Introduction
Wells Fargo & Company is a diversified financial services company providing banking, insurance, investments, mortgage, and consumer and commercial finance through more than 10,000 stores and 12,000 ATMs and the Internet across North America and internationally. They are headquartered in San Francisco; however, they’re decentralized so every local Wells Fargo store is a headquarters for satisfying all their customers’ financial needs. This has led to a large customer base, which Wells estimates that one in three households in America does business with them. Wells Fargo has $1.2 trillion in assets and more than 278,000 team members across their 80+ businesses. They ranked fourth in assets, and third in market value of their stock among their U.S. peers as of March 31, 2010 ("Wellsfargo.com," 2010).
Wells Fargo’s company vision is stated as, “We want to satisfy all our customers’ financial needs, help them succeed financially, be the premier provider of financial services in every one of our markets, and be known as one of America’s great companies.” This statement has led them to have an outstanding reputation in the community. They have been recognized in the following publications: FORTUNE 19th in Revenue among All Companies in All Industries (2010), World’s 39th Most Admired Company (2010), Forbes One of America’s Best Big Companies (2008), Top 100 Best Companies in the World (2010), Barron’s World’s 50 Most Respected Companies (2010), BusinessWeek Best Places to Launch a Career (2009), America’s #2 Most Generous Corporate Foundations (2010), Newsweek America’s #1 Green Bank and #13 Greenest Big Company (2009), Human Rights Campaign Perfect Score of 100 on Corporate Equality Index (2009),U.S. Environmental. we researched Wells Fargo's performance in the last couple of years as a way to check on its progress to greatness. What we found was an overwhelmingly charismatic company that not only puts down its values in ink, but also strictly abides by them. Much to our surprise, a huge chunk of their thick annual report for 2002 was an honest listing of all the threatening factors that stand in the company's way rather than its exceptional rankings in its sector. In this paper, we will focus specifically on Wells Fargo's leadership, company culture, SWOT analysis, and financial performance analysis. We will try to link our findings to Jim Collins's book as a way to prove that the company has really made the jump from good to great.
Charismatic Leadership
The CEO Dick Kovacevich became the head of the company in 1998 after its merger with Norwest Corp. "Business Week" classifies him as one of the best managers: "While many of his peers have been embroiledin one scandal or another, Wells Fargo & Co. CEO Richard M. Kovacevich, 59, has kept his bank safely out of the fray" (BW). Kovacevich obtained his MBA from Stanford after an injury in his shoulder kept him from becoming a pitcher for the New Yorker Yankees. Nevertheless, Kovacevich transports his athletic attitude to his business "pitching hard and fast" in his industry (RMA Journal). For him, mistakes are unavoidable part of business but he treats them as opportunities to learn and grow. His core strategy is to sell as many products as possible to each customer. Currently, four products are sold on average to each customer, which is double the industry average. Furthermore, Kovacevich admits to his willingness to sacrifice a little profit margin for the purpose of building lasting and trusting relationships with their customers.
Problem Statement:
Wells Fargo is losing a portion of their prospective business by only focusing their model on the retail consumer deposits and loan sector, which is more heavily Operational rather than Customer based.
Hypothesis:
Wells Fargo would capture additional clientele by creating a specialized business unit that caters to high wealth customers with $25 million or more in net worth.
Analysis Plan / Solution Approach:
I am using the BMG Canvas to map what would be required for Wells Fargo to create a new specialized high net worth business (blue) vs. what they currently have as a business model (green). I will also use the Value Proposition map to review how Wells Fargo is currently positioned to see if it fits with a more high net worth client’s needs.
Data Used / Key Assumptions:
Wells Fargo Analyst reports, “Occupy Protests” articles and information, Banking industry reports, Wall Street Journal, Wells Fargo earnings reports, Assuming Wells Fargo has some staff already trained to take on high net worth clients as they do have a small investment business line
Analyze Data / Draw Conclusions:
Wells Fargo shares dropped 8% in Q3 2011. Since the economic downturn in 2008, Wells Fargo has been focusing more on retail business while competitors, like Citigroup, have moved more towards an investment focus. Wells Fargo is cited as having a “weak” investment operation, focusing too much on “meat and potatoes” of banking, with easy deposits. Wells Fargo is projected to continue to lose money in Q4 2011. Deposit accounts provide a lower return for banks than investment accounts. Earnings on loans vs. cost of deposits have declined from a year ago, indicating deposits are not as profitable as other lines of business. Focusing on average retail consumers only translates to lower profits. Wells Fargo’s Value Proposition is currently not geared towards high net worth clients.
Conclusion:
Wells Fargo will capture additional clientele with a new division focused on clients with a net worth of $25 million or more, as they have not been doing so in the past.
Recommendation to Management:
Wells Fargo should add a new line of business focused on high net worth clients and with the characteristics outlined on the BMG Canvas. This will begin to diversify its product line and will allow Wells Fargo to be able to gain market share with a new, high-revenue generating client. With protestors pushing for retail consumers to ...