Wells fargo competitive advantage

WEEK 3 ASSIGMENT 1 6

Week 3 Assignment 1

Ellen Milton

Strayer University

BUS499 Business Administration Capstone

Dr. Brian C. Grizzell

July 14, 2018

Week 3 Assignment 1

Introduction

Wells Fargo is an international financial company. It offers diverse financial services including banking, investments, insurance, mortgage, and commercial and consumer finance. It has its headquarters in San Francisco and has about 9000 stores internationally and across North America. It has been in business for long and has set its base as a reliable financial services company with businesses in different countries. Its strategic plan and stakeholders have contributed to its success despite effects of the technological advancements and globalization.

Globalization

Globalization have impacted greatly on Wells Fargo. They have had positive and negative effects. Globalization has helped in managing the physical supply chain. This has led to a substantial progress that optimizes the physical supply chain. Nonbank and bank payment technologies have eased business by enabling small companies to do business with larger ones. Optimal financing instruments have emerged that minimize the capital cost to both supplier and seller and develop a beneficial partnership. The cost that would have been incurred in the capital can be directed to other sectors in the business. These may include business expansion or increasing efficiency in other departments. Technology-based financing options lower administrative burdens, risks and costs incurred in handling the cash and its transactions. Despite globalization showing a positive impact, it has its negative side. It has led to loss of several jobs more so from automation of most processes.

Technology

Technology has had a significant impact on financial management approaches. Previously, the sellers and buyers worked independently in acquiring the financial assistance that was necessary to enable their businesses to trade. This approach was costly as the process resulted in additional costs. There were trade documents used traditionally such as credit letters to follow up processes and keep records. These were expensive and heavily relied on manual processes. Such transactions can nowadays be done through online communication or telephone calls. This lowers the cost incurred by both clients and Wells Fargo and saves on time. There has been an increase in the number of available financing options for the company through technology.

Industrial-Based Model

There are two models that can be used by a company to earn returns that are above average. These are industrial organization model and resource-based model. The industrial organization model argues that external characteristics of the firm largely determine above-average returns. It focuses on the external characteristics of the firm such as the general, industry and competitive environment. The general environment is about the society, demographic, sociocultural, technological and political trends. Political stability is necessary to provide an enabling business environment. An increase in population size can impact positively on revenue due to high demand for financial services offered by Wells Fargo. The income distribution of the population will also determine the purchasing power. Wells Fargo has tailored its services to suit customers from all income levels, and this is one way of realizing above-average revenue. The industry environment consists of supplier power, entry barriers, buyer power, competitive rivalry and availability of substitutes. New firms always take a share of the market when they enter an industry. Wells Fargo is established and is a major shareholder in the financial industry that can be rarely shaken by new entrants. The financial industry is characterized by a high buyer power. Customer care must be kept efficient and high to retain customers, and this is one area that Wells Fargo has invested. There is competitive rivalry between wells Fargo, Bank of America, J. P. Morgan Chase and Citigroup. However, differentiation of products makes it possible to recognize them and avoid confusion.

Resource-Based Model

On the other hand, resource-based model argues that it is the internal characteristics of any organization that determine the above-average returns. It focuses on obtaining and developing important capabilities and resources that cannot be imitated by rival companies. It needs the knowledge of the firm’s resources and its strengths and weaknesses. The integration of resources, strengths and capabilities, should be used to create a competitive advantage. Wells Fargo has the strengths of large market share, unique products and a good reputation. These make it trustworthy for customers who like dealing with an established financial company like Wells Fargo. The unique products make it easier to recognize in the market so that customers do not have a problem in associating with the company. To provide a competitive advantage, the resources and capabilities should be valuable, rare, costly to imitate and impossible to substitute. They should enable the firm to exploit opportunities and neutralize the external threats. The firm needs to be well-organized to realize the full benefits of these capabilities to use them as a competitive advantage.