J.P. Morgan Chase and Company (JPMCC) is a prominent fixture of the American banking landscape. This multinational banking corporation has investments, securities, and retail operations. Traditionally, this entity has targeting both enterprises and individuals in need of financial services, specifically large businesses, and the affluent constituency. However, it seems that industry and corporate strategy changes could translate to changes in the business and functional strategies of this banking corporation. Hence, an analysis of the corporate and business strategies in the context of the competitive environment should provide better understanding.
Fundamentally, a corporate strategy determines the businesses in which the firm plans to compete. Considering the highly competitive nature of the American banking sector, especially among the top banks, it is important to discuss JPMCC’s corporate strategy. Grant (2016) notes that there are two approaches, namely: the alternative generic method and the portfolio approach. Because the former is more suitable for companies competing either in one market or in a few highly similar markets. Furthermore, the generic approach consists of growth, stability, and retrenchment.
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Companies implement growth strategies to stimulate growth among its areas of operations. Conversely, companies use retrenchment to reduce the scale of operations or to eliminate unprofitable operations. Still, stability usually comes into play immediately after either retrenchment or growth, that is when the company is keen on maintaining status quo (Grant, 2016). An analysis of JPMCC’s activities implies that the company is pursuing a growth strategy. The enterprise has embarked on several activities that seek to drive growth and enhance customer satisfaction. This is in line with the bank’s position as an institution that builds relationships with its customers. “The right relationship is everything”, goes the company’s slogan (JP Morgan Chase and Company,2018).
An analysis of the company’s performance reveals a trajectory of organic growth in most of the company’s businesses. Arguably, there is some growth in market share that is attributable to the acquisitions of both Bear Stearns and Washington Mutual (JP Morgan Chase and Company,2018). However, most of the growth has come about from the company investing in the businesses to obtain growth organically. For example, the consumer and community banking business have a relationship with almost 50% of all American households (JP Morgan Chase and Company,2018). Again, the corporate and investment Bank does business with over 80% of the Fortune 500. Still, the commercial banking side has maintained an industry best credit performance for more than 5 years.
Customer satisfaction has also grown with JPMCC products and services. Specifically, there has been an increase in customer satisfaction since the company merged procedures of its consumer and community banking operations (JP Morgan Chase and Company,2018). Looking ahead, the company seeks to establish more consumer branch operations as it seeks to expand into approximately 20 new markets in the next 5 years. In the corporate and investment front, the enterprise seeks to venture to new countries.
As for the commercial banking, it just concluded its expansion into approximately 50 of the top American market, a feat that is set to stimulate growth for years to come. Generally, the company is relying on new products, locations, and services to drive growth of all its businesses. Notably, JPMCC is using technology to create digital payment solutions and to target millennials for this group is critical to the future growth of market share (JP Morgan Chase and Company,2018). Fundamentally, though it can costly both in terms of time and financial resources, the management of JPMCC believes that organic growth is the best kind of growth. This approach is consistent with the historically conservative approach that has earned JPMCC its extensive reputation. Combined with the use of technological advances, the company has developed a growth strategy that seeks to increase its market presence and reduce customer pain points (JP Morgan Chase and Company,2018).
At the business level, there are strategies developed for the different businesses. According to the adaptation model, business managers must address entrepreneurial, engineering, or administrative (Grant, 2016). The entrepreneurial approach addresses concerns about business opportunities to pursue, the introduction of new products or the acquisition of another business. On the other hand, engineering problems relate to the processes involved in the production of goods and services. The administrative method looks at the company structure (Berger, 2015).
Considering that the corporate strategy is one that is focused on growth, it is necessary to consider both the entrepreneurial and engineering approaches in JPMCC business strategies. Starting with the entrepreneurial approach, JPMCC’s consumer and community banking unit has plans to expand into at least 15 new markets of in a five-year period (JP Morgan Chase and Company,2018). Additionally, the company has developed and is set to continue developing new products that seek to improve the banking experience for their customers. One such product specifically targets the millennial demographic, a mobile bank (JP Morgan Chase and Company,2018). The company seems to developing products aimed at driving interactions with their customers and among customers themselves.
According to Grant (2016), an engineering approach addresses the production and distribution of goods and services. Though JPMCC has a reputation as a conservative enterprise, the company has adapted to the disruptive nature of technological advancements. For example, the company has developed multiple products to ease wholesale payments while also making them faster and safer (JP Morgan Chase and Company,2018). Furthermore, the company has introduced a digital equivalent of a debit or credit card. The provides their consumers the benefit of convenience as they can pay for either their online or in-store shopping using their mobile phone. Still, JPMCC has yet another digital payment innovation. This one, Zelle, enables consumers to send money to each other in a manner that is safe, convenient, and immediate (JP Morgan Chase and Company,2018). Notably, this move to the digital platform has enabled the company to change how it produces and distributes its goods and services.
JPMCC is using advancements in information technology to change how it distributes it products and services, the benefit of which has been a growing share in existing markets and entry into new markets (JP Morgan Chase and Company,2018). Notably, the company is using its considerable capital and scale in this move aimed that seems like a hybrid of entrepreneurial and engineering approaches (Grant, 2016). JPMCC has been able to develop at least 3 different mobile applications. Specifically, Chase Mobile is JPMCC ‘s equivalent of a digital branch as it allows customers to deposit, make payments and access paperless account statements. Notably, this application facilitates digital cheque deposits and Automated Machine Teller (ATM) transactions without the physical cards (JP Morgan Chase and Company,2018).
Finn is the name of JPMCC’s preemptive attempt to enter the mobile-only bank market. Consistent with the banks slogan, the current offering aims to cultivate the right relationship with millennials (JP Morgan Chase and Company,2018). Currently, Finn mainly offers customers a platform to learn saving skills. Though, it is likely that the company will introduce investment capabilities to this application. Notably, JPMCC is turning to technology and innovation to position itself as comprehensive payments solution provider. JPMCC has done more than adapted to the disruptions of information technology, it is now using the digital platform as a strategic tool (JP Morgan Chase and Company,2018). Not only has the digital platform being used to address engineering challenges, it is also being used to address entrepreneurial problems. Notably, JPMCC has applied its business strategies in a manner that takes advantage of its considerable capital and technological scale. Evidently, the long-term goal of this company is having some considerable payments solutions offering (Berger, 2015).
An analysis of the competitive environment reveals that JPMCC has several competitors, such as: Bank of America Corporation and Wells Fargo (Grant,2016). Notably all these enterprises target the same group as JPMCC; large companies and rich individual investors. Of the two, Wells Fargo has experienced legal challenges and lacks the international acclaim of either JPMCC or Bank of America Corporation. Therefore, the latter is the most significant competitor. Bank of America Corporation is the holding company of Bank of America (Berger, 2015). Notably, this bank has positioned itself as one that provides an opportunity to all its customers. Coupled with its target market, it becomes clear that both banks are operating in the same client base. Moreover, Bank of America has presence in the international market, this presence is supported by the banks’ strong brand name and good financial performance (Grant,2016).
This competitor is also one of the biggest banks operating in the US and has presence in more than 150 countries. Critically, this entity operates in the stable and growing American banking sector where it, additionally, offers excellent customer service. Again, the bank does business with approximately 99% of the Fortune 500 companies and has about 300,000 employees worldwide (Grant,2016). Therefore, Bank of America has several strengths that threaten JPMCC. That said, the bank is not without weaknesses as consumer credit controversies have negatively affected their strong brand standing. Similarly, there is stiff competition from other banks that can reduce Bank of America’s market share (Berger, 2015).
Alternatively, JPMCC also targets both companies and individuals in need of financial advice and assistance but it positions itself as a company that builds sustainable relationships with its customers. Moreover, the bank has developed an extensive retail network and provides excellent customer service. Notably, JPMCC is one of the largest in terms of sales, profit, market value and assets. Again, this enterprise has global presence and about 250,000 employees worldwide (JP Morgan Chase and Company,2018). Then again, JPMCC is over reliant on the North American market. This makes the bank particularly vulnerable to American economic downturns. Furthermore, there is stiff competition from both the international and domestic markets (Berger, 2015). Notably, the American banking sector has been growing steadily and this has increased the competitiveness banks other than JPMCC. Another weakness presents itself in the form of fluctuating markets. Notably, both Bank of America and JPMCC are threatened by changing government regulations. Notably, the stringent nature of the regulatory environment is a product of the 2008/2009 financial crisis and limits the development of the entire American banking industry (Grant,2016).
The American banking industry remains one of the most important globally and JPMCC is one of its most prominent performers. This bank has been able to generate corporate and business strategies that have contributed to its current trajectory of growth. Notably, JPMCC has been able to achieve this without incurring regulatory sanctions like most of its rivals. However, it is the use of their corporate strategy of growth that has guided the banks recent run of incredible performances. Coupled with the environmental factor of technology, JPMCC has also developed business strategies that leverage their capital and technological scale to great effect. Importantly, the company has resorted to innovation in the development of new products and services. Similarly, this environment has also presented the company with regulatory challenges, competitors, and market fluctuations.
The current regulatory environment hinders the development of the entire banking sector while competitors threaten JPMCC’s current and future market share. Market fluctuations present operational challenges to all sector players but the dependence of JPMCC on the American market makes it particularly vulnerable. Historically, the company has displayed the ability to overcome most of the weaknesses and threats it encounters.
References
Berger, A. N. (2015). The Oxford handbook of banking . Oxford: Oxford University Press.
Grant, R. M. (2016). Contemporary Strategy Analysis: Text and Cases. Hoboken, New Jersey: John Wiley & Sons
JP Morgan Chase and Company (2018). Annual Report 2017 . New York: JP Morgan Chase and Company. Retrieved from https://www.jpmorganchase.com/corporate/investor-relations/document/annualreport-2017.pdf .
