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MGMT605 Strategic Management For Sustainability

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MGMT605 Strategic Management For Sustainability

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Course Code: MGMT605
University: Australian Catholic University

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Country: Australia

Question:
Rom throughout the organization who will analyze the trategic direction of the bank and locate opportunities x growth. Historically, Bank of America has pursued a strategy f growth through acquisition. (See Exhibits 1, 2. and for Bank of America’s historical financial information.) his strategy was evident even at the height of the nancial crisis, when the bank purchased mortgage ending powerhouse Countrywide Financial in the sum-ter of 2008 and brokerage Merrill Lynch in early 2009. lee Exhibit 4 for a list of important company dates.) hose latest acquisitions made Bank of America the irgest bank holding company in the United States by sset value (Exhibits 5 and 6).’ They also led to the asorption of nearly $100 billion dollars in toxic assets om Merrill and increased the bank’s exposure to Dtentially massive losses in the mortgage industry.?
 
Like its competitors, Bank of America had signifi-int problems in late 2008 and was on the verge of  vvnat will me TIllanClal ianoscape look like as the U.S. economy continues to recover? Where will the bank’s opportunities lie in the new economy? And most importantly, how should the bank position itself strategically to compete success-fully and grow in the future? These questions swirl in Stephanie Milner’s head as the room quiets and the team gets to work. 
Answer:

Bank of America is involved in Multinational Banking and Financial services and is an American Company. It was basically formed through the acquisition of NationsBank’s in the year 1998. The Bank of America has its headquarters in Charlotte, North Carolina. It is the world’s leading financial institutions. It is one of the very popular brand and it carries out its operations through a very large chain of various ATMs and the banking centers.
The Bank also provides latest banking facilities to its customers. The core strategy of Bank of America is mainly focused on the acquisitions. The company faced various financial crises in the past, regardless of this the company kept on buying various companies like Merrill Lynch and Countrywide Financial. Due to this reason it is the largest bank holding company in the United States.
Mission Statement of Bank of America
The Mission Statement of Bank of America is to offer investment and lending products that serve the individuals that have both low and moderate income, and improve undeserved low income communities so that a sustainable practices are created in the long run.
Gaining & Sustaining Competitive Advantage
One of the huge competitive advantages at the disposal of Bank of America is that it has huge amount of free money that it can invest in the interest earning assets, and government bonds. It has more non interest deposits bearing as compared to any other bank in United States (Choudhary, 2011).
Living the Values
Bank of America is a strong believer to follow various values while serving the society. Some of the values of Bank of America include:

Acting responsibly: it is believed by the company that to have a strong foundation disciplined management and integrity are the must. The company is very well aware that actions and decisions can affect various lives of people, so it is important to make fair decisions.
Trust the team: The Company is a strong believer that it can achieve best outcomes if the people of the organization work as team(Parnell, 2013). The team members shall work on mutual benefits and trust.

PESTEL Analysis of Bank of America
There are various operating challenges that are faced by Bank of America in its macro environment.
Political Factors
The political factors are very important as they help us to understand how some factors can impact the profitability of Bank of America in long run (Distao & Bortee, 2014). There are more than dozen countries where Bank of America is carrying on its operations in Money Centered Banks therefore it faces different types of political environment  and various risks that are associated with the same. Some of the political factors that affect the Bank of America are:

Military invasion risk
Corruption level
Tariffs and Trade regulations
Trading partners that favor particular company
Tax rates and various incentives
Legislations related to wages
Legal frameworks
Employee related benefits that are mandatory
Regulations related to pricing
Economic Factors

There are various macro environmental factors that can affect the working of the organization some of them includes: interest rates, inflation rates, economic cycle, foreign exchange rates and savings rate (Verbeke, 2013). Along with the macro environmental factors there are also micro environmental factors like growth rate and competition norms due to which the working of the company gets affected. Some of the economic factors that are required to be considered by Bank of America are:

Different type of economic systems that prevails in the country of operation
Education level
The workforce skill level
Quality of the infrastructure
Productivity and labour costs
The comparative advantage of the host country
Interest rates
Growth rate of the economy
Unemployment rate
The cycle stage of business
Social Factors

The culture of the society impacts an organization to a large extent. There is a great role played by shared attitudes and beliefs (Kumar, 2017). Some of the social factors that are required to be analyzed by the leadership of Bank of America are:

The skill level and demographics of the population
Culture
Attitudes
Education level
Spirit of the entrepreneurs
Technological Factors

Technology is disrupting various industries. It has been seen that there are various technological advancements over the past five years. So, it is very important for every firm to do the technological analysis before entering any new market (Combe, 2012). The Technological factors that can affect the Bank fo America are:

Technological rate diffusion
Product offerings technology impact
Recent technological developments by the competitors of Bank of America
Cost structure impact
Value chain structure impact

Environmental Factors
There are different norms and environmental factors that affect the profitability of the organization. Within the country as well there are various laws which can affect the working of the organization.
It is desirable that if a company is willing to start its operations in new country than it takes care about the various environmental laws and norms prevailing in that country (Forte & Oppenheim, 2010). Some of the environmental factors affecting the firm are:

Change in the climate
Weather conditions
Recycling
Laws relating to the environmental pollution
Waste management
Legal Factors

There are legal frameworks in different countries that are important to protect the intellectual property of the organization. Therefore, it is very important that the company evaluates these factors before entering the markets (Hensen, 2002). Some of the legal factors are:

Discrimination Law
Copyright, patent law
Employment law
Data protection

Competitive Forces and Firm Strategy: The Five Forces Model
Porter’s Five Forces Model is basically a framework that helps in the analysis of the competition. We will be conducting the Porter’s Five Forces of Bank of America to analyze how the bank is building a sustainable competitive advantage in the banking industry (Clasen & Lorenzo, 2010).
Threats of New Entrants
There are various new entrants in the banking industry that bring innovation and put pressure on the bank so that it can lower its strategy and cost reductions. In order to safeguard its competitive edge it is required that the bank manages the challenges and builds effective barriers.
Ways in which Bank of America can tackle the new entrants threats challenge

Innovation of new services and products.
Building economics of scale so that the fixed cost gets reduced(Doski, 2013)
Spending some money on research and development and therefore building capacities.
The Bargaining power of suppliers

There are various suppliers from where the raw materials are bought by the banks. If the suppliers are in dominant position that it can decrease the margins of Bank of America (Gordon, 2011).The suppliers who are powerful can often use their negotiating power so that they can extract higher prices from the firms. If the buyers have powerful bargaining power than it can lower overall profitability of the banks.
Ways in which the bargaining power of suppliers can be tackled

It can build supply chain with different suppliers
It can experiment with various designs of the products, so that if there is increase in the prices of one raw material than it can shift to new products.
It can develop dedicated suppliers who depend on the firm for their business.
The Bargaining Power of the Buyers

There are some buyers who are very demanding. They wish to buy best product in minimum amount. This problem can often put some kind of pressure on the Bank of America and its profitability. If the buyer has high bargaining power than they often seek for high offers and discounts (Chotipanich, 2011).
Ways in which the Bank of America can tackle these challenges

It can build a large customers base which could be very helpful in many ways to reduce the bargaining power of the buyers.
It can innovate the products on rapid basis.
If there will be new products that it can reduce the existing customers’ defection to the competitors of Bank of America.
Substitute Products threats

The profitability of the industry suffers if a new product meets the needs of the customers. There is high chance of threat of substitute products as it offers a value proposition (Tan, 2017).
Ways in which the Threat of Substitute products can be tackled

Bank can be more service oriented as compared to product oriented
It can concentrate on increase of the switching costs for its customers.
It can understand the main need of the customers.

If there is high rivalry among the competitors than the prices will decrease and overall profitability of the industry will come down. As the bank operates in a competitive industry so there are many competitors for it. The intense competition affects the overall profitability of the company.
Ways in which Bank can tackle the above issue

It can concentrate on differentiation of sustainability
It can collaborate with its competitors so as to increase the size of the market
It can build scale so that competition becomes better(Haytko, 2018).

After analyzing the five forces above it is seen that the strategists are able to again overall picture of how the profitability of the organization gets impacted. Game changing trends can be identified and can respond to the existing opportunities.
Internal Analysis of Bank of America
Core Competencies
The Core Competencies that Bank of America looks in to its new employees while hiring them are as mentioned below:

Innovation
Team work and Trust, loyalty
Leadership qualities
Skills of problem solving
Initiative
Ability of working in a fast paced environment
Multitasking
Excellent communication skills

 

Valuable

Rare

Worthy of Imitate

Utilizable

Competitive Implications

Product Development
 

Yes

No

Yes

Yes

Similarity

Product Support

No

No

Yes

Yes

Similarity

Marketing

Yes

Yes

Yes

Yes

Sustainable Advantage

Sales

Yes

Yes

No

Yes

Sustainable Advantage

From the VRIO analysis of Bank of America it can be concluded that the bank has core-competencies mainly in sales and marketing area.
SWOT Analysis
SWOT analysis is a very important tool to measure the strengths and weaknesses that a company might be facing. For understanding and analyzing the internal and external environment of Bank of America we will be conducting the SWOT analysis of Bank of America.
Strengths
Operations Scale:
The Main strengths of Bank of America comes from its brand image that it has gained from its scale of operations. There are more than 150 countries where the company carries on its operations which is the biggest strength of the company.
Strategic Acquisitions:
The Bank of America became the biggest wealth manager after it acquired Merrill Lynch in the year 2008 which also made it enter in to the mainstream banking investment sector.
Big Businesses:
There are various divisions of Bank of America out of which Global Consumer and Small Business Banking are one of the biggest. Credit Card Insurance and Consumer Banking are the biggest banking business of the bank.
Weaknesses
Low income from other countries:
The Bank of America operates in 150 countries; however 90% of its income is generated from the operations carried out in United States itself.
Interest Rates are high
It is seen that the bank charges a very high interest rate which is the biggest weakness of Bank of America.
Wiki Leaks Scandals:
The brand name of the bank has spoiled to a large extent by the scandals in the year 2010 and 2011. It was claimed by the wiki leaks that it has enough evidences that could bring bank down and expose its malpractices.
Opportunities
Scope of Acquisition:
It has a scope of expanding its operations outside the domestic market.
Tech Development:
There are many developments in the technology that can prove out to be emerging opportunities for the bank in the near future.
Threats
Changing Global Financial Scenario:
There are thin threads associated with the global financial scenario which is the biggest threat for the banking sector.
Rivals:
There are many big rivals of Bank of America like J.P. Morgan, Citi Bank and Wells forgo that pose  a huge danger on its expansion.
Conclusion:
After analyzing Bank of America from all the possible factors, it has been observed that the Bank of America has been a ruler in the Banking Industry. But, due to its name stuck in the wiki Leak scandals its image got detioriated. It overcomes that issue pretty well by following various strategies and it has been seen that it is performing very well since then. There are many customers who trust its brand and are not affected by its name being caught in the scandals. Since, it would be advisable that Bank shall not overlook the various opportunities that are present and shall take the advantage of the available opportunities so that it can expand its operations to a large extent.
Bibliography
Chotipanich, S., 2011. A study of facility management strategy: the case of commercial banks in Thailand. Journal of Facilities Management, 9(4), pp.282-99.
Choudhary, M., 2011. Bank Asset and Liability Management: Strategy, Trading, Analysis. New York: Cengage Publications.
Clasen, W. & Lorenzo, E., 2010. Customer Service — Good is Just Not Good Enough. Journal of Management, 8(2), pp.20-25.
Combe, C., 2012. Introduction to e-Business. London: Wiley Publications.
Distao, M. & Bortee, D., 2014. Ethical Practice of Social Media in Public Relations – Page 48. London: Wiley Publications.
Doski, S., 2013. Analyzing Growth Strategies of Banking Sectors: A case study on Kurdistan International Bank. Research Journal of Finance and Accounting , 4(18), pp.110-25.
Forte, E. & Oppenheim, M., 2010. The Basic Business Library: Core Resources and Services – Page 49. Journal of Management, 5(1), pp.12-45.
Gordon, C., 2011. Competing in global niche markets: the case of Macquarie Bank. International Journal of Bank Marketing, 29(4), pp.293-307.
Haytko, D., 2018. Journal of Business Cases and Applications, 22.
Hensen, S., 2002. Case study Strategic challenges in the financial services industry. Journal of Business & Industrial Marketing, 17(5), pp.407-18.
Kumar, R., 2017. Strategic Financial Management Casebook. London: Cengage Publications.
Parnell, J., 2013. Strategic Management. London: Wiley Publications.
Tan, P., 2017. Index Copernicus Value. Journal of Business & Financial Affairs, 7(2), pp.84-85.
Verbeke, A., 2013. International Business Strategy – Page 579. London: Wiley Publications.

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