally, the buyers’ power often manifests when they decide not to borrow loans or deposit at the JPM bank. Also, buyers can negotiate the interests for their deposit without much resistance from the bank. Furthermore, the switching costs for most buyers are so low that they can opt for other competitors without any hurdle. Consequently, the bank’s profit margins drop as evidenced in 2015 when the bank decided to increase the deposit rate to the clients whom it deemed as influential and whom it feared could opt for competitors (Krouse, Trichur, and Ensign, 2015). Due to competition, JPM bank’s buyers have immense power.
Threat of Rivalry
Besides, the buyer power threat, JPM Bank faces the threat of stiff competition from major banks include the HSBC, Barclays, Bank of America (BAC), and CitiGroup. Due to their infrastructure, customer loyalty, and brand image, the four banks usually limit the dominance of JPM bank not just in the US but also elsewhere. For instance, as of 2015, JPM bank’s market share was 13.34% compared to 10.12% for BAC and 9.86% and 8.72% for Wells Fargo and Citibank respectively (Cox, 2015). In essence, the threat of rivalry makes it somewhat hard for JPM bank to achieve either oligopoly or monopoly.
Threat of substitution
While the banking industry was thought to be immune from substitutes, the advancement of technology has proved otherwise. JPM bank faces substitute services such as Paypal, Apple Pay, peer-to-peer lenders advanced by companies such as Lending.com and Prosper.com, and the availability of prepaid debit cards by different companies. A case in point entails Paypal which apparently has more clients than 20 US banks, yet it is not a bank itself (King, 2012). As a result of these substitutes, JPM bank has lost the opportunity to expand its operations especially the online customers. Even though the threat of substitute in banking industry has increased but JPM has found a unique position by creating small business spending and digital wallet services.
Threat of new entrants
The threat of new entrant has not affected the corporation since new entrants are obstructed by the high capital, financial services and government regulations. To operate on the same level as JPM bank, a substantial amount of financial capital, years of brand image, and loyal clientele are needed. Due to these cumbersome entry requirements, JPM bank enjoys a sense of dominance and this success is evidenced by the rising number of customers. Between 2014 and 2016, JPM bank reported the highest number of customers in the industry, and the trend may continue with the introduction of other services (“Annual Report,” 2016). In short, the tedious entry process works to the advantage of the bank.
SWOT analysis for JP Morgan bank
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· Strong brand image · Global presence · Loyal and high number of employees · Strong financial base (revenue, assets, shareholder equity, profits) · High market share · Reliable distribution network · Innovative |
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Opportunities |
Threats |
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· Online customers · Expansion to other regions · Diversification · Credit card market |
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While there may be other SWOT related factors, the oners mentioned in the table are the most crucial. For instance, strong brand image, loyal employees, innovation, and reliable distribution network form the backbone of JPM bank. Similarly, the opportunity for online customers is due to the advancement of the internet; the credit market is also expanding due to globalization while diversification is inevitable as competition rises. Then, cyber security issues, mergers, and substitutes are the most impactful threats at the moment. Also, over-dependence of the US market and the instability of the mortgage markets affect JPM bank’s progress.
Strategy to address the SWOT analysis
In light of the SWOT analysis highlighted above, it is imperative for the JPM bank to craft a strategy that will address its weaknesses, mitigate the threats, utilize its strength, and seize the current opportunities. Such a strategy ought to target every area of operation to ensure that unnecessary inefficiencies are eliminated. Specifically, JPM’s strategy ought to target the following areas: innovation, customer satisfaction, smaller banks, and IT security. In the innovation, JPM bank should increase its spending on the Research and Development (R&D) department. Additionally, the company should link innovationnew packages for online clients to mitigate the threat of PayPal and Apple as well as other new entrants. Then, the company needs to hire the best IT specialist to address the threat of cyber security since such an occurrence would sabotage and jeopardize the objectives of the company. In essence, this strategy is meant to tacitly address the threats and weaknesses while capitalizing on opportunities and strengths of JPM bank
Various levels and types of strategies
While the current environment does not appear to be friendly to JPM bank, the company could still maximize competitiveness and profitability through the application of various levels and types of strategies. The first strategy which JPM bank has to utilize is the functional approach which considers the human resource, R&D, and marketing for its corporate objectives. Specifically, JPM bank needs to ensure that the R&D department is focused on the external and internal factors that may inhibit the company’s goals. Additionally, it is imperative for the department to create products that target other markets such as the online customers after which vigorous marketing is essential.
Business level strategy
Furthermore, JPM bank needs to improve on its business level strategyo ensure that other competitors do not capitalize on its weaknesses. Typically, the business strategy focuses on three crucial areas: setting specific goals for performance; monitoring the competitors’ actions; evaluating the actions and decisions necessary for the attainment and maintenance of competitive advantage (Kotter, 2012). In this case, JPM bank needs to recognize companies such as PayPal and Apple as serious competitors whose actions deserve close monitoring and precise response. In conjunction with this approach, JPM bank needs to ensure that its operational level strategy is effective. Specifically, the bank has to use its resources such as experienced workers, financial muscles, and reliable distribution network to achieve its objectives. The company should use business-level strategy in creating the business goals, competitive advantage, minimizing cost and controlling expenses. Under business-level strategy, the company should focus on;
Cost leadership
The company should implement unique set of actions which are related with the production of quality goods and services with low prices. To be a cost leader, the business should focus on minimizing cost, create production control and ensure efficient facilities. Cost leadership will maintain profitability by developing substitutes, creating barriers for new entrants and avoiding the price war (Kotter, 2012).
Differentiation
The company should apply the differentiation strategy and ensure unique features, customer’s services and more. The Company should show commitment and high performance in order to maintain the competitive edge (Kotter, 2012). To ensure differentiation, the company should adapt to the changes, implement new technologies and implement core competencies in the production of quality products.
Corporate-level strategy
The company should apply corporate-level strategy and in this case, it should focus on uniting business units. For example, the company may focus on portfolio management and conduct diversification and acquisitions. The main purpose of corporate-level strategies is to expand the business in global level and become globally efficient. In addition, corporate-level strategy will assist the company in creating standardized products and develop innovations internationally. The company should think on how to accomplish the long-term goals. In this case, it is important for the company to focus on knowledge of competitors, company structure and business segmentation (Kotter, 2012). Under corporate-level strategy, the company focuses on the following;
Market expansion and penetration
The rising number of players in the industry implies that competition is inevitable, meaning that profit margins may decline. To prevent this occurrence, JPM bank ought to expand to other regions such as Asia. According to Kinkyo, Matsubayashi, and Hamori (2013), Asia offers a lucrative opportunity for the players in the banking industry due to the infrastructure needed in the continent as in the case of Japan. The same opportunity has been reported in Africa, where foreign participation has increased exponentially in the recent years (Gekonge, 2014). Such opportunities would result in improved competitiveness and maximized profitability by JPM bank while easing the burden of over-relying on the US market. It is important for the company to expand internationally and compete internationally in order to enjoy high profitability. The latter will be achieved through gaining new opportunities and understanding the global customers.
Acquisitions and diversification
The company should focus on investing in different areas in order to minimize the risk and achieve financial goals. This is an effective way of avoiding downturns and survive lengthy decline. The company will also build stability and avoid company risks.
Also, JPM bank has to consider acquiring other companies that pose a serious threat to its operations. One target that JPM bank should target as part of its acquisition is Paypal due to the high number of customers the company commands coupled with the magnitude of a threat it poses. Currently, PayPal acts as a platform of substitutes, thus weakening the competitiveness and profitability of JPM bank. Besides PayPal, JPM bank needs to target other companies since acquisitions have been found to neutralize competition while boosting the chance of oligopoly (Geiger, 2010). All the above strategies would ensure that the weaknesses and threats identified earlier are addressed effectively, thus improving the competitiveness of JPM bank while assuring it of increased profitability.
Communication plan
To effectively communicate to its various stakeholders, JPM bank requires a communication plan. In communicating with different stakeholders, JPM bank ought to change some methods of communication. For instance, the company ought to use memos when communicating with its workers on issues to do with the strategies mentioned above. A case in point includes acquisitions, diversification, or expansion, where the company should not use the internet due to the hacking issues, which may affect the process; currently the company utilizes the emails and internet for most of its communications. Such a communication ought to come from the top management to avoid any misunderstandings.
Conversely, communication with the government needs a different approach; official letters would suffice. Typically, companies have to notify government agencies when a decision on mergers and acquisitions is made. Again, using the internet is not recommendable, but letters would ensure the information reaches the intended department without an intrusion on privacy. The person responsible for the task depends on the responsibilities assigned, but the top management is typically mandated with the duty.
Contrastingly, all communications pertaining to customers ought to happen through the mainstream media since such as method would give the company the much-needed publicity. It is improper for the employees to learn about the company’s plans through the media but that is the only appropriate medium for the customers. In essence, JPM bank needs to utilize official letter as the medium for communication with some stakeholders, specifically the government, but use internal mechanisms such as memo when communicating to employees and the media to the customers.
Corporate governance mechanisms
Since the banking industry is prone to unethical practices such as insider trading, the JPM bank has strived to employ different corporate governance mechanisms to control the managerial actions. Currently, JPM bank utilizes the collaborative and multi-stakeholder (MSM) governance mechanisms in controlling the managerial actions. Typically, the collaborative governance mechanism entails constant communication between an entity and the government as well as the community it serves while the MSM gathers the relevant stakeholders to ensure dialogue and decision-making work to address any issue affecting the industry. The MSM is perfectly employed at JPM bank as evidenced by the annual assessment of all the managers by the Board including the quality of information flow in the company. The MSM mechanism has, for instance, enabled the company’s board to access the management at any time and report anything that may appear to contradict the company values (“Corporate Governance Principles,” 2016). As a result, managers have to adhere to the stipulated ethical standards and rules both by the government and the company.
Similarly, the collaborative mechanism is applied at JPM bank as seen in the collaboration with the relevant stakeholders including the government, community, and employees to safeguard the privacy and confidentiality of all the customers and other personnel. Additionally, the Board reviews the Chairman’s and CEO’s performance each year while working with the employees in crucial decision-making initiatives (“Corporate Governance Principles,” 2016). Such mechanisms, if maintained, could have significantly positive impact on the company since corporate governance mechanisms usually help firms to achieve the much-needed value-addition (Nikoskelainen & Wright, 2007). As a result of embracing these mechanisms, JPM bank has managed to overcome many hurdles in an industry that is often prone to financial scandals.
Effectiveness of leadership
For a long time, the leadership at JPM bank has been effective as evidenced by the success trends witnessed in years. According to Humphrey (2014), effective leadership is characterized by strong personality traits, emotional intelligence, high skills, and unmatched competencies. These qualities have been manifested at JPM bank in years as seen in the quality of the employees it hires, the level of motivation among the workers, and the loyalty of its customers. Subsequently, the company has remained at the top of others in the industry for a long time.
However, it is imperative for the leadership at JPM Bank to focus on the major factors that help in the business sustainability. While the company has been resilient amidst stiff competition, the level of innovation, coupled with the emerging trends among buyers, requires a different approach from the one JPM bank has maintained in the past. Specifically, the firm needs to have a leader with unmatched skills and focus on sustainability to address the new challenges in this era. Metcalf and Benn (2013) asserted that a sustainability-oriented leader demonstrates unique abilities to predict complexities and engaging workers to adapt and have “the emotional intelligence to adaptively engage with their emotions associated with complex problem solving” (p.369). Unless such a leader is installed at JPM bank, the competition and ever-changing consumer trends may have a negative impact on the company.
Ethical corporate citizen and its impact
Considering the sensitivity of the financial industry, JPM bank has strived to uphold the ethical values of the industry. For instance, the company has a strict code of ethics tackling almost all areas of operation. The financial officers and other employees are expected to always maintain ethical conduct while complying with all the legal requirements “even when it not the easy thing” (“Code of Conduct,” 2017, para.1). The company proved its commitment to this code by dismissing some employees in both the US and UK who had cheated about the accountancy results (De Graaf, 2015). Consequently, such actions help the company’s bottom-line by portraying it as an organization with a high level of integrity.
Nonetheless, the company does not fully embrace these values, particularly when it is operating in other regions, and this trend may have an adverse impact on its bottom-line. A case in point entails the scandal that was exposed in 2016, where the company tacitly hired employees who parents had political influence in China as a way of winning business opportunities; in the aftermath of the revelations, the company opted for a $264 million settlement (Protess & Stevenson, 2016). Subsequently, the company suffered not only financial implications but also reputational crises, meaning its bottom-line was inevitably and severely affected.
Conclusion
In summary, JPM bank has remained successful in years, but that success and dominance will be affected by innovation, competition, and substitutes unless specific strategies and measures are implemented promptly and effectively. In leadership, the company needs a sustainable-oriented leader with the ability to predict complexities and prepare for the same accordingly by motivating employees to act proactively. Secondly, the company has to be fully committed to the ethical governance code to avoid a repeat of the scandal exposed in China. Lastly, JPM bank ought to employ diversification, acquisitions, and market development to counter the rising competition. Once these recommendations are implemented, JPM bank may remain dominant for another century.
References
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De Graaf, M. (2015, October 23). Goldman Sachs and JPMorgan grads fired for CHEATING on basic math test | Daily Mail. Retrieved from http://www.dailymail.co.uk/news/article-3285807/Dozens-junior-bankers-Goldman-Sachs-JPMorgan-laid-CHEATING-basic-math-test.html
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Krouse, S., Trichur, R., & Ensign, R. (2015, December 28). J.P. Morgan to Increase Deposit Rates for Some Big Clients in January. WSJ [NY]. Retrieved from https://www.wsj.com/articles/j-p-morgan-to-increase-deposit-rates-for-some-big-clients-in-january-1451330440
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