Strategic Management

Case Report

JPMorgan Chase & Co.

Prepared by:
Bilal Ahmed Siddiqui (ID- 9331)
Muhammad Danish (ID- 5588)

Presented to:
Sir Abdul Mujeeb Farooqi
 JPMorgan Chase & Co.

Abstract

JP Morgan Chase & Co. is a financial company and its headquarter is

located in New York City.
They serve in more than 60 countries with the workforce of over
240,000. Considered many to be the largest bank in the USA, JPM
reported total assets in 2012 of over $2.3 trillion and is a Dow Jones
Industrial Average 30 member.

JPM operates in two broad segments, 1) JP Morgan and 2) Chase. JP

Morgan brand focuses on large corporations, governments and
institutional investors; the Chase brand focuses on consumers and
smaller businesses.

About 80% of the JPM’s $100 billion in revenues is derived from

businesses in the USA, leaving only $20+ billion being derived from
foreign markets, with Europe/Middle East & Africa accounting for
around 67% of foreign revenue. JPM enjoyed modest growth in 2012
especially in its Consumer & Community Banking in overseas markets.
This segment reported a 71% increase in sales to $10.6 billion in 2012.
However, JPM’s Corporate and Private Equity segments in both USA and
foreign markets reported decreases in sales of 128% and 353%
respectively in 2012 – so the company does need a clear strategic plan
for the future.
Vision Statement

JPMorgan Chase, we want to be the best financial services provider

worldwide. Because of our great heritage and excellent platform, we
believe this is within our reach.

Mission Statement
JP Morgan Chase tries to be the number one choice for governments,
institutions, small businesses and consumers for all of their banking
needs. At JPM, they pride ourselves on Consumer & Community
Banking, where they feel they are the best in the world. They are
consistently redeveloping their selves and moving resources around to
provide the maximum return for the shareholders. Their mobile
platforms are used extensively by customers globally. JMP hires only the
most experienced financial advisors and believe good ethics is good
business. They strive to be great community citizens everywhere they
operate.

External Audit
Opportunities:

a) Growing customer base for asset management and investment bank

services in Latin America, Asia, Africa and the Middle East.
b) USA small businesses are continuing to develop and recover.
c) Customers prefer to do banking businesses face to face when it
comes to applying for credit cards, seeking financial advices, and
getting loans.
d) Bank of America is laying off about 36K people.
e) The USA government filed a civil lawsuit seeking $1 billion in
damages for misrepresenting the quality of home loans sold to
Fannie Mae and Freddie Mac.
f) Smart phone providers such as Apple and Android may wish to form
an alliance with banks to help facilitate the usage of mobile phone
payments.
g) Unemployment rate is improving, as a result qualifying more people
for home loans.
h) More and more consumers prefer online banking and smartphone
banking.

Threats:

a) Banks are viewed like commodities to many potential customers.

b) Bank of America and Citigroup are two large domestic
competitors.
c) Foreign banks have yet to enter the USA market on a wide scale.
d) Increase in online banks such as Ally and ING Direct are
advertising heavily and marketing no fees on many products
where brick and mortar banks are increasing fees.
e) Low interest rates have helped to squeeze profits from banks.
f) The Dodd Frank Wall Street Reform and Customer Protection Act
signed by President Obama, is expected to greatly increase the
fees all financial intuitions pay.
g) Mobile payments over smartphones and Near Field
Communications (NFC) are expected to greatly erode into credit
card usage.
h) In 2012, around 25% of homes are in a delinquent state, 4.7
million homes.
 i) Percent of Americans owning checking accounts dropped from 92
to 88% between 2010 and 2011 and the number owning a credit
card dropped from 74 to 67%.
j) The Federal Reserve Board established the Consumer Financial
Protection Bureau, which has placed restrictions for lenders on
credit cards, mortgage loans, student loans, and auto loans.

Competitive Profile Matrix

Based on the factors in the CPM, JPM is out performing both major rivals
Citigroup and Bank of America. An area where JMP lags significantly
behind is on geographic range of markets serviced. One factor not
considered because all their firms above are relatively the same was
fees. Many online banks such as Ally and E-Trade can offer services with
much lower fees or no fees at all to customers.

EFE Matrix
JPM is addressing external issues slightly above average with a score
of 2.58. A key area JPM needs to focus on is entering more foreign
markets. Currently JPM only serves 60 international markets, while
rivals Citigroup and Bank of America serve over 150 each. The threat
 of foreign banks increasingly doing business in the USA is also a risk
factor moving forward.

Internal Audit
Strengths:

a) Largest bank in the USA with $2.3 trillion in assets and operations in
over 60 countries.
b) Increased clients in Brazil, China, and India from 200 to 800 between
2008 and 2012 and expected to increase to 2,000 by 2017.
c) Significant focus on USA small businesses providing $17 billion of
credit in 2011 alone; added 1,200 relationship mangers and business
bankers from 2009 to 2012.
d) Acquired Sempra in 2011 to become one of the top three firms in the
world in commodity dealings.
e) Continue to add physical branches across the country while
competitors are removing branches.
f) Provides detailed segment data for 7 different businesses.
g) Controls 12.3% of bonds in the USA, making JPM the largest holder
among all banks.
h) JPM focuses heavily doing business with small businesses.
i) International Consumer & Community Banking segment reported a
71% increase in revenues in 2012.

Weaknesses:
a) Many in upper management have dual titles.
b) Heavy reliance on the USA with over 80% of 2012 revenues derived from
the USA up from 75% in 2011.
c) Less than 4% of Investment Bank revenues derived from Latin America.
d) Poor judgment in lending has resulted in JPM continued mortgage losses
expected.
e) $48 billion in goodwill on the balance sheet.
f) Domestic Corporate/Private Equity reported $4 billion in revenues in
2011 and -$1 billion in 2012 for a net change of -128%.
g) International Corporate/Private Equity experienced a -353% decrease in
revenues from 2011 to 2012.
h) Domestic Consumer & community banking segment reported only a 9%
increase in revenues in 2012.
i) London Whale ethical issues plague JPM.

Net Worth Analysis (in billions)

JPM is worth slightly more than Citi, yet has substantially higher net income
in 2012. Both JPM and Citigroup are actually valued at a discount as
stockholders’ equity is higher than shares outstanding x share price.
IFE Matrix

JPM is doing slightly above average on addressing internal issues as indicated by

the 2.68 score. A major weakness of the firm is that they only have operations in
60 nations while competitors Citigroup and Bank of America have business
operations in over 150 nations. However, the company remains the largest in the
USA based on assets and net worth. JPM should expand further into Latin
America and Europe.

SWOT Analysis:
SO Strategies

1. Continue with plans to increase customer base in Latin America to 2,000

by 2017 (S2, S9, O1).
2. Form an alliance with Apple or Samsung to help facilitate mobile phone
payments (S1, S8, S9, O6, O8).
3. Allocate $200 million through 2015 to develop new relationships with
small businesses in the USA (S5, S8, O2, O4, O7).

WO Strategies
1. Spend $300 million in Europe for customer acquisitions (W2, O1).
2. Spend $100 million in Latin America to acquire new customers,
especially in the investment bank segment (W2, W3, O1).
3. Divest both the domestic and international Corporate/Private Equity
segments (W6, O1, O2, O6).

ST Strategies
1. Spend $200 million on advertising in the USA to attract more small
business customers (S1, S3, S5, S8, T1, T2, T9).
2. Increase free checking and feeless products for customers who have a
checking account with Chase (S1, S5, T1, T2, T3, T4,T9).
3. Spend $2 billion by 2015 to increase stake in bonds and commodity
financial instruments (S4, S7, T4, T7, T9, T10).

WT Strategies
1. Divest both the domestic and international Corporate/Private Equity
segments (W6, T5, T8, T10).
2. Spend $500 million to develop a better statistical model for predicting
whom (and whom not) to lend to and at what interest rate (W4, W6,
W7, T5, T8, T10).

Grand Strategy Matrix

JPM is located in Quadrant IV of the Grand Strategy Matrix based on its

strong competitive position and slow market growth of the industry. The
banking industry is facing more governmental regulation, ease of entry of
online competitors, and a climate of low interest rates. As a result, banks
are forcing higher fees on consumers to make up for lost revenues, and
overall the industry has experienced negative sales growth over the last 5
years of around 3% compared to the SP 500 average of positive 3%. JPM
should divest areas of their business that deal with private and corporate
 equity, rethink its strategy of adding more branch offices, and focus more
on commodities and bonds.

The Internal-External (IE) Matrix:

Services Offered 2012 Revenues (in Percent
millions) Revenues
(1) Consumer &Community $60,556 50%
Banking
(2) Corporate & Investment 42,732 35
Banking
(3) Commercial Banking 9,471 8
(4) Asset Management 11,649 10
(5) Corporate/Private Equity (3,234) (3)
Totals $121,174 100%

JPM overall is in the hold and maintain cell of the IE Matrix. Corporate/Private
Equity should be divested and an expansion of the bonds and commodities found
in the Corporate & Investment Banking division should be expanded. While
Consumer & Community Banking has the largest total revenues, it is unclear what
margins are obtained from this division. Increased competition from online banks
may soon weight heavily on this division.
QSPM
The QSPM reveals that increasing global presence, especially in Latin
America, Europe, and Asia, is a more attractive strategy than marketing
further to small businesses in the USA. This makes intuitive sense, since
80% of all revenues in 2012 were derived from the USA.
Recommendations

1. Carry on with plans to increase customer base in Latin America to 2000

till 2017.
2. Form an association with Apple or Samsung to help facilitate mobile
phone payments.
3. Spend $300 million in Europe for customer attainments.
4. Spend $100 million in Latin America to acquire new customers,
especially in the investment bank segment.
5. Divest both the domestic and international Corporate/Private Equity
segments.
6. Increase free checking and feeless products for customers who have a
checking account with Chase.
7. Spend $2 billion by 2015 to increase stake in bonds and commodity
financial instruments.
8. Spend $500 million to develop a better statistical model for predicting
whom and whom not to lend to and at what interest rate.