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Business Strategy Final Projec 1) Misbah Bashir (0045) 2) Saira Ashraf (2051) July 2, 2014
M. Com July 2, 2014
M. Com

“This is not a task. This is a journey. Every journey has a destination. To get to that destination, you need a vision. Ours is an ambitious one.”
Richard M. Kovacevich CEO and chairman of Wells Fargo’s

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2) Company Profile of Related Case Study

* History:
Origins
Soon after gold was discovered in early 1848 at Sutter's Mill near Coloma, California, financiers and entrepreneurs from all over North America and the world flocked to California, drawn by the promise of huge profits. Vermont native Henry Wells and New Yorker William G. Fargo watched the California boom economy with keen interest. Before either Wells or Fargo could pursue opportunities offered in the West, however, they had business to attend to in the East.
Wells, founder of Wells and Company, and Fargo, a partner in Livingston, Fargo and Company, were major figures in the young and fiercely competitive express industry. In 1849 a new rival, John Butterfield, founder of Butterfield, Wasson & Company, entered the express business. Butterfield, Wells, and Fargo soon realized that their competition was destructive and wasteful, and in 1850 they decided to join forces to form the American Express Company.
Soon after the new company was formed, Wells, the first president of American Express, and Fargo, its vice-president, proposed expanding their business to California. Fearing that American Express's most powerful rival, Adams and Company (later renamed Adams Express Company), would acquire a monopoly in the West, the majority of the American Express Company's directors balked. Undaunted, Wells and Fargo decided to start their own business while continuing to fulfill their responsibilities as officers and directors of American Express.
Foundation of Wells Fargo
On March 18, 1852, they organized Wells, Fargo & Company, a joint-stock association with an initial capitalization of $300,000, to provide express and banking services to California. The original board of directors comprised Wells, Fargo, Johnston Livingston, Elijah P. Williams, Edwin B. Morgan, James McKay, Alpheus Reynolds, Alexander M.C. Smith and Henry D. Rice. Of these, Wells, Fargo, Livingston and McKay were also on the board of American Express.
Financier Edwin B. Morgan of Aurora, New York, was appointed Wells Fargo's first president. They commenced business May 20, 1852, the day their announcement appeared in The New York Times. The company's arrival in San Francisco was announced in the Alta California of July 3, 1852. The immediate challenge facing Morgan and Danford N. Barney, who became president in November 1853, was to establish the company in two highly competitive fields under conditions of rapid growth and unpredictable change. At the time, California regulated neither the banking nor the express industry, so both fields were wide open. Anyone with a wagon and team of horses could open an express company; and all it took to open a bank was a safe and a room to keep it in. Because of its comparatively late entry into the California market, Wells Fargo faced well-established competition in both fields.
From the beginning, the fledgling company offered diverse and mutually supportive services: general forwarding and commissions; buying and selling of gold dust, bullion, and specie (or coin); and freight service between New York and California. Under Morgan's and Barney's direction, express and banking offices were quickly established in key communities bordering the gold fields, and a network of freight and messenger routes was soon in place throughout California. Barney's policy of subcontracting express services to established companies, rather than duplicating existing services, was a key factor in Wells Fargo's early success.
So in 1852, Henry Wells and William Fargo founded a financial services company that has become a legendary part of the American West, and a part of thousands of other communities as well. This heritage continues as part of Wells Fargo’s identity today—in our values, with our service, and with our people.
Wells Fargo and Company’s Express provided financial services by the fastest means available: overseas by sailing ship or steamer; and overland by stagecoach, Pony Express or railroad. Within a few years, business was transacted electronically by telegraph, which would later grow to include radio, telephone and the internet.
From the first day of business, Wells Fargo came through for pioneer miners, merchants and ranchers in the West. And in a very short time, the company opened offices in mining camps, towns and cities—there were more than 10,000 Wells Fargo offices by 1918.
The current Wells Fargo is a result of a 1998 merger between Minneapolis-based Norwest Corporation and the original Wells Fargo. Although Norwest was the nominal survivor, the new company kept the Wells Fargo name to capitalize on the long history of the nationally recognized Wells Fargo name and its trademark stagecoach (the company's previous slogan, "The Next Stage," is likely a nod to the company's trademark). After the acquisition, the parent company kept its headquarters in San Francisco. The company's current tagline, "Together we'll go far" also references the stagecoach motif, its customers, and represents the company name itself in a transposed way (Wells Far-go = we'll[s] go-Far).

* Introduction:
Wells Fargo & Company is an American multinational banking and financial services holding company which is headquartered in San Francisco, California, with "hubquarters" throughout the country. It is the fourth largest bank in the U.S. by assets and the largest bank by market capitalization. Wells Fargo is the second largest bank in deposits, home mortgage servicing, and debit cards. In 2011, Wells Fargo was the 23rd largest company in the United States.
In 2007 it was the only bank in the United States to be rated AAA by S&P, though its rating has since been lowered to AA in light of the financial crisis of 2007–2012. The firm's primary U.S. operating subsidiary is national bank Wells Fargo Bank, N.A., which designates its main office as Sioux Falls, South Dakota.
Wells Fargo in its present form is a result of a merger between San Francisco-based Wells Fargo & Company and Minneapolis-based Norwest Corporation in 1998 and the subsequent 2008 acquisition of Charlotte-based Wachovia. Following the mergers, the company transferred its headquarters to Wells Fargo's headquarters in San Francisco and merged its operating subsidiary with Wells Fargo's operating subsidiary in Sioux Falls.
Wells Fargo is one of the "Big Four banks" of the United States, along with JPMorgan Chase, Bank of America and Citigroup—its main competitors. The company operates across 35 countries and has over 70 million customers globally. In 2012, it had more than 9,000 retail branches and over 12,000 automated teller machines in 39 states and the District of Columbia. As of July 12, 2013, Wells Fargo became the world's biggest bank by market capitalization, worth $236 billion, beating ICBC.
In February 2014 Wells Fargo was named the world's most valuable bank brand for the 2nd year running in The Banker and Brand Finance study of the top 500 banking brands.

* Registered Head Office:
Wells Fargo registered head office located in San Francisco and California, United States and served as worldwide.
“We’re headquartered in San Francisco, but we are decentralized so every local Wells Fargo store is a headquarters for satisfying all our customers’ financial needs and helping them succeed financially.” (Company’s statement)

* Nature Private/Public:
If we talk about Wells Fargo nature, it’s Public. Kovacevich states, “We are a big company. We will continue to grow—not to become bigger but as a result of getting better. . . . Regardless of how big we are and how much territory we cover our team shares certain values that hold us together wherever we are and whatever we do.”

* Auditor:
If we talk about Wells Fargo auditors, KPMG is still Wells Fargo auditor.

* Functions:
Wells Fargo functions are; * Banking, * Financial services.

* Products:
Wells Fargo products are; * Consumer banking, * Corporate banking, * Credit cards, * Finance and insurance, * Foreign currency exchange, * Investment banking, * Mortgage loans, * Private banking, * Private equity, * Wealth management. * Main Brands: * Main Departments: * Business Volume (Countries in Which Company is Preforming it’s Operations):
Wells Fargo provides banking, insurance, investments, mortgage and consumer finance services for more than 25 million customers through over 6,000 stores. If we talk about its area in which he served to customers it’s Worldwide. * Revenue Decrease US$ 83.78 billion (2013) * Operating income Increase US$ 32.62 billion (2013) * Profit Increase US$ 21.87 billion (2013) * Total assets Increase US$ 1.527 trillion (2013) * Total equity Increase US$ 170.1 billion (2013) * Employees 264,900 (2013)

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3) Company Analysis

* SWOT Analysis (Strategy of SWOT analysis):

Strength:- 1. Leading innovator in the use of internet and e-commerce ( Online growth) 2. Servicing for more than 25 million customers through over 6000 stores. (Worldwide service) 3. Strong balance sheet (Strong financial position) 4. Strong national presence and credible reputation (Strong brand) 5. Values and treats its customer as friends (Loyal customers) 6. Values its people as its competitive advantage (Strong HR & management team) 7. Widely recognized as industry and market share leader (Industry leader)

Weakness:- 1. Cut its dividend payment in a move to attempt to solidify its balance sheet (Diseconomies of scale) 2. Overcommitted in credit swap (Over leveraged financial position) 3. The reduction of Wells Fargo debt rating two levels during January 2009 (Weak capital position) 4. The Wachovia Bank subprime mortgage problems (Over leveraged financial position) 5. Too much focus on consumer/retail banking (Not diversified) 6. Weak International growth. 7. Wells Fargo basically did no securities business after merger (Not diversified)

Opportunities:- 1. Growth and success of combined. 2. Increasing its extensiveness through mergers and acquisitions with recently owned Wachovia or with other new bank (M&A opportunities) 3. Move the large national bank with an international presence forward or expansion abroad (International growth) 4. The disappearance of investment banking and the 5. The use of internet banking and e-commerce (Online growth) 6. Wachovia and Wells Fargo will be one of the great financial services company (National growth) 7. Wells Fargo announcement to significantly expand its security business (Product & service diversification)

Threats:- 1. Lingering economic recession and changes in the banking industries (Economic slowdown) 2. The lack of regulation today (External factors/PEST) 3. The large national bank have become larger while community banks still exist to satisfy local customer (Intense competition) 4. There will be anticipated duplication of labor and functions (Company’s downsizing) 5. There would be continued downward pressure on housing price (Weak real estate business)

When analyzing the strengths of Wells Fargo Company we noticed that Wells Fargo’s overall size is their biggest strength. As noted under the company section, they are physically the largest bank in America. We identify the banking industry as a still expanding and growing market; therefore we see Wells Fargo’s banking services to be a star instead of a cash cow when using the BCG matrix. When our team analyzed the advertising and marketing measures that Wells Fargo uses, we noticed that they are a highly recognizable brand, and therefore their marketing recognition is a strength.

Weaknesses include the fact that they are not international when many of their competitors are, as well as general banking weaknesses such as security, policies, regulation, and problems with our current economy that banks face.

Opportunities that our group points out are easily brought down from our weaknesses, but also from our research. When doing research we found that US Bank helps with customer’s tax returns, perhaps Wells Fargo could follow the same type of idea. Maybe a merger with a company like H&R Block could gain customers.

Finally, threats that we noted are mostly self-explanatory. One thing our team would like to talk about though is the problem with brand loyalty. In the banking business the biggest threat is that of brand loyalty. How does a company keep its customers loyal, and what if a new competitor’s promotions exceed the company’s? A big threat is that of losing customer loyalty through such measures. * Ratio Analysis: * BCG Matrix:

* Internal Evaluation Matrix & External Evaluation Matrix & CPM:

* Wells Fargo Internal Factor Evaluation Matrix:- Key Internal Factors | Weighted | Rating | Weighted Score | Strength | 1. Industry Leader | 0.12 | 4 | 0.48 | 2. Loyal Customer | 0.10 | 4 | 0.40 | 3. Online Growth | 0.06 | 2 | 0.12 | 4. Strong Brand | 0.08 | 4 | 0.32 | 5. Strong Financial Position | 0.11 | 3 | 0.33 | 6. Strong HR & Management Team | 0.08 | 4 | 0.32 | 7. Worldwide Service | 0.06 | 2 | 0.12 | | Weakness | 1. Diseconomies of scale | 0.08 | 3 | 0.24 | 2. Not Diversified | 0.07 | 2 | 0.14 | 3. Weak capital position | 0.07 | 2 | 0.14 | 4. Weak international growth | 0.06 | 3 | 0.18 | 5. Weak real estate business | 0.11 | 2 | 0.22 | | Total | 1.00 | | 2.93 |

* Wells Fargo External Factor Evaluation Matrix:- Key Internal Factors | Weighted | Rating | Weighted Score | Opportunities | 1. International growth | 0.12 | 4 | 0.48 | 2. M&A opportunities | 0.14 | 3 | 0.24 | 3. National growth | 0.09 | 3 | 0.36 | 4. Online growth | 0.11 | 3 | 0.33 | 5. Product & service diversification | 0.12 | 4 | 0.48 | | Threats | 1. Company’s downsizing | 0.06 | 1 | 0.06 | 2. Economic slowdown | 0.12 | 2 | 0.24 | 3. External factors/PEST | 0.07 | 2 | 0.14 | 4. Intense Competition | 0.09 | 2 | 0.18 | 5. Weak real estate business | 0.08 | 1 | 0.08 | | Total | 1.00 | | 2.42 |

* SPACE Matrix: Composition | Ratings | Financial Strengths (FS) | 1. Liquidity | 6.0 | 2. Leverage | 5.0 | 3. Company Model | 6.0 | 4. Return on Assets | 4.0 | 5. Return on Equity | 4.0 | 6. Stock Price | 6.0 | 7. Net Income | 6.0 | FS Total | 37 | FS Average | 5.3 | | Industry Strengths (IS) | 1. Benefits Potential | 6.0 | 2. Extend Leveraged | 6.0 | 3. Economic Scale | 5.0 | 4. Development Potential | 6.0 | 5. Financial Stability | 5.0 | 6. Utilization of Recourses | 4.0 | 7. Diverse Portfolio | 4.0 | IS Total | 36 | IS Average | 5.1 | | Environmental Stability (ES) | | 1. Price Range of Competing Products | -2.0 | 2. Competitive Pressure | -1.0 | 3. Market Distribution | -3.0 | 4. Advertising Success | -4.0 | 5. The Employment Contract | -1.0 | 6. Price Elasticity of Demand | -1.0 | 7. Risks Involved in the Business | -1.0 | ES Total | -13.0 | ES Average | -1.9 | | Competitive Advantage (CA) | | 1. Market Share | -1.0 | 2. Globalization | -1.0 | 3. Reputation for Strong Investor | -1.0 | 4. Technology Innovation | -1.0 | 5. Product life cycle | -2.0 | 6. Customer Loyalty | -2.0 | 7. Control over suppliers and distributor | -2.0 | CA Total | -10.0 | CA Average | 1.40 |

* SPACE Matrix Diagram:FS
FS
+6
+6
+1
+1
+5
+5
+4
+4
+3
+3
+2
+2
-6
-6
-5
-5
-4
-4
-3
-3
-2
-2
-1
-1
-6
-6
-5
-5
-4
-4
-3
-3
-2
-2
-1
-1
+1
+1
+2
+2
+3
+3
+4
+4
+5
+5
+6
+6
ES
ES
CA
CA
IS
IS
Defensive
Defensive
Competitive
Competitive

Aggressive
Aggressive
Conservative
Conservative

* IE Matrix:

EFE Score 4.0 Strong Average Weak

Grow and Build

I II III High

2.42 Hold and Maintain Medium

IV V VI

VII VIII IX Low

Harvest or Divest IFE Score 1.0 4.0 2.93 1.0

Hold & Maintain (Average/ Medium)

* Market Penetration;
By increasing market share expansion or marketing way wider. * Product Development; * Namely by improving existing products or create new products, as described in the article, that Wells Fargo develop financial securities products.

* QSPM (Quantitative Strategic Planning Matrix): | Market Penetration | Product Development | Key Factors | Weight | AS* | TAS** | Weight | AS* | TAS** | Strengths | | | | | | | 1. Industry Leader | 0.12 | 4 | 0.48 | 0.12 | 2 | 0.24 | 2. Loyal Customer | 0.10 | 3 | 0.30 | 0.10 | 2 | 0.20 | 3. Online Growth | 0.06 | 2 | 0.12 | 0.06 | 1 | 0.06 | 4. Strong Brand | 0.08 | 4 | 0.32 | 0.08 | 3 | 0.24 | 5. Strong Financial Position | 0.11 | 4 | 0.44 | 0.11 | 3 | 0.33 | 6. Strong HR & Management Team | 0.08 | 3 | 0.24 | 0.08 | 3 | 0.24 | 7. Worldwide Service | 0.06 | 3 | 0.18 | 0.06 | 2 | 0.12 | Weakness | | | | | | | 1. Diseconomies of scale | 0.08 | 3 | 0.24 | 0.08 | 2 | 0.16 | 2. Not Diversified | 0.07 | 2 | 0.14 | 0.07 | 2 | 0.14 | 3. Weak capital position | 0.07 | 3 | 0.21 | 0.07 | 3 | 0.21 | 4. Weak international growth | 0.06 | 3 | 0.18 | 0.06 | 3 | 0.18 | 5. Weak real estate business | 0.11 | 2 | 0.22 | 0.11 | 2 | 0.22 | Sum Weights | 100% | | | 100% | | | Opportunities | | | | | | | 1. International growth | 0.12 | 4 | 0.48 | 0.12 | 4 | 0.48 | 2. M&A opportunities | 0.14 | 3 | 0.42 | 0.14 | 3 | 0.42 | 3. National growth | 0.09 | 3 | 0.27 | 0.09 | 3 | 0.27 | 4. Online growth | 0.11 | 2 | 0.22 | 0.11 | 2 | 0.22 | 5. Product & service diversification | 0.12 | 2 | 0.24 | 0.12 | 3 | 0.36 | Threats | | | | | | | 1. Company’s downsizing | 0.06 | 2 | 0.12 | 0.06 | 2 | 0.12 | 2. Economic slowdown | 0.12 | 3 | 0.36 | 0.12 | 3 | 0.36 | 3. External factors/PEST | 0.07 | 2 | 0.14 | 0.07 | 2 | 0.14 | 4. Intense Competition | 0.09 | 2 | 0.18 | 0.09 | 2 | 0.18 | 5. Weak real estate business | 0.08 | 2 | 0.16 | 0.08 | 2 | 0.16 | Sum Weights | 100% | | | 100% | | | | Sum Total Attractiveness Score | | 5.66 | > | 5.05 |
* Attractiveness Score
** Total Attractiveness Score

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4) Strategy Recommendation Based On Company Plan
Wells Fargo need the company’s growth strategy to win the competition in the industry and to keep stronger their position in the market.

Recommended Strategies
Wells Fargo use Incentive Strategy by doing Market Penetration and Integrated Strategy by doing
Horizontal Integration.
Follow by these Implementation Strategy: 1. Developing competitor’s acquisition program 2. Developing international offices abroad 3. Developing insurance business entry program 4. Developing marketing & publicity program

Recommended Decision
The Management has decided to allocate capital expenditure to develop: 1. Competitor’s acquisition program 2. Insurance business entry program 3. International office abroad

Action Plan 1. Developing Competitors Acquisition Program: i. Acquisition Wachovia (the major competitor) ii. Start negotiation & agreement iii. Preparing the takeover funds

2. Developing Insurance Business Entry Program: i. Set up the organization & resources ii. Set up the 10 years business plan iii. Start the promotion of new business

3. Developing International Offices Abroad: i. Targeting New Markets in Europe, Asia &Australia ii. Set up the organization & resources iii. Set up the10 years business plan

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