JP Morgan Chase
Introduction
Within the United States, JP Morgan is known as the oldest financial institution. According to Maxfield (2017), the history of this company extends over two centuries. Currently, the company has a total of over 270,000 workers, runs a business in almost 70 different nations worldwide with assets close to $2.5 million. More so, JP Morgan is leading in processing financial transactions, commercial banking and small enterprises, private equity and asset management, consumer financial services, as well as investment banking (About Us, 2014). From 2005 to 2014, the company was led by Jamie Dimon as its CEO, within his term, JP Morgan managed to reach the prestigious title of big four banks in America such as Wells Fargo, Bank of America, and Citigroup. On the other hand, many financial institutions faced an uncertain working environment during the economic recession; nevertheless, JP Morgan managed to fight back and overcome the barriers, and the institution has sustained its relevance and value in the financial industry.
It should be noted that the financial gains of a company do not determine its success. This is because a company like JP Morgan can be financially successful within specific periods, but what makes or breaks the business is the smart strategies implement in the firm’s operations. In this project, the primary focus is to look at the mission, vision, and objectives of JP Morgan and determine whether the targets are being achieved by discussing the firm’s generic strategy. Besides, the external and internal factors of JP Morgan are considered since they play a significant role in determining the success of the company toward its goal. Furthermore, examining all aspects related to the company’s external and internal qualities is considered as a way to define whether the current strategy exercised at JP Morgan is beneficial to its business operations. Lastly, a number of suggestions on how JP Morgan can realign its strategy and its markets are also discussed.
Mission
The mission statement at JP Morgan states that “At JP Morgan, we want to be the best financial services company in the world. Because of our great heritage and excellent platform, we believe this within our reach.” (JP Morgan Chase, 2014) Notably, this type of mission statement portrays the excellence of business operations within the company. Such a goal gives the company a more competitive advantage in the complex financial industry.
Vision
JP Morgan’s vision is underlined by its core principles; “Operational excellence, exceptional customer service, responsibility, fairness, commitment to integrity, as well as a winning culture.” (JP Morgan Chase, 2014) ideally, these are the main elements that have allowed the company to grow.
Objectives
To gather income data from assets such as dividends for equities and stocks, as well as coupons for bonds.
To manage involuntary and voluntary corporate actions on securities held, such as stock splits, tender offers, business combinations, as well as bond calls, among others.
To maintain cash or currency bank accounts, effect deposits, and withdrawals, and administer other cash transactions.
To provide authoritative information on the securities and their issuers
To perform foreign exchange transactions between countries regardless of their clients’ location
To offer additional specialized services for particular clients like mutual funds
To provide financial support to legal reviews of business transactions, such as acquisitions and mergers
JP Morgan Chase Generic Strategy
Differentiation is one of the generic strategies used by JP Morgan, with this type of approach, the company centers on identifying its brand such that it can be different from its rivals. Since the company’s mission is to establish the most respected and best financial services worldwide through developing their communities and serving their clients, the company emphasizes on offering a unique experience and customer service for the clients (JP Morgan Chase, 2014). Such experience is provided regardless of whether the clients are opening a checking account or managing a million-dollar hedge fund. Ideally, this strategy has enabled JP Morgan to be different from its rivals.
Diversification is the other strategy used by JP Morgan to compete within the financial industry. It should be noted that the process of expanding the operations of any company in terms of adding services, products, markets, and improving the stages of product requires diversification (Diversification Strategy, 2009). According to Diversification (2009), this strategy is termed as a growth strategy, and it has two different types; the conglomerate where new endeavors are unrelated to the previous business and the concentric where the new endeavors much relate with the previous business. The company understudy takes a concentric type of diversification because it has four lines of business. These include invest and corporate baking, community and consumer banking, asset management, as well as commercial banking. The other aspect of diversification exercised at JP Morgan is the fact that the company operates in over 70 countries (How We Do Business, 2014).
Notably, the company’s ability to expand internationally offers significant, as well as potential competitive advantages. Right from the economic recession of 2008, the company has rapidly expanded its operations to many other countries. Maxfield (2017), assert that by early 2017, JP Morgan was a few steps being Citigroup in terms of net exposure to international markets; this indicates that the company used a transnational approach to attain its goal of achieving international markets. It should be noted that all the services and products that JP Morgan offers in different countries are the same, only that the organization allows decision making at a local level (Maxfield, 2017). Such business operations enable the company to survive in cases of any economic downturn. Ideally, in case any economic issue arises in one area of the world, the investment in other ears cannot leave the organization to be vulnerable.
On the other hand, the organization prioritizes business ethics as a strategy that can enable them to run competitively against its rivals. Notably, the aspect of business ethics is known as a set of arguments or principles that govern any business conduct either at a personal level or a collective one (Andreescu, 2015). Different reports indicate that JP Morgan depends much on establishing a unique brand from its competitors in the financial industry. In case the company does not gain trust, its brand is affected, which leads to detrimental effects on the differentiation approach being used. To avoid such issues from occurring, the company structured a code of business conduct to be used by directors and workers in making essential decisions to run the business (Governance – Code of Conduct and Ethics, n.d.).
Besides, there is also another code of ethics created for financial professionals at JP Morgan to promote ethical and honest conduct, as well as adherence to the law (Governance – Code of Conduct and Ethics, n.d.). However, this does not interfere with the obligations and responsibilities of the code of business conduct. In the same way, the company also has a set of other ethical standards regarding the reporting requirements for finance professionals and officers. Such standards are commonly raised to the workforce during workshops, training, as well as through peer pressure by other workers. With that sense of ethics, it can be concluded that ethically running a business is a culture at JP Morgan.
The other generic approach that has enabled JP Morgan to sustain its market position is its engagement in social responsibility. According to Gendron (2009), the aspect of social responsibility involves the support of organizations to sustainable development; this entails the well-being of society. As a way of sustaining the brand reputation and image, JP Morgan is engaged in several initiatives, which has made the company appear responsibly. The primary divers of social responsibility at JP Morgan are inclusive development. With this idea, JP Morgan believes that many individuals can have access to different opportunities that can, in turn, provide them with a chance of developing financially (Corporate Responsibility, n.d).
Some of the initiatives held at JP Morgan emphasize on improving the skills and jobs of individuals through a $326 million fund. This initiative looks at improving skills worldwide such that people can acquire skills to compete in the current market trends. The organization also offers a $155 million grant to different entrepreneurs around the world, such that they can expand their small enterprises. There is also a $130 million fund from JP Morgan that is provided to revitalize all the distressed neighborhoods across the United States. The low-income individuals are also catered for through a $50 million grant. Besides, JP Morgan also cares for families of veterans and military by paying mortgages to over 14,000 families and also supports those with small businesses.
In any business today, the aspect of environmental sustainability is greatly emphasized as a corporate social responsibility. It should be noted that environmental sustainability increases the attention of the world’s environmental concerns such that organizations are provided with an incentive of assessing their environmental impact like usage of carbon footprint, as well as natural resources. In other words, with environmental sustainability, the organizations have to ensure that they meet the present needs without compromising future needs. Besides, looking at the company’s website on sustainability, it is observed that their goal is to develop a long-term commitment to providing advanced sustainable solutions for clients. To be specific, JP Morgan has two strategic goals to this, and they include clean financing, as well as renewable energy. The company has intentions of becoming a dependant on renewable energy in 2020. JP Morgan has also organized over $150 billion in support of clean financing; this will help in transportation, facilitating new energy, technology innovations, and waste management.
Industry Analysis
Research indicates that business operations at JP Morgan have been greatly affected by both political and legal factors. Several governments, including that o the United States, have implements many harsh regulations on the financial industry, which have resulted in significant backlash for many companies such as JP Morgan. However, as a way of minimizing these financial losses, the company has also employed stringent limitations to consumer accounts. For instance, money lenders have applied restrictions on the qualifications of those who would like to borrow housing loans.
From the company’s current performance, it can be observed that JP Morgan has tried to do away with the free consumer banking industry, and they are now much reliant on strategizing their digital platform. This is because the digital platform favors engagement between financial organizations and consumers. Horowitz (2019) argues that this change is justified since technology is the main factor that can enable such interactions to occur. Among the technological alternations that have been done by JP Morgan is the Quick-Deposit application for mobile devices. This feature or application enables the client to make a check deposit using a mobile device.
On the other hand, the factor of demographics significantly contributes to the company’s business operations. According to Dess (2012), two significant features are currently prevailing in developed countries, and they include increasing women professionals, as well as increasing older adults. It can be observed that the marketing team at JP Morgan can easily address these demographics on the local and international levels. Besides, JP Morgan is involved in running a business overseas, but the report from the international monetary fund indicates that India and China contribute almost 45 percent of emerging markets. I believe JP Morgan should put considerations on creating more financial ventures outside North America and the US because it can provide the opportunity of diversifying their business operations even further.
In the same way, several Global factors greatly affect operations at JP Morgan, which has increased their ability to tapping in new markets. Dess (2012) asserts that the drastic increase of the middle class, especially in emerging countries, has played a key role in altering the global economy. This global expansion provides an opportunity for JP Morgan to conduct business even in these emerging nations. In case the company engages in such markets, it is projected that a competitive edge known as the first-mover advantage can be achieved.
There are also some economic aspects that JP Morgan experiences; these have affected its profit margin. Recently, real estate marketing has turned into a buyers’ market because of low-interest rates, when compared to previous years. On the other hand, the levels of unemployment have started to decrease. This is because JP Morgan has tried to lay a foundation as a company to create a business by improving the economy and establishing potential employment opportunities.
Internal Analysis
The financial analysis of the company for the past three years indicate that JP Morgan has registered a stagnant move. JP Morgan’s net income increased from 2018 to 2019 and then reduced in 2020. On can ask the reason behind this performance of the current financial year 2019-2020 as the company reports a profit of over $ 20 million, which is significantly below the $50 million profit that was reported in the 2018-2019 financial year. This loss is attributed to the current Covid 19 pandemic, which has crippled most financial operations of the company.
The value chain at JP Morgan indicates that the company has tried to establish both support and primary activities. Ideally, support activities increase the value themselves or through an essential relationship with other support activities and primary activities (Dess, 2012). In the support activities, JP Morgan has ensured that it implements activities that are relevant to its operations. These include general administration, technology, procurement, as well as human resource management. It should be noted that the primary activities refer to the physical development of service or product, its sale and transfer to the buyer, as well as its service after the sale. The primary activities exercised at JP Morgan include sale and marketing, customer service, as well as outbound and inbound logistics.
Results of SWOT Analysis
The generic strategy has greatly enabled the company to achieve its business success. One of the major drivers of this success is the diversified revenue streams created by JP Morgan following its generic strategy of creating a unique brand. More so, the organization is acquiring income from several businesses such as processing financial transactions, commercial banking and small enterprises, private equity and asset management, consumer financial services, as well as investment banking. On the other hand, the type of strategic management practices at JP Morgan has enabled them to maintain a well-balanced portfolio, which has made them less exposed to risks.
Besides, the company has increased much effort in diversifying its products into other markets. Ideally, the aspect of global reach is very crucial for organizations to consider. JP Morgan has utilized this opportunity by multiplying in over 90 markets, and this has enabled the organization to record more assets. The generic strategy at JP Morgan has enabled the company to enjoy a strong financial position. For example, in 2018, the company recorded a net profit of $33 billion (Horowitz, 2019). Through its generic strategy, JP Morgan is serving diverse groups of customers, including large organizations, individual consumers, small and medium enterprises, as well as clients from government bodies. Such performance presents a successful implementation of JP Morgan’s generic strategy.
Recommendations
Throughout this discussion, it has been indicated that JP Morgan is among the top financial institutions worldwide. It has also been highlighted that to achieve this success; the company relied much on diversifying its services. This is evident because JP Morgan has businesses in over 70 countries. However, this does not change the fact that JP Morgan greatly depends on the North American market for a significant percentage of its income. With that in mind, I have provided some recommendations that can help JP Morgan to mitigate its reliance on this market. These suggestions offer a focus strategy, diversification of current products, as well as increasing global expansion.
There is a strategy exercised at JP Morgan, known as the focus strategy, which centers on creating wealthy individuals. This has been observed through their new product known as “chase private client,” and many people in the southern Washington and Oregon have greatly changed their lives. Through this strategy, JP Morgan is aiming at attracting rich individuals that have an estimated net worth of $500,000 and more. It is also projected that the company has managed to obtain almost 40,000 people with such a criterion. Ideally, such a strategy could also convey several potential customers in the underserved market segment.
In the same way, I would recommend JP Morgan to team up with other organizations and do business with them. The idea behind this move is to create more opportunities for diversifying their products. History indicates that the company has been innovative over the tears, but as they have continued in their business journey, their competitive advance has been decreasing. This is because their products and services could be imitated easily. I believe that move can enable the company to sustain its competitive advantage.
On the other hand, I suggest that JP Morgan continues with its effort to expand the business to other countries such that it becomes less dependent on the American market. From my extensive study on JP Morgan, I realized that the main reason why the company is experiencing all the financial distress results from poor investing decisions. However, through the focus strategy and engaging in joint ventures, the company can gain value, which can enable it to expand further. In the same way, the company has to set clear objectives and goals. This can help in executing plans for doing business in emerging markets. Besides, if the company is targeting to perform well outside the North America markets, there is a need to allocate their resources in a resourceful and educated way. Implying that before doing business in other areas, there is a need for performing an extensive study to determine the prospects of development, as well as barriers to entry.
Conclusion
From this analysis, I have managed to get a better understanding of how the previous operations of financial institutions have impacted on the economy. And how the government and the society have taken a stand to prevent repeating of the same issues. To sum up, the strategic management practices at JP Morgan have allowed the company to perform well and still be considered as the leader in many commercial areas. The company has managed to build a significant reputation that cannot be easily challenged. It should be noted that creating a good reputation is an essential asset in the financial world. Because of this, JP Morgan realized this opportunity and acted upon developing and sustaining a reputation of being a financial institution that businesses and individuals want to partner with. This effort is seen through JP Morgan’s’ international operations, business strategies, ethics handling, as well as sustainability policies. Ideally, with such implementation of strategic policies, it is projected that JP Morgan will sustain its market position for many years to come.
References
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