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J. P. Morgan Report Section 4 and 5 Case Solution & Answer

  1. P. Morgan Report Section 4 and 5 Case Solution 

  2. Section 4: Internal Environment

    Functional Area/Internal Factors:

    1. Management

    Strength

    The management of the company is comprised of experienced and highly skilled personnel. The company has continued its operations with the aggressive capacity building through training and development programs for its staff and employees. One of the core and critical success factors of the company is the strong organizational culture that values the people, supports the business and enhances the company’s performance. The company has aimed to make 30 million dollar global investment in its future projects, in order to meet the increasing demand for the experienced and skilled workers.

    In addition to this, the New Skills at Work are most likely focused on the career pathways for the underserved population and creation of the economic mobility. Also, it helps in forecasting the emerging skill-sets possessed by thecompany’s employeesand it also helps in proactively developing new & advanced training and development programs to prepare the firm’s workforce for changes in the business & technology.(release, 2019).

    Moreover, the company’s boards of directors have successfully attracted competent and skilled directors, who have shown great enthusiasm and commitmentby involving themselves in the bank’s affairs and have also demonstratedthe ethos and spirit of the organization.
    Weakness

    In contradiction to the JP Morgan’s management’s strength; the company is required to pay 250 dollars penalty that settles charges, indicating the vulnerability of the company, weakening it controlling its fiduciary business. It is analyzed that the company is maintaining a poor control and management framework for its fiduciary activities and has inadequate internal controls within the organization. Along with this, the company has deficient practices for risk management and insufficient framework for avoiding the conflict of interest.(WEIL, 2020 ).

    1. Marketing

    Strength

    Despite its weak social media presence; JP Morgan is world’s sixth largest public company and the largest bank of the USA. The company has millions of customers from all around the globe due to its strong marketing strategy. The company has proceeded- to make investments in advertising and adapting its ad messaging. The company has reached to the wider base of customers through sponsoring the tennis star “Serena Williams” as well as forming a partnership with the animated movie “Kung Fu Panda 3”.

    In addition to this, JP Morgan earmarked 700 million dollars in per year spending for innovation and on marketing. This expenditureseems to work because 100 million dollars of marketing in the consumer banking tends to generate 2.6 billion dollars in deposits and 300000 new households.

    The current target customers of the company are millennial, because of the reason that 57 percent of the new checking account customers are millennial, as represented in the chart provided below:

  3. The chart shows that the millennial are more likely to use mobile banking as compared to other channels,such as: ATMs, Branches and Conventional. Hence, the statistics show that the appeal of these primarily digital customers is clear. They are more loyal as well as cheaper to service.(Turner, 2016).

    In the wake of the global pandemic: “Covid19”, the company has started airing Thursday evening as well as featuring the advisors of the firm speaking to the clients from home. By doing so, the company has made an attempt to keep customers engaged with the firm and has taken an initiative to help them in every possible way.(Graham, 2020).

    Weakness

    Between 2008 and 2016; the company was engaged in a pattern of manipulation in the US treasury future markets and precious metals futures. The orders were placed by traders on one side of the market, which they had never contemplated to execute for the purpose of creating a false impression of selling or buying interest that depressed or raised the prices. This practice is called Spoofing, which is designed for creating the illusion of demand. Hence, the intent of creating the demand through the Spoofing attack required the company to pay 920 million dollars for manipulating the treasury markets and precious metals.(Abhishek Manikandan, 2020).

    1. Technology/R&D

    Strength

    A global financial institution – JP Morgan is partnered with the city of Westerville, Jobs Ohio and Otterbein University in order to bring some of its financial technology research & development in central Ohio. The company is incredibly focused on investing in advanced technological capabilities & innovation. Additionally, the partnership between Otterbein University as well as JP Morgan Chase has established a financial technology innovation space. Furthermore, the company has chosen Ohio for the unprecedented model for innovation & R&D as well as learning stipulates the world-class quality of talent, innovation and collaboration potential (Officials, OH: JPMorgan Chase to Open New Fintech R&D Innovation Space in Westerville, 2018).

    The accelerated efforts of the company towards innovation and advancement of the technological capabilities has helped it in improving its customer experience. The annual tech & R&D budget of the company is 11.5 billion, which insignificantly creating a work environment within the organization that tends to thrive the innovation. Furthermore, the company has brought together more than 50000 technologists into collaborative tech centers who are focused on solving, reinvention and innovation.  The tech team leads and supports the development of the cutting edge technology that are core to the company’s vision of how to improve its customer experience and serve them specifically in areas, such as:

(Officials, Technology Innovation at JPMorgan Chase, 2019).

Below is the tech budget by the big banks, which shows that JP Morgan’sspending is more than that of the valuable and leading financial service providers,including: theBank of America, Citigroup, US Bancorp and Morgan Stanley.

The company has a clear view of the future due to which the technologists are continuously working on a number of other solutions, such as: cloud computing, cyber-security, big data and electronic and mobile payments. In a consequence of which, JP Morgan is now competing with the top tier giants of technology, for the employees’ talent and consumers’ attention.(Officials, This $11 Billion Tech Investment Could Disrupt Banking, 2015).

Weakness

The company’s profitability is vulnerable to the changing trends and opportunities in the market as well as the increased investments of the market competitors in the new areas of technology. In order to lead the market and beat the head-to-head competition; the company needs to focus on spending massively in its R&D and innovation.

  1. Operations

Strength

The operation team of the company is aligned to its regional footprint and business in more than 60 countries throughout the world. The company’s operational plan is followed by the objectives of strengthening the financial system, promoting the ability as well as maintaining the price stability. Additionally, the company is engaged in increasing its accountability and transparency and improving the level of institutional productivity.

Weakness

The company is faced with unseen operational failures, including: cyber risk, due to which the company is required to invest a considerable amount of money to counter the cybersecuritythreats and risks. Additionally, the company needs to increase the ability of reducing the risks and achieving the desirable outcomes.

  1. IT

Strength

The annual investment of the company in the information technology amounts $11 billion. It is because of the reason that offering better customer experience, becoming more efficient and reducing the errors are the main reasons behind investing in the information technology in areas, such as: artificial intelligence, big data and digital services.(Flinders, 2017).

Weakness

Despite its robust success in innovation and advancement of the technological capabilities;the company lags in innovation, due to which it must focus on upgrading its systems, improving the mobile banking, protecting its data as well as enhancing the customers’ experiences. Additionally, the company’s spending goals must include ensuring that the customers’ data is secured, it has become more efficient and it is staving off the new market competition as well as reaching to the new customers.

  1. Culture

Strength

JP Morgan is a talent driven company that heavily focuses on strengthening the diverse and inclusive culture of the organization. At JP Morgan, there is a forward looking and innovative friendly culture that tends to allow the companies to innovate and bring in new ideas, thoughts and high tech solutions in the market to compete with the giant market rivals, so that the companycould be able to maximize its market share, improve its productivity, boost its sales and increase its bottom line growth. The company also stresses over the significance of improvement and innovation, knowledge sharing and collaboration, inclusion and diversity. Through setup retention, recruitment, improvement in the workplace diversity and inclusion (D&I);the company has enabled itself to achieve an efficient and effective workforce, where every  employee is supported to work collaboratively to their full potential.

Weakness

Despiteof strong cultural values; the company was sued by its employees for the racial discrimination and harassment and retaliation, which in turn has adversely affected its reputation and image in the market. Due to the allegation of racism; the company has announced a new long-term commitment to advance the racial equity.(News, 2020).

  1. Finance

Strength

The finance department of the company is responsible to drive efficiencies and growth, manage capital, proactively manage risk and maintain financial reporting. The strong financial standing of the company is followed by the firm wide strategy which drives the inclusive growth. Additionally, the company is committed 125 million dollars over the period of 5 years to improve the financial health. The market capitalization of the company is 359.32 billion dollars which means that the worth of the company is 359.32 billion dollars on the open market and shows that the investors would be willing to pay for its stock due to the robust financial performance of the company (Officials, JPMorgan Chase & Co., 2020).

Weakness

Having anexcessamount of cash in the balance sheet in the form of reserves tend to hinder the potential of the company to use it for funding the growth opportunities to generate high amount of returns. Bykeeping the cash idle, there is a likelihood that the company would loss the opportunity to generate additional returns.

  1. Organizational structure

Strength

Given the hierarchical organizational structure within the organization;the company is able to improve the adaptability and flexibility of the business. Each department of the company has sense of competition, which favors the development and growth of the entire business. It has also resulted in a clear understanding of the employees’ responsibilities and duties, clear chain of command and clear paths of advancement.

Weakness

Due to the increased drawbacks of the hierarchical organizational structure; the company often faces the issues of organizational disunity, communication barriers, lack of innovative and new ideas from the employees and poor flexibility.

Internal factor analysis summary

Internal factors Weight Rating Weighted score Weighted comments
Strengths
Experienced and highly skilled personnel 0.05 4 0.2 Responsibly perform their roles
Investments in advertising 0.20 5 1.0 Advertisement leads to increase brand awareness
Investing in advanced technological capabilities & innovation 0.20 5 1.0 Help stay ahead of the competition in the market
Innovative friendly culture 0.15 2 0.3  
Weaknesses
Over dependence on certain markets 0.05 2 0.1 Heavily dependent on North America for a major portion of its revenues
Fluctuating markets 0.05 2 0.1 Subject to a vulnerability of the markets&susceptible to fluctuating markets
Vulnerable to Intensity competition 0.20 2 0.4 Subject to the intensity of the competition
Operational failures 0.05 3 0.15 Highly prone to cybersecurity threats and risks

The company long term profitability of the company is subject to the vulnerability of the markets due to which the company is unstable in such circumstances. Also, the robust competition in the market could threatens the survival of the company because the market competitors are in race of stealing the market share of another competitor. Furthermore, the company is highly dependent on major markets such as North America, hence the dependence over the single market makes the company vulnerable to business or economic slowdown in the similar market.

Industry Value Chain:

There are various key activities that are of high importance in delivering the value added products and services to the customers or clients. These activities include:

  • Maintenance and development of the customer relationship.
  • The provision of the financial service.
  • Product development and provision.
  • Processing of transaction.

Primacy activities

Marketing activities 

The primary activities of the banking industry include marketing,because the robust and rigorous competition in the industry requires the company to retain and attract its customers. Furthermore, the marketing is of high significance in increasing the brand awareness.

Transaction

Transaction is another activity included in the value chain. There are various methods of carrying out the transaction, such as: offline, online, branch, ATM and so forth. Thus, providing an improved customer experience and offering ease and convenience to the customers helps in generating huge profit returns……………….

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