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The Bank of America over the years has been the subject of criticism and scrutiny. With reports of negative income and a 48% decline in stock price. (Dhulekar, Hensaw and Levy, 2013, p. 9).
Threat Of New Entrants
The Bank of America is facing strategic challenges. To deal with high exposure to mortgage related losses, lawsuits and the slow recovery from the USA economy it needs to position its self for survival (Dhulekar, Hensaw and Levy, 2013, p. 9). Management needs to fully recover their financial position as of before the recession occurred in order to compete against the major competitors who have already financed and paid off their TARP. Management also need to understand the effectiveness to continue merging or acquiring other banks including expanding into other locations given that their financial recovery is slow.(Milner
Given its depths and complexity of its problems, the scope of this analysis focuses on business segments and where the Bank of America can make changes to defend its strategic position (Dhulekar, Hensaw and Levy, 2013, p. 9).
The Bank of America can make changes to defend its strategic position, but it’s needs to understand its competitive markets and strategic segments and how best to position itself for recovery.
Porter's Five Forces
In order for the Bank of America to defend it’s strategic position, two strategic options have been proposed for consideration that can assist and stabilise profits and repair the bank’s mortgage lending investment. ( Dhulekar, Hensaw and Levy, 2013, p.9)
Acquire new products to offer its customer in order to differentiate from its competitors and earn new market shares and grow the market.
The Bank of America can easily spread their activities outside of the United States of America (USA) and grown in the market. They can achieve this by developing products, services with foreign banks and achieve better margins in emerging countries, whereby benefiting from economies of scale, there are fewer competitors and taxes.
Bank Of America's Swot Analysis
In addition to the above, the Bank of America needs to put more focus on mobile banking because they are good at it. Emerging countries have trouble accessing banks and agencies, so mobile banking such as Bank of America is very desired by customers.
Political: Bank of America faces pressure of paying back the Federal Reserve TARP funds following a bail out during the financial crisis (Dhulekar, Hensaw and Levy, 2013, p.14)
Economic: Unemployment in the USA is constant at around 8%-10%. The high unemployment rate will result in high savings, low spending, and low borrowings (Neeraj Dhulekar, Chris Hensaw, Ethan Levy, 2013, p.15)
World Bank Project Cycle
Technological: Bank of America has the best technological advances in the industry, e.g advanced bill-payment options for customers, apps for smartphones, advanced ATM technology allowing customers to deposit without envelopes (Dhulekar, Hensaw and Levy, 2013, p.15)
Legal: Bank of America faced investigations from the Securities and Exchange Commission (SEC) of the large bonus paid at Merrill Lynch, which upset their shareholders. A law suit settlement was reached to shareholders in the amount of $150 million (Dhulekar, Hensaw and Levy, 2013, p. 15)
Its main stakeholders are investors, shareholders and its customer base (depositors). However, its biggest financial revenue and profit takings come from mortgage loans to investors making it the largest mortgage provider in the USA following the acquisition of Countrywide Financial in 2007. A wrong direction in management could potentially increase in debt and have a ripple effect on the USA economy.
What Is Five Forces Analysis: Explain With Example
Management needs to fully recover their financial position as of before the recession occurred in order to compete against the major competitors who have already financed and paid off their TARP. Management also need to understand the effectiveness to continue merging or acquiring other banks including expanding into other locations given that their financial recovery is slow.
“Bank of America is the world’s largest bank based in Delaware and operating under USA. federal law with its headquarters based in Charlotte, North Carolina. It serves individual customers, small and middle enterprises, and large corporations in 175 countries. Bank of America business lines includes banking, investing, asset management, and risk management products and services. In United States alone, BOA had 59 million customers served through 6000 retail banking offices, 18000 ATMs, and online banking. As of June 30, 2008 it had total consolidated assets of $ 1.7 trillion, deposits of $ 785 million, and stockholders’ equity of $ 163 billion)” (Yulianto and Adrian, 2017, p.2)
“Bank of America’s strategy over the past 5 -10 years has been based on expanding its product line by merging and acquiring Countrywide to expand its mortgage portfolio and Merrill Lynch to expand its investment banking customer base and product line. Their strategy has been based on personalisng its products across customer segments as a key driver for positioning. However the financial crisis had impacted and its strategy and put the bank into a complex and costly mess” (Dhulekar, Hensaw, amd Levy, 2013, p. 37)
Best Porter's 5 Forces Examples For Students
“The Bank of America is a multinational institution which provides it’s customers services in investment and wealth banking. It has a net asset base of $2.2B and ranked the fourth (4) largest bank in the USA with a total capitalization value of over $2B”. (Dhulekar, Hensaw and Levy, 2013, p.9)
“It main purpose is to make opportunity possible for all customers and client and every stage of their life. Its objectives are to services it three customer group, offer all of its capabilities in the US and investment capabilities world wide” (Kilpatrick, 2015)
“Bank of America competitive advantage lies in its effective strategic planning process, huge asset base with regards to infrastructure, technology and talent, sophisticated financial technology and IT and its ability to leverage the government relationship for favorable macro- economic conditions”(Kilpatrick, 2015).
Neobanks Porter Five Forces [classic]
On acquisition and merges. In July 2008 the Bank of America acquired Countrywide in order to gain entry and expand its mortgage product line and on 1 January 2009 acquired Merrill Lynch to gain entry and expand the investment product line (Dhulekar, Hensaw and Levy, 2013, p. 37)
The strategic merges where seen as an important strategic move by the Bank of America. Its customers were losing faith with the bank given the low uncertainties of the economy and market (Dyer H., 2005).
By acquiring Merrill Lynch, the bank was able to expand its investment portfolio and increase its global presence. However some may argue that the United States Government forced the Bank of America to acquire Merrill Lynch to avoid the same outcome and faith that occurred to the Lehman Brothers.
Luxury And Sweetness Of Life On Tumblr: Porter's Five Forces Analysis Rivalry Among Competitors In The Industry Main Competitors: Metro
The key initiatives from the acquisition meant that the Bank of America could offer its customer base a greater investment product which prior to the acquisition was week. In addition Merrill Lynch brought its large resource and extensive technology and infrastructure capabilities.
The acquisition of Countrywide provided the Bank of America with an entry into the mortgage service markets and expanded its capabilities in that a market.
Based on the Bank of America’s mortgage business as being the case for its financial problems at the time of the analysis, the analysis only takes into consideration the mortgage segment evaluate its attractiveness to formulate recommendations for moving forward.
Swot Analysis Of Bank Of America
Threat of Rivalry: “Threat of rivalry is high with low diversity among competitors. High barriers to entry and low demand in current economic situation which forces incumbents to compete and cut costs”(Dhulekar, Hensaw, Levy, 2013p. 12 & 13).
Barriers to Entry. “ Barriers to entry are moderate-high. There are increasing government regulations and demands for low cost operations make the industry less attractive” ”(Dhulekar, Hensaw, Levy, 2013p. 12 & 13).
Supplier Power: “ Cost savings are important and drivers the importance of having good technology and innovation place “”(Dhulekar, Hensaw, Levy, 2013p. 12 & 13).
Porter's Five Forces Explained And How To Use The Model
Buyer Power: “Given that switching costs are highly competitive, this allows buyers to shop around ”(Dhulekar, Hensaw, Levy, 2013p. 12 & 13).
Threat of Substitute: “This is low because small banks cannot not complete for loan serving with larger banks”(Dhulekar, Hensaw, Levy, 2013p. 12 & 13).
Following on from the 2008 financial crisis, the markets experienced a global downturn which resulted in the collapse of the USA housing market. A number of major banks went into bankruptcy, stocks were greatly devalued and the government had to step in to stabilise collapse through bank obligation assurance ( Dhulekar, Hensaw, Levy, 2013, p. 19)
Management Principles And Applications
“With $2.22 trillion in assets reported in its 2011 third-quarter earnings, Bank of America now ranks second behind JPMorgan Chase, whose assets total $2.29 trillion. JPMorgan Chase also ranks first in terms of branches and total deposits. In September 2008, JPMorgan Chase acquired the investment bank Bear Stearns and Washington Mutual, the largest savings and loans institution in the USA” (Dhulekar, Hensaw and Levy, 2013, p. 19)
“ Citicorp and Travelers Group merged in 1998 to give birth to what is today the third largest bank in the USA with assets of $2.00 trillion”(Dhulekar, Hensaw and Levy, 2013, p 19 & 20)
“Wells Fargo acquired Wachovia in 2008 and is now the fourth largest bank in the USA.
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