INDUSTRY ANALYSIS

1.
Checking Account deposit account held at a bank or other financial institution, for
the purpose of securely and quickly providing frequent access to funds on
demand, through a variety of different channels.


The banking industry offers several financial services through different ways. For
the customers convenience, the following are the distribution channels provided
by the bank:
Automated Teller Machines allow the customers to access banking services
anytime, but at designated locations.
Branch which serves as a retail location
Mail never gets old. Most banks accept cheque deposits via mail and use mail to
communicate to their customers.
Mobile banking is a method of using one's mobile phone to conduct banking
transactions
Online banking is also believed to reduce costs in the transaction of services,
whilst adding customer convenience. It, therefore, enables customers to conduct
transactions, make purchases or collect information at a click.
Relationship Managers which involves visits to customers at their homes or
businesses mostly for private banking or business banking.
Telephone banking allows the company to access wide array of simple financial
services. It is a very cost effective method of prospecting new clients and at the
same time it provides different services to customers.
Video banking is a term used for performing banking transactions or
professional banking consultations via a remote video and audio connection.
DSA is a Direct Selling Agent, who works for the bank based on a contract. Its
main job is to increase the customer base for the bank.

2. The United States has the most banks in the world in terms of institutions (7,085
at the end of 2008) and possibly branches (82,000).
(http://en.wikipedia.org/wiki/Banking_in_the_United_States)
Products being offered are not differentiated since activities are common to all
players in the banking industry but the company, however, may differentiate their
products from competitors through variations in their services.
Compared to many businesses, banks incur extremely high fixed cost and with a
very low variable cost. Fixed costs are particularly important when it comes to
calculating the break-even output of a business. A business needs to generate
enough contribution to cover its fixed costs in order for it to break-even. Putting
up numerous branches just to reach the customers is entirely composed of fixed
cost, thus, making the financial institutions find it hard to exit the market due to
large capital and it will take too long for them to break-even.
Intensive marketing, technological advantage and efficient financial management
are some factors that make the competition stiff.



3. Since a consolidated industry is likely to be more profitable than a fragmented
one, firms have a predisposition to modify the industry structure in their favor,
making it more consolidated through (horizontal) mergers and acquisitions.
Through this there became fewer competitors and that is generally associated
with higher industry profitability. Wells Fargo, along with its major competitors
namely Bank of America, J.P Morgan Chase Bank and Citibank, had a lot of
acquisition for the past years.


Bank of the America held $1,082,242,862,000 total assets ranking them as #1 on total
assets by American Banker. BofA has a market share of 21% based on assets. Also,
Bank of America has 161,318 full-time employees and 5,808 branches around the
United States. All the branches are distributed within 50 states. However, according to
Gardner, After [Wells Fargos] forays onto the tundra, the bank's 2,900-branch network
spans almost 3,500 miles across 23 states and five time zones, from Van Wert, Ohio, to
Bethel, Alaska, and that's more miles and more time zones than BofA (Gardner). It can
be seen, therefore, that Wells Fargo could be considered the biggest bank by physical
size.
Their products do not generally have a set price, since the diversity of the banking world
has several different interest rates applying to different credit scores as well as sizes of
corporations. Most of their banks can be found near businesses in high growth
communities, such as business and retail districts in Los Angeles. They have fewer
banks near residential districts, and do not aim for the in supermarket banks like Wells
Fargo. This can be seen as a weakness. Their strength is their capabilities with big
businesses, but their weakness is that of not being connected with individual customers.

J. P. Morgan Chase Bank has $1,013,985,000,000 total assets, market share is 20%
based on assets. Also, it has 131,868 full-time employees and 2,667 branches in the
U.S. They focus most of their services towards commercial and corporate companies,
and very little on private banking. They offer all of the regular banking services as well
as treasury services and asset management. They focus on asset management inside
of large commercial and corporate companies to increase revenue, and then their
secondary product is commercial banking. They have, physically, several banks in
which they do business, including their Chase banks for business transactions with
individual customers. They are generally located in cities and suburban areas, and less
in rural. They focus on fast, busy business people and market their products towards
them (Chase About). Although their bank company Chase is aimed more at individual
customers than businesses, JP Morgan is still losing a great deal of customers to
smaller banks. Their biggest weakness is that they do not concentrate on small
customers, but their biggest strength is that they have a large amount of the big money
customers, making it so that their profits are high even with lower market segment.


Citibank has $706,497,000,000 total assets, 184,489 full-time employees and 286
branches with a market share of 14% based on assets. It has $472,143,000,000 total
assets, a market share of 9% based on assets, 78,571 full-time employees, and 3,193
branches for the Wachovia Bank. They offer all the main banking products, as well as
Identity Theft Solutions and the ThankYou Network. Their main products which are both
offered to individual and private customers are online banking, which they have been
made famous by. They have reached customers through online banking more than they
did before without it. They specifically target the market of online investing more than
other comparable banking industries, helping customers to earn money investing, as
well as saving money in their accounts. Their online strategy is their biggest strength
and weakness at the same time. While it is very innovative and attracts younger
consumers, it can easily scare away those who still think the internet is insecure and
those who are confused or scared by new technology.

US bank is located in 24 states nationwide. The head quarter is located in Minneapolis.
They have over 2,472 branches in convenient locations. They have a market share of
4% based on assets.US Banks main services include checking accounts, investing,
loans money transfer, insurance, debt consolidation, saving accounts, student credit
cards, and home mortgages. During the tax season, they offer a program called
TurboTax over the internet for their customers to calculate their income taxes. Using
TurboTax to help customers do their taxes is an example of one of their strengths. They
concentrate on helping the customer, and making the customer happy. This makes
customers brand loyalty grows more than most other banks in the industry.
US Bank offers check cards with rewards for their customers, such as cash bonus to
redeem for gifts. They have an expert to help their customers to do their finance and
investments. Also they have online services for management customers bank account
and investments. Their biggest weakness seems to be their innovativeness when it
comes to technology. The website is hard to get around on, and it is not really up to par
with the other big banks in the industry that it is competing against.


4. Customers are a vital part of any financial institution. They must be provided a
value-based service and obtain satisfaction. Banks must ensure that they are keeping a
competitive advantage and a high level of service delivery to ensure that they keep their
current customers. Generally, there are three major customers in the banking industry:
individuals, small businesses and large businesses.

Individuals
Small Businesses are looking for a bank that can help them in managing their assets
and their financial needs. Often times, they will need quick short-term loans in order to
purchase materials or equipment. They may also need larger long-term loans to start up
the business. Large businesses look for something completely different from the rest of
the consumers. They need large short-term loans to acquire smaller companies. These
Businesses are looking for every way possible to make their profits bigger. This includes
investing, marketing, and accounting.


5. A bank has three suppliers of its product which is money: depositors, credit market
and the central bank. Depositors does not actually have bargaining power because
whenever they make time deposits, the bank will be the one to set the price or interest
that it will pay. If they have a demand deposit the bank will pay nothing for it, as well as
the deposits. There may be competitions through variation of services, however,
demand account is not subject to great variations and most of the time, customers just
want to have an account and dont even know the exact terms of their account.
For large parties, such as corporations, government agencies and the like, the bank is
still the dominant party even with very large clients, but the clients can make the threat
to shift to other banks and if that client is huge enough, that could be considered as a
significant threat. A credit market, on the other hand, is a marketplace for the exchange
of debt securities and short-term commercial paper. The Central bank is effectively the
resource of last resort. In fact, at least for the moment, it will continue to supply liquidity
to the banking system in virtually unlimited quantities at very reasonable cost.


6. Entries of potential competitors can be a threat but not so much for Wells Fargo.
Wells Fargo has been in the business for several years and is an established firm that
holds the majority of the financial industry along with their major three competitors. New
entrants in the financial industry are not considered a threat for Wells Fargo. The
financial industry requires a lot of capital and trust. Currently none of the industry has a
lot of trust but they do have capital to make investments and decisions that a new
entrant to the industry does not have. There is a very high entry barrier in the financial
industry. Having a barrier is very important because the fewer the competitors the larger
the chance to gain profit. What companies have to do is to either be at par with the
competitors or surpass them.