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Case Analysis on
Wells Fargo Corporation
Course Title: Strategic Management
Course Code: F- 408
Submitted to
Ms. Samia Sultana Tani
Associate Professor
Department of Finance
University of Dhaka
Submitted by
Group no.
Section: A
Date of Submission: 2nd February, 2017
Group profile
Sl no Name Id Comments
1 Maruf Hossain 19-013
2 MonjurulAhsan 19-099
3 Md. Abdul Quyum 19-121
4 Md. Ripon Molla 19-123
5 Raqib Hossain 19-157
6 Md. Inzamul Haque 19-179
7 Md. Niaz Mahmud Khan 19-067
8 Md. Ariful Hasan 19-175
9 Md Sobuz Ahmed 19-111
10 Md Moshiur Rahman 19-269
Letter of Transmittal
2nd February 2017
Ms. Samia Sultana Tani
Associate Professor
Department of Finance
University of Dhaka
Subject: Report on “Wells Fargo Corporation 2009”
Dear Madam,
At the threshold of submitting this report on “Wells Fargo Corporation 2009 ". We feel immense
pleasure to prepare this report as a partial requirement of course F-408(Strategic Management).
We would like to mention that, we have tried my best to prepare this report to our greater extent
through reading, consulting, discussing with our group mates to make it a comprehensive one.
But due to the limitation of knowledge, there might be some unforeseen mistake and
incompleteness in our paper. We hope that you will overlook them with thekind consideration
that we are still learners and will give us the necessary suggestions that you always give for the
improvement of our quality in future. We again express my gratitude to you to give us the
opportunity of analyzing this case.
We would like to place this Paper for your evaluation & recommendations.
Thanking you.
Sincerely Yours,
Maruf Hossain
………………………..
On behalf of group
Section: A
Acknowledgement
As per requirements of the BBA program, our honorable course teacher Ms. Samia Sultana Tani
has included a report in the course curriculum. Our assigned case is “Wells Fargo Corporation
2009 ". We express our sincere gratitude to our honorable course teacher Ms. Samia Sultana
Tani, Associate Professor of the Department of Finance, University of Dhaka, for her guidance,
advice, and assistance in preparing the assigned case. We are really grateful to our course
instructor for her unstinted support, timely and sophisticated direction and finally endless morale
in learning the knowledge through preparing this report. This analysis helped us a lot in
understanding different situations in a business and ways to solve them.
Table of Contents Executive Summary ........................................................................................................................ 6
Task 1 .............................................................................................................................................. 7
Company Description ..................................................................................................................... 7
History of Company .................................................................................................................... 7
Current Situation ......................................................................................................................... 7
Human Resources ....................................................................................................................... 7
Financial Resources .................................................................................................................... 8
Product Portfolio ......................................................................................................................... 8
Company Strengths ..................................................................................................................... 8
Company Weaknesses ................................................................................................................ 9
Task 2 ............................................................................................................................................ 10
Customer Analysis ........................................................................................................................ 10
Customer Description at Industry Level ................................................................................... 10
Relevant Variables to Describe Segment .................................................................................. 10
SWOT Table and Analysis ....................................................................................................... 14
Strengths ............................................................................................................................... 14
Weaknesses ........................................................................................................................... 14
Opportunities......................................................................................................................... 14
Threats................................................................................................................................... 14
Task 3 ............................................................................................................................................ 16
Case analysis ................................................................................................................................. 16
The future of Wells Fargo ......................................................................................................... 16
Projected financial statements................................................................................................... 17
Financing of acquisitions/growth .............................................................................................. 17
Raising capital and debt ............................................................................................................ 17
Strengthening market position .................................................................................................. 18
Management strategies for the years ahead for Wells Fargo .................................................... 18
Conclusion .................................................................................................................................... 19
References ..................................................................................................................................... 20
Executive Summary
Our group has constructed the case on the company Wells Fargo. The first half of the report
covers the company background by finding information about it, and its competition. The
second half of the report deals with the case solution of Wells Fargo.
When analyzing the company, we found that it is viewed as the largest bank in the United States
by physical size. The company has “2000” child companies and their advertising style is very
recognizable with the stagecoach theme. The biggest competition to Wells Fargo is Bank of
America.
There are many trends that are looked at that could affect the banking industry. Some trends
include the environment, government policies, technology, and much more. These trends show
how the industry should view what is going on in the market that could affect how consumer’s
perceptions are changing in the market.
Then we made a SWOT table; that shows our strengths, weaknesses, opportunities, and threats.
All this information was then used to make our marketing plan.Finally, our group has analyzed
the case to solve it properly.
Task 1
Company Description
History of Company
Wells Fargo is a publicly traded company that was founded by Henry Wells, William G. Fargo,
and associates on March 18, 1852. During the era in which it was founded, stagecoach robberies
were infamous. At that time, they focused on safely transporting their money from Nebraska to
California. Now, Wells Fargo uses this stagecoach image as their company’s background and
main marketing techniques.
Current Situation
Out of all companies worldwide, Wells Fargo is the 26th leading company based on sales, assets,
profits, and market value. Their debt ratings are ranked positive and stable as well as having the
highest possible credit ranking from Moody’s Investing Services, Aaa. When ranked by
American Banker based on assets, they ranked 5th against all other American banks.
Human Resources
They employ over 155,000 individuals and that number grows more every year. Within these
individuals, Wells Fargo understands the importance of diversity and works to employ people of
all races and personalities. Diversity helps them to deliver quality services by further
understanding their diverse customers’ needs. The chairman and CEO of Wells Fargo, Dick
Kovacevich, sees that as a team, Wells Fargo Company shares common values on
responsibilities, and how they live and work. Their company also instills those values and hard
work ethics into the over 2000 separate “child” companies they own, such as; Crocker National
Bank, First Interstate Bancorp, and Northwest Corporation.
Wells Fargo knows the quality of customer service is very critical to customers. The Branch
Customer Service Manager is responsible for managing quick, smooth, and quality customer
experience. Meaning the manager must make sure the customer gets all questions answered,
speedy service, and to wait no longer than 5 minutes for service. This position focuses on proper
production management skills. Managers pinpoint problems by going to the source to solve
them instead of using band-aid solutions. Managers motivate bank workers to treat customers
nicely, and more importantly, make them feel comfortable. Enough workers are always
employed to satisfy the banks busiest times. When customers call the bank to report a problem
or ask for information they get taken care of with fast friendly service. Managers analyze
existing procedures and devise new ones to increase efficiency. For example the time it takes a
teller to help a customer can be reduced by rearranging the physical layout of the bank. All the
tools teller’s need is positioned close by for easy access. The qualitatively improved services
make the bank more competitive and more attractive to customers.
Financial Resources
With a stock market value of over $110 billion, Wells Fargo Company has become the largest
financial institution on the west coast of the United States. Wells Fargo also has a high cash
volume of over $480 billion in assets.
Product Portfolio
Wells Fargo Company focuses its skills on many aspects of banking; investing, insurance,
brokerage services, trust and estate services, financial consulting, international banking, foreign
exchange, as well as online and ATM banking. Their products include diversified financial
services, banking, consumer finance, home loans, commercial real estate, and specialized
lending. Their company is always conducting economic research to better their financial market
strategies. They believe that understanding what is going on around them increases their
understanding of investing. They use agricultural reports, country reports, regional reports,
housing situation analysis, economic forecasts, growth charts, and local banker observations to
find all types of economic information.
Company Strengths
Wells Fargo is a very strong financial lending company. Their strengths include high cash
volume of over $480 billion in assets as well as a powerful distribution of advantages in the
Banking Industry (Appendix C). They also have strong ties to several different industries
including financial services, energy, gaming, media, communications, municipalities, real estate,
retail, solid waste management, and technology. Since 1852, they have grown roots into the mind
of individuals as being strong and trustworthy. Their name is well known and they’re marketing
strategy, the stagecoach specifically; can be identified easily with individuals. They have strong,
hardworking, and smart employees from all types of diverse lifestyles. They are considered
“America’s large bank and 12th most admired company in the world” (Barron’s). They are the #
1 bank in total stores, the 3rd in banking stores, 1st in mortgage stores, 1st in personal credit
market share, 3rd branded bank ATM owner, the 2nd debit card issuer, and the 1st prime home-
equity lender in states they do business in Wells Fargo.
Company Weaknesses
Wells Fargo’s weaknesses include confusion due to large-scale activity. Being an enormous
company it is hard to personally know all individuals within the banking community. They are
often the targets of fraud and counterfeiting due to how large they are. Other weaknesses might
include theability to obtain brand loyalty. In today’s society, with so many other large scale
competing banks, getting brand loyalty from individuals can be complicated. Many people have
accounts in more than one bank, and several individuals’ change from bank to bank depending
on offers they are given at different times.
Task 2
Customer Analysis
Customer Description at Industry Level
Wells Fargo provides, “banking, insurance, investments, mortgage, and consumer finance to
more than 23 million customers from more than 6,100 stores and the internet”. Wells Fargo does
not discriminate on race. The main thing they look at is financial history. In fact, Wells Fargo
recognizes that certain areas can have a large population of different nationalities. For example,
Wells Fargo understands that the Hispanic community is increasing, representing $1.8 billion in
buying power for 2005. In response, Wells Fargo looks at the demographics of an area and tries
to get as much bilingual staff as possible. Altogether, “Wells Fargo provides financial services
and products to more than one million businesses with annual sales up to $20 million in all 50
states, Puerto Rico, and Canada”.
Relevant Variables to Describe Segment
The variables that are relevant to describe the segment are age, thelevel of schooling, how many
people they support or that are in the household, and theamount of income coming into the
household. Age is relevant because if someone is new to receiving money, they are not thinking
about buying a house or getting a car; whereas if someone has been working for a while, they
will be a little older and thinking about buying a car or a house. The level of schooling is
relevant due to the fact that people that go to school longer will have more knowledge of their
money resources. Also, when they are going to school, they are using their money for school
and not thinking about renting or buying anything unless it is school related. A number of
people in a household can determine the amount of money spent on food and clothing and also
how people decide on where they will live by renting or buying a household depending on a
number of people that need to live in one location. The last relevant issue discussed is the
amount of money that is coming into a household that can determine if the household is renting
or how much they will spend on the house they are looking to buy. All these are relevant to the
segment because it will determine how customers will use the services of the banks and where
they will spend their money or save their money.
From this information, our team has separated the banking industry’s customers into several
different categories, and then we described those categories and their needs as follows:
Young Adults
Young adults are between the ages of 18 and 25. Even though they may have had a savings
account, these people are at a place in their lives where they need to start a bank account for the
first time. They look for free checking and savings accounts and have much less money to put
into a bank account than other customers. As college students, these individuals may be taking
out their first loan. The most common way they look for banks is by looking for those that are
easily accessible, nearby their homes and workplaces. Their attention is more geared toward TV
advertising rather than advertising in magazines. Young adults are looking for quality and unique
goods instead of trendy ones. These consumers have great potential for being future clients when
they grow older. Therefore, building brand loyalty now helps banks to keep these clients when
they get to ages where they start to need larger loans and banking.
New Families
These individuals have just started a family. They may be looking for homes to raise their new
family. This may require them to take out their first home loans. They have high involvement
when looking for the best rates for the loan.
Low-Income Families
These families have already developed themselves as a unit. “40% of bank customers were low
to middle income.”They may be struggling from paycheck to paycheck. This means savings is
not much of an option. Rather, credit card loans might be of interest to them. Tax accounting
cannot save them much money except if the tax accountant is cheap.
Middle-Income Families
The middle-income family looks for improvement on their status. These families are most
certainly have or are looking for homes to establish themselves. Therefore, financing or
refinancing is always options for them. Tax accounting can save them money that they
desperately need to pay off loans.
Wealthy Families
These customers are looking for a bank that will help them to make more money from their
money. They do not need many loans unless they are starting a business. They are also investing
in CDs, mutual funds, real estates, and anywhere they can make aprofit. Also, a good tax
accountant can help them save a lot of money
Foreign Families
These families are looking for banks that can fulfill their language barrier needs. They look for
people they can trust and help them understand the product. Preferably, they would like to speak
to someone who has their native tongue. Advertising does not affect them as much, due to the
fact that they don’t understand it as much
Seniors
Senior may be trying to secure their retirement. They are also looking for security and might be
considering investing. They want people to manage their estate and assets. Generally, this is the
most brand-loyal demographic, because they look for familiarity and brand they know they can
trust from past experiences.
Farmers
Farmers are looking for a bank that knows what they want. Their bankers should be friendly and
get along with them. Farmers can have big or small bank accounts depending on their profits, but
they always look for the same things: reliability, trust, and goodwill.
Small Businesses
Small Businesses are looking for a bank that can help them 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
Middle Businesses
These businesses are normally the market followers in an industry. They look for the same things
as a small business, while also needing more diverse financial support.
Big business / Corporations
Big 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
everyway possible to make their profits bigger. This includes investing, marketing, and
accounting.
Customers use Wells Fargo products for many reasons. Age, credit scores, and income are
relevant. One reason is to buy now what they cannot afford with financing. If the customer owns
a small business, they seem to get more loans out of Wells Fargo than any other bank. According
to CRA, Wells Fargo is the number one lender in terms of total volume of dollars to small
businesses in the United States. Finances from commercial real estate seem to be on the rise,
“Avg. commercial and commercial real estate loans grew $11b or 10% from 3Q05 and $2.2b or
8% annualized on a linked-qtr. Basis”.
SWOT Table and Analysis
Strengths
Size
Star/Still Expanding/Growing Market
FDIC Insured
Solid Reputation
Highly recognizable advertising
campaign / Marketing Recognition
Business Environment (open counters)
Weaknesses
Not International
Internet Security
Government Policies/ Fed. Regulation
Recession
Economy
Highly Competitive Market
Low Brand Loyalty
Opportunities
International
Ease of Use for Internet Usage
Tax Services/Free/Internet
Branches
ATM Service
24 Hour Services
Threats
Highly Competitive Market (Major)
Low Brand Loyalty in Industry (Major)
Government Policies (Potential)
Depression (Potential)
Economy (Potential)
Civil Unrest/War (Potential)
Interest Rates (Minor)
Inflation (Minor)
New Competitor Sales Promotions and
Strategies (Minor)
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 isastrength.
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.
Task 3
Case
In July 2009, Wells Fargo announced that the firm is significantly expanding its securities
business that it largely inherited from Wachovia. Prior to the December 31, 2008, Wachovia
acquisition, Wells Fargo basically did no securities business. The new business at Wells Fargo is
to be called Wells Fargo Securities and will begin offering merger advice, stock and bond
underwriting, loan syndications, and fixed-income trading. Wells Fargo today has approximately
6,700 bank branches in some 40 states. It also has more than 4,000 mortgage and consumer
finance offices nationwide and is one of the largest residential mortgage lenders in the United
States.
How should Wells Fargo position itself in the future?
Should it strengthen its retail presence, grow internationally, or move into the void
created by the disappearance of investment banks?
This case provides the opportunity to analyze the future of the financial services industry and
develop a plan to position Wells Fargo to better compete in this industry over the next several
years
Case analysis
Wells Fargo Bank has been hit by the consequences of recession, and the delinquency level for
its holdings reached 40 percent. The value of the company’s property and investments has
decreased, and although many banks face similar problems at the moment, the management
needs to find a suitable strategy to create a competitive advantage, attract good customers,
eliminate bad debt and secure investments for the future. The below study would look at
different aspects of the strategic plan, to create a fully functional outline of the management
issues.
The future of Wells Fargo
The case study reveals that the company’s credit rating in 2009 was weakened by the last
merger; according to Jo et al. (2010), the company lost 2.4 billion dollars in the last quarter of
2008. Although the company has expected a decline in share prices, they could not predict that
the house prices would fall further. Therefore, the recommendations of the study would include
re-branding the Wachovia Bank, sell bad debt and move towards international business
investment banking. As the personal finance market has not stabilized, and there is a large
competition in the 40 states the company is present, there is a need for specialization; providing
merger advice, business financial and investment services, as well as creating joint ventures for
trading internationally. This move would help the Wells Fargo Bank to increase its reputation,
provide healthier balance sheets and regain its market position while expanding internationally.
Projected financial statements
Position Dec 2016 Dec 2017
Total revenue $55,000,000 $52,389,000
Gross profit $52,000,999 $47,868,000
Total assets $1,600,000,000 $1,309,639,000
Net income $2,766,000 $2,655,000
Operating income $9,000,000 $8,491,000
Net income $3,000,000 $2,655,000
Liabilities $1,000,000 $1,210,555,000
Stakeholders’ equity $100,000,000 $99,084,000
Financing of acquisitions/growth
The financing of acquisition would be supported by savings made by the automated, safe Internet
operation. As the liabilities that came with the last acquisition have increased workforce, process
improvement needs to be carried out to reduce the cost of operations, therefore, increase the net
income and profits.
Raising capital and debt
Diluting the ownership of FWC would be providing enough assets for the bank to make the
necessary improvements, change the profile of the company from mortgage lending to
investment banking, advice and savings, which would not be as profitable short term as lending,
however, it would provide more securities for stakeholders and increase the asset of the
company.
Strengthening market position
In order to strengthen its market position, the Wells Fargo Bank needs to re-position its different
services and create an image that would attract both high profile private and business investors,
looking for financial services. The consolidation of mortgage debt would be the most challenging
task during the year; however, with securing more investments, issuing further securities during
the year, the goals set in the projected balance sheet could be achieved. International expansion
with reduced number of offices, but safe online services, such as offshore and international
banking or investment portfolio management can be achieved at a considerably low investment
budget.
Management strategies for the years ahead for Wells Fargo
Because of the number of mergers during the past decades the company has gone through, it is
important to focus on a shared common vision as a company, taking into consideration
stakeholders’ interest. Evaluating the market, needs, competition and current products would be
the start of a long-term project to create a strong company with a healthy balance sheet and high
standard international financial products and services. This would involve investments into IT,
but the company already has human assets to use. (Skills Measurement Report)
When Wells Fargo launched the Boomers Network and Young Professionals Network, they had
the benefit of learning from other internal team member networks, but did not have the benefit of
a benchmarking perspective as no peer companies at the time had similar groups. For others
considering launching similar resource groups, Wells Fargo offers the following advice:
Ensure that executive leadership support and sponsorship is present.
Hand-select the group’s leadership, especially the chair or co-chair.
Provide financial sponsorship in the form of a budget for each group.
Ensure that the group’s objectives are relevant and align with the business.
Define the group’s priorities. Launching a new group with members who want to do too
much can be overwhelming. “Think small; do big.”
Measure success.
Tell the stories.
Conclusion
Like many large organizations, Wells Fargo develops top performers through one of two career
development paths. An employee may be targeted and trained for a management career track, or
that person may be targeted for an advanced IT track. But while the path for a manager is clear,
high-level IT training proved to be more challenging. “If I’m a top performer,” says Travis, “I
might be asking myself, ‘what do I do next?’ We needed a way to identify top IT employees,
identify the skills they need to developand provide the tools to help top performers develop their
skills and careers within the company.” Wells Fargo’s solution is an innovative skills
management and training strategy called the “Tech Masters program.” Developed for top IT
performers, Tech Masters is designed to help Wells Fargo keep them in-house to spread their
knowledge, and continue on what Travis refers to as a “trend of technology innovation in the
financial services industry.”
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