Introduction
The Bank of America is one of the largest financial institutions in the United States of America. In accordance with 2015 reports, the company was the twenty-third biggest company in the United States in terms of gross revenue. When the company acquired Merill Lynch in 2009, it became one of the most significant wealth and investment management corporations in the world, demonstrating 10-12% increase of its assets and portfolio annually (Bank of America, 2016).
Holding more than 14% of all banking deposits in the United States, the firm has presence in all regions of the United States and in more than forty countries overseas (Bank of America, 2016).
Some commentators speculated that the main reason of Bank of America successfulness is not only its successful management practices, but also its approach to marketing. In other reasons, the key metrics measuring company successfulness is how the company grows, not only how much profits it generates.
The purpose of this analysis is to analyze what McKinsey’s staircases is Bank of America currently utilizing to increase its market share , what type of resources is the firm implementing and how it uses a McKinsey ‘three horizon’ approach.
Staircases, used by the Bank of America
In contrast to its competitors (e.g. Citigroup and GP Morgan), Bank of America is using a somewhat aggressive approach to company growth and development. Despite the fact that this approach is fraught with some risks, it has higher ROI and is better suited to the current realities of the American financial market. Thus, among other issues, the company is focused on the following:
Bank of America is actively maximizing its ROI from the existing customers. In contrast to its competitors, this financial giant is actively developing new methods and ways of delivering value to its customers, e.g. by constantly developing and updating its online banking procedure, providing better online foreign-exchange rates, and otherwise seeking to deliver more services to the existing pool of customers. The company also has ‘frequency’-related offers to its clients, i.e. for those, who actively uses the services of Bank of America, the system of flexible discounts and other features is available.
The second staircase used by the Bank of America to preserve its growth tempos is attraction of the new customers. The firm has one of the most pervasive advertising and promotional policies among all financial institutions in the United States. Even during the times of economic instability and turbulence, when the company had negative profit ratio, it did not stop opening new branches and ATM stores, especially overseas. Having the grasped all globalization benefits, management of the bank of America understood that the sooner it gets global presence, the bigger its revenues become. In addition, the company is known for effective targeting of all potential groups of customers. Thus, it develops special promotional approaches to students, working adults, unemployed, single mothers etc. The marketers design and implement the campaigns, which are specifically appealing to each group of potential clients.
Innovation of Services – the practice demonstrates that in today’ technological era, one of the fastest, yet the riskiest, way to increase the number of customers is to innovate products and services (Hall , Lovallo & Musters, 2012). The ultimate goal is to make them better than the competitors’ ones in terms of value, which has several dimensions (McKinsey Quarterly, 2009). Though in essence the products of Bank of America are relatively similar to the products of its competitors, the way the company delivers these products to the clients is conspicuously innovative. The company provides an option of accessing even the most complicated banking operations through mobile devices, although they require voice authorization. Furthermore, the company focuses security of their clients – while almost all of its key competitors reported to have suffered from hackers, Bank of America is among the few institutions, who successfully withstood all types of hacking attacks.
A new approach to advertising - in contrast to its competitors, Bank of America realizes the importance of high-tech advertising. Thus, not only the firm keeps on launching traditional advertising campaigns, but also its uses targeted promotion on the popular social networks and on the web in general. Statistically, almost 25% of all new clients come to the bank of America due to positive reviews left by other customers (Bank of America, 2016). Some potential clients, especially those, who are from overseas, are not aware about the existence of this corporation, and high web ranking of bank of America helps them to choose the most effective business or personal banking partner for their needs.
With regard to potential new developments, it is recommendable to start exploring other industry and acquisition of other companies. In particular, the development of alternative digital currencies (e.g. BitCoin) appears to have a large market potential. In addition, the market of alternative money transfers (e.g. Payoneer, PayPal etc.) is at full swing of its evolution. By 2025, it is expected that 25% of all international transactions will be processed via the combination of the twos (Ellison, 2013).
In the light of its rich financial and technological resource pools, the Bank of America can become a serious player in these fields. Thus, not only the research & development in-house departments of the company are adequately trained to develop required protocols, but also the company cooperation with the leading R&D agencies makes this scenario realistic.
Resources, Used by the Bank of America to Achieve Performance Excellence
The Bank of America is utilizing different resources to retain and increase its market share. The most significant categories of its resources portfolio include human, technological, financial and reputational resources.
Although it is one of the largest employers in the United States, which workforce exceeds 220 000 employees (Bank of America, 2016), the firm is extremely selective in its hiring policies. The company tries to get the best talents only, both among graduates and experienced professionals. Nowadays, human resources are the key of corporate success nowadays, because it is the people, who adapt the company to the perpetually evolving conditions of the market (Baghai et al, 1996).
Furthermore, company reliance on technology is tremendous. Not only technology determines the approaches of Bank of America to advertising, but also it is critical to development of new products. As discussed before, a serious portion of the company profits come from mobile banking. By improving user experience and offering new options, the company continuously increases its profits.
In addition, the company has huge financial reserves, which help the company to withstand economic turbulences. To illustrate, although the company declared negative profit ratios during the 2008-2010 financial recession, yet it did not announce layoffs (Bank of America, 2016). Therefore, the Bank of America has sufficient resources for investing into various research & development projects. It can afford pursuing risky ventures, which may potentially bring high revenues, but are usually neglected by the competitors because of cost concerns.
Finally, the Bank of America enjoys a reputation of one of the safest, customer-friendly and market-focused bank in the USA. This reputation has been earned through many years of dedicated work, and even if the company commits a blunder, its reputation helps the clients to forget their negative experiences quickly.
At the same time, it is important to highlight that there is a group of resources, which the Bank of America is not using, while it should rather do. In particular, the use of partners as resources is an important step in portfolio expansion, brand building and geographical expansion. Practically, the Bank of America should stark working with the foreign small banks and other financial institutions, acting as their credit partners. Nowadays, the company has sufficient financial, organizational and human resources to pursue this option.
Three Horizon Model of Growth
The company extensively uses three-horizon model of growth. In many aspects, growth and development of Bank of America seriously depends on implementation of this model.
The first horizon is core business of the company, which generates cash flow (McKinsey Quarterly, 2009). The company focuses on improving its tactic and strategic performance in this regard, thus maximizing the returns, and getting financial and other resources for further progress and development.
The second horizon of Bank of America growth is represented by emerging opportunities, which can yield big revenues in the future, but require substantial investments now. The Bank of America is especially interested in development of robotic solutions, which can replace cashiers in the future (Bank of America, 2016).
The third horizon are side, non-core, yet profitable projects, which the company pursues simultaneously with other activities (Gadiesh & Gillbert, 2001). The interest of bank of America in the developing countries may be attributed to this category.
Conclusions
References
Bank of America. (2016). Annual report 2015. Web. Retrieved from
Baghai, M. , Coley, S.C., & White, D. Conn, C. and McLean, R.J. (1996). Staircases to growth. Web. Retrieved from http://www.mckinsey.com/global-themes/employment-and-growth/staircases-to-growth
Gadiesh, O. & Gilbert, J.L. (2001). Transforming Corner-Office Strategy into Frontline Action (in HBR’S 10 Must Reads on Strategy)
Ellison, S. (2013). The future of POS: point of sale evolution and its impacts. Web. Retrieved from https://www.paypal-community.com/ppl/attachments/ppl/PPFWD/57/1/future_of_pos_paper%20copy.pdf
Hall, S., Lovallo, D. & Musters, R. (2012) How to put your money where your strategy is, McKinsey Quarterly, 2 (27-38
McKinsey Quarterly. (2009). Enduring Ideas: The three horizons of growth. Web. Retrieved from http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/enduring-ideas-the-three-horizons-of-growth
