Introduction
JP Morgan Chase & Co is one of the most successful financial corporations in the world. One of the oldest companies in the country, JP Morgan Chase has survived through turbulent market conditions and intense competition and has strong financial performance. As a result, the company has attracted the attention of many people who are keen on identifying the secret behind its success. Notable is the company’s large portfolio of tangible and intangible assets that separates it from its closest competitors including Wells Fargo & Co, Citigroup Inc, and Bank of America Co (SEC, 2018). The paper will highlight JP Morgan Chase’s greatest strengths and weaknesses, analyze the competition and external and internal environment, and determine the company’s tangible and intangible resources, core capabilities, and core competencies.
Strengths and Weaknesses
JP Morgan Chase has numerous strengths and weaknesses. From a personal perspective, the company’s most preeminent strength is business diversification that enables the entity to earn revenue from multiple sources. JP Morgan and Chase offers a wide range of services including commercial banking, asset and wealth management, investment banking, corporate banking, and community banking, and non-interest income (SEC, 2018). The firm leverages the non-traditional banking activities like asset management to overcome the intense competition in the industry and safeguard its position in the market. Moreover, JP Morgan has spread its risks across all the segments, thus it can survive even when one part of the business is faced with crippling challenges.
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On the downside, JP Morgan’s is overly reliant on the USA market. JP Morgan is a global firm with operations on over 60 countries across the world. Despite its huge presence in the world, the corporates’ largest source of income is North America. Undoubtedly, JP Morgan and Chase’s performance would adversely be affected by a market failure in the USA as it would lose a significant percentage of clients (SEC, 2018). Although the USA has one of the strongest economies in the world, there is no guarantee that the situation will remain the same in the future. As the situation stands now, JP Morgan and Chase’s future is closely intertwined with the USA economy and the consequences could be disastrous during recessions and depressions.
JP Morgan and Chase can solve its weakness of over-dependence on North America by venturing into the developing markets. Developing nations have recorded high growth rates over the last decades, for example, China’s GDP growth rate averages 6.5% annually. Therefore, by penetrating into these countries, JP Morgan and Chase would diversify its operations and also experience phenomenal growth. Besides, the company has surplus capital to fund new developments, thus it would face little difficulties in adopting any method of entering into new markets (SEC, 2018). By adopting this strategy, the firm will safeguard its long-term future.
Tangible and Intangible Resources, Core Capabilities, and Core Competencies
JP Morgan Chase has a wide portfolio of assets. The tangible assets are physical, and they include cash, bank deposits, marketable securities, loans, accounts receivables, and fixed assets. On the other hand, intangible assets, which are found in unphysical form and are immeasurable, held by the bank are goodwill and intellectual property (SEC, 2018).
Additionally, the company has admirable capabilities. The organization attracts the best talent in the market and hires the most competent individuals creating a formidable team. Moreover, the company gives employees competitive pay and rewards, hence the rate of turnover from the company is low. There is superb product development in the company that has contributed to its enlarging market share.
Undoubtedly, JP Morgan and Chase’s core competencies differentiate the institution from its rivals. The company is innovative and has fully transitioned from traditional banking to digital banking enabling the institution to tap into a new group of consumers. Digital banking helps the firm to develop better security measures to protect sensitive private information. Moreover, JP Morgan and Chase is customer-centric-its primary purpose is to meet customers’ needs and wants at all times and making their journey as seamless as possible. The adoption of the omnichannel access also means that customers can communicate with the company through their most convenient method. Besides, the company provides personalized care for all clients, and this enables the organization to develop a personal relationship with its huge number of customers. As a result, JP Morgan and Chase have become a well-known global brand.
External Environmental Analysis
JP Morgan and Chase is an open organization that is affected by different forces within the external environment. The legal environment has the most significant influence over the corporations’ local and international operations today. After the 2008/2009 financial crisis, the world has become obsessed with the need to formulate new banking regulations to avert such disasters in the future. In the USA, the subprime crisis elicited sharp reactions from the Federal government and politicians that prompted a series of actions that involved the introduction of stringent regulations on the financial industry. These laws are stringent and are a barrier to the fast expansion of businesses within the sector. JP Morgan and Chase have not been spared from these changes, compliance is key to continue operating in the industry.
Technology is another major environmental factor affecting JP Morgan and Chase’s business. Technological advancement has influenced every aspect of life particularly financial management. Banks have been forced to move towards digital banking that allows customers to transact their businesses over the Internet using customized banking applications (Shaikh, & Karjaluoto, 2015). New digital banking techniques evolve daily, and first movers have an added advantage over the others. Technological development has equalized the playing field in the banking sector by eliminating entry barriers into the industry and allowing the creation of new banking services like Fintech companies. As a result, competition has also intensified increasing the risk that JP Morgan and Chase will lose its dominant position in the financial industry.
Competition Analysis
The competition analysis of JP Morgan and Chase using the five forces Porter framework shows that the company has been more vulnerable to two main forces over the last five years. One is the intense rivalry in the banking industry. There are many financial institutions in the market fighting for the same number of customers (Egan, Hortaçsu, & Matvos, 2018). The number of banks has grown at a first-rate, especially in countries where the effects of the recent financial crisis were minimal like China and Brazil. As a result, JP Morgan and Chase face more rivalry in the efforts to build its international business.
Other than the above, there is also the higher power of consumers in the market. Due to the intense competition in banking, consumers have many alternative banks to use to fulfill their financial needs. Moreover, technological development has led to the faster flow of information on the availability of various banking services and their costs (Shaikh, & Karjaluoto, 2015). The customers easily switch banks at negligible costs, and they can also make more informed financial decisions.
However, the company can address these issues by adopting the following strategies. It is important for JP Morgan and Chase to focus on increasing the market share by attracting new consumers. The firm can achieve this objective by getting new strategic partners within or outside the industry that can improve the organization’s product offerings, hence impress existing and new clients. Moreover, the company should personalize the customer journey and eliminate all the pain points to make them loyal to the firm. Consequently, the company will retain most of its customers in the long-run.
Internal Environmental Analysis
Arguably, JP Morgan and Chase’s greatest external threat is government regulations. The firm has to comply with the constant changes in the government regulations affecting its operations. Without a doubt, lack of harmonization of banking regulations exacerbates the problem as the company has to deal with the developments in each nation independently. Notable is that failure to keep up with changes could lead to prosecution or revocation of licenses. However, this problem can be resolved by creating a legal committee to look over the legal requirements in all areas and consolidate them into rules that should be used in all the regions.
The firms’ best opportunity is expanding into other markets. As earlier said, JP Morgan and Chase is an established brand that can prosper in any country as long as the right approach is used. The corporation should take advantage of this opportunity by acquiring existing financial organizations for easy entry into the markets and offering products fitting the new customers. Once JP Morgan and Chase establishes itself in the new countries, it will begin reaping high returns.
Conclusion
Without a doubt, JP Morgan Chase & Co is a successful company with a bright future, The company’s strength in its diversification, strong management, and value system makes it stand out from the rest. However, the company has weaknesses in concentrating on one market. Although the company has overcome many problems and competition, it has a long way to go for the interests of its shareholders.
References
Egan, M., Hortaçsu, A., & Matvos, G. (2017). Deposit competition and financial fragility: Evidence from the us banking sector. American Economic Review, 107(1), 169-216.
SEC. (2018). JP Morgan Chase & Co. Retrieved from https://www.sec.gov/Archives/edgar/data/19617/000001961717000314/corp10k2016.htm
Shaikh, A. A., & Karjaluoto, H. (2015). Mobile banking adoption: A literature review. Telematics and Informatics, 32(1), 129-142.
