Wells Fargo Case
The largest threat to the market of banking would have to be the Government with the changing of interest rates and pricing of a lot of products. If the interest rates drop then that helps the market and people go take more loans out and spend more money at the same time, but if interest rates go up as they are now, consumers tend to just save money and not spend as much, also not take out any loans. This is bound to hurt the whole market.
I considered four main components when it comes to getting better understanding of Wells Fargo Corporation: Strengths, Weakness, Threats, and Opportunities.
There are numerous strengths for Wells Fargo Corporation. It has built a creditable reputation and recognition as an industry leader, serving over 25 million customers in over 6000 locations. It strives to be the number-one financial services provider in each of the markets by being a lender, issuer, and provider. In 2008, Moody’s Credit Rating gave “AAA”, the highest possible rating. It was the only bank in the U.S. to receive it. Furthermore, Wells Fargo has an unbroken record of paying dividends since the 1995. In addition, it acquired Wachovia Bank, which was a rising bank in the east. From the acquisition, Wells Fargo doubled in size and assets and become the most extensive coast-to-coast community bank. Wells Fargo believes that its people are their largest competitive advantage. John Stumpf states: “We strive to find the best people from a diversity of backgrounds and cultures, give them the knowledge and training they need, allow them to be responsible and accountable for their businesses, and recognize them for outstanding performance.” The company’s executives understand that their personal relationships with their clients are the gateway to increased revenue; they consider their financial advice as their value added advantage.
Another large source of competitive advantage is Well Fargo’s Advisors’ ability to cross-sell their products, which strengthens their relationships with their current customers while simultaneously increasing revenue.
Wells Fargo has few weaknesses regarding the acquisition of Wachovia Bank. Wachovia was overcommitted in credit default swaps, which brought subprime mortgage problems during the global economic recession. Moody’s Credit Rating lowered 2 levels citing that Wells Fargo’s capital position has weakened and Wachovia’s assets could hurt earnings. Also, Wells Fargo had to cut dividends to solidify the balance sheets. In January 2009, the recession made Wells Fargo lose half the value of its shares.
Wells Fargo has great opportunities from the global economic recession. Numerous investment banks have disappeared and created a void in investments. This gives a window for Wells Fargo to attempt a new sector of the investment business. Another, large national banks are getting bigger, which means that Wells Fargo is able to leverage its gain during the recession to expand internationally. Since there is lack of regulation that creates a grey area of products and services that bank offers, Wells Fargo can try to lobby regulations that can change its brand as being ethical.
Some threats that Wells Fargo faces are that larger banks worldwide are attempting to expand globally. Foremost, the larger banks in U.S. are also growing as rapidly as Wells Fargo after the recession, which creates greater competition in banking industry.
First Wells Fargo needs to reconfigure the securities section of the Wachovia Bank acquisition. Since the recession has brought down investment banks such as Bear Stearns, Merrill Lynch, and Lehman Brothers, there are great opportunities to expand into this business segment. With strong creditable reputation and considerable emphasis on culture that brings efficiency, Wells Fargo can fill the void of investment banking and securities. There are over 25 million customers and over 6000 coast-to-coast locations, where sufficient customers that will support the new business segment since there is a history with the brand of Moody’s Credit Rating “AAA” and a record of strong balance sheets.
The Second strategy for Wells Fargo would be to expand its business internationally. Since community banks are serving the local communities, and the larger banks, such as Wells Fargo are growing bigger, it will be easier for Wells Fargo to use its credentials and vast number of employees to successfully enter a new market. The extension into the global market will be able to brand the corporation and gain better work force, which will give greater diversity and emphasis on corporate culture. With 2009 Q1 revenue increase even after the acquisition of Wachovia clearly indicates that there are funds to move to a new market.
In conclusion, if Wells Fargo proceeds to configure its securities section as well as expand its market overseas then we would see a profitable future, only time will tell the future of the company and the current economic situation.