Wells Fargo Investors Relations, Business Plan Example

Introduction

History of Company

Wells Fargo is a well-known publicly traded business, originally founded by Henry Wells and William G. Fargo, as well as other associates on March 18, 1852. This time period was notorious for stagecoach robberies of bank holdings in transit. During the era in which it was founded, stagecoach robberies were infamous.  It was during this time that Wells Fargo established a name for itself in the practice of supplying secure travel to its stage coaches in transporting funds. This was especially the case in respect to the company transporting their funds from California to Nebraska and vice versa. Today, the symbol of the coach can still be seen in the company’s background as a part of their marketing logo. 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 logo.

Financial Resources

As of 2014 Wells Fargo has reached a cumulative $1.6 trillion in assets. Wells Fargo has established itself as the 4th largest financial organization in the United States and the single largest on the United States’ west coast.  Wells Fargo’s total revenue earned in 2014 was $21.2 billion in assets (Wells Fargo & Company, 2014). Wells Fargo Company focuses its skills on many aspects of banking; investing, foreign exchange, trust and estate services, insurance, brokerage services, financial consulting, international banking as well as online and ATM services. Wells Fargo’s products include a diverse range of financial services such as, consumer finance services, banking, business and home loans, commercial real estate, and other forms of alternative specialty lending. Wells Fargo also plays a substantial role in providing economic studies, research, and analysis for the financial industry. This research is often cited in academic journals and used to formulate competitive financial strategies within the banking industry and other finance related fields. Wells Fargo firmly follows the belief that an enhanced understanding of the investment environment can lead to more sound decisions and investments.

Company Weaknesses

Some of Wells Fargo’s weaknesses entail the possibility for confusion within operations based on having many activities on a grand scale. The fact that Wells Fargo is such a large company makes it more difficult for them to maintain 1 on 1 personal interactions with their customers. The fact that Wells Fargo is a significantly large corporation also makes them the target of counterfeiting and fraud. Criminals are likely to view this significant size as a vulnerability of which they can take advantage. Some other weaknesses entail the possibility to obtain brand loyalty.  As there are so many financial institutions emerging, many consumers have the option to bounce around from bank to bank and never keep one particular account as their main account. It can also be the case that individuals open accounts with Wells Fargo but those accounts go unused as they only invest in their preferred institution over Wells Fargo. This is a potential challenge the institution must overcome through marketing advertising and strategic brand promotion.

Company Strengths

Wells Fargo is a strong financial institution, especially in regards to its ability and function as a lending company. One of their strength entail having significantly high cash volume of over $1.6 trillion in assets. Another key strength the company has is their distribution reach, as it provides them with a significant advantage within the industry to have a large number of branches through which they can provide their services in a more convenient capacity for the consumer.  Another strength can be seen in the fact that through being a lending firm, the company establishes numerous relationships with other financial industries like the gaming industry, real estate, media, energy, municipalities.

How is/was this company considered a leader?

Wells Fargo is currently ranked as the market leader for upper middle class and lower middle class home loans in the Southern California region. This is primarily attributed to the fact that customers in this particular demographic are more frequently exposed to Wells Fargo, as the company has substantial branches located in the Southern California area. These consumers choose Wells Fargo due to the familiarity of the brand image, due to the fact that they are hospitable and offer kind service.  Wells Fargo’s main competitors include Bank of America and Chase Mortgage. These particular banks focus primarily on larger corporate accounts, leaving Wells Fargo to take advantage of this younger market. Additionally the fact that Wells Fargo’s main competitors are viewed as being significantly corporation oriented, it enables Wells Fargo to present itself as the family oriented brand. This can also be seen with its stage coach logo, which easily could be a family traveling across the countryside to resettle as a stagecoach guarding money. Individuals looking to take out home a home loan, are likely to identify Bank of America and other financial institutions like it as being too corporation oriented, and incapable of caring about the concerns of small families. Dealing with large corporations can be an intimidating experience for many individuals, and the same can be applied to the relationship between a small town consumer and a large corporate bank. Wells Fargo makes itself available, significantly within the Southern California area and the company adopts a philosophy of friendliness that carries over into their marketing and brand. They are perceived as the warm friendly bank by many consumers, despite the fact that they are the largest financial institution on the west coast.

Currently, out of all companies throughout the globe, Wells Fargo represents the 26th leading company based on assets sales, assets, market value and profitability (“The Forbes 2000,” 2006). Wells Fargo has a positive debt rating and the company has an Aaa credit rating based on their Moody’s Investing Services score. Likewise American Banker ranked Wells Fargo 5th in assets (Wellsfargo.com, 2014). In respect to human resources, specifically labor, the company has over 155,000 employees. Among the Wells Fargo workforce is a large and diverse range of workers represented across all races and social groups. Diversity helps them to deliver quality services by further understanding their diverse customers’ needs.  The chairman and CEO of Wells Fargo, Dick Kovacevich, sees the company more as a team than simply an organization. He bases this belief on the fact that Wells Fargo Company shares common values on responsibilities, and how the community lives and interacts with one another.  Their company also instils these same values, like hard work and ethics into the, over 2000 separate, subsidiary or ‘child’ companies they acquire or to which they give life., such as; First Interstate Bancorp, Crocker National Bank, and Northwest Corporation.

Compare and contrast 2 similar companies.

Wells Fargo’s main competitors are Chase Bank, J.P. Morgan, Citibank and Wachovia Bank. Wells Fargo’s net assets are consistently remain less than Bank of America’s total assets by anywhere from 2 percent to 50 percent. For the most part Wells Fargo and U.S. Bank are viewed as market followers. Wells Fargo also has competitors outside of the banking industry, like ING Direct, which is a financial institution that offers financial services. In Johnson’s (2013) study evaluating risk, asset management investments and liability among US and Foreign Banks the author notes that in past years financial institutions have had an equally positive and negative impact on measuring “risk, liability and asset management from other competitors such as Bank of America, Wells Fargo and Wachovia. There have been many recent discussions about the U.S. and International banking management and investments” (Johnson, 2013). Based on these factors organizations like the U.S. Exchange Commission and the Federal Reserve are seeking new ways to assess the negative and positive behaviour exhibited different banks, and financial institutions, to recognize how that behaviour impacts their bottom line and form these assessments, debt rankings are formed.

The above table shows that Wells Fargo Company has a A+ rating according to Standards and Poors. Comparing Wells Fargo to Bank of America (BofA), it’s revealed that BofA carried over $1,082,242,862,000 in net assets since its MBNA merge, ranking it number 1 based on the American Banker listing (American Banker, 2014). Bank of America employs over 161,318 full-time employees and they have over 5,000 branches in the United States, across all 50 states. Bank of America and Wells Fargo both have some of the largest networks of bank branches throughout the U.S. today. Currently, Wells Fargo has more branches than Bank of America as BofA only has 5,100 to Wells Fargo’s 6,200 bank locations.  In this respect, Wells Fargo has a slight edge on Bank of America. Advancements in technology, however, have made the number of branches not as important as the number people one can connect with online.  This is why both Bank of American and Wells Fargo have been looking for ways to integrate resourceful technology to assist with expansions. The main focus is to utilize the internet to reduce costs related to branches and the forming of branches. Wells Fargo is cutting branch costs through the creation of mini-branches, these are locations that provide traditional banking services utilizing half the resources through incorporating technology such as folding walls and tablets and other aspects of the latest technology available to make banking more convenient.  Ban k of America on the other hand is closing a wide range of branches with the genuine approval of its stakeholders who also want branches closed down. In respect to technological aspects of operations, Bank of America and Wells Fargo have each developed banking applications to make their brands more convenient options for online banking. Both apps share virtually all the same features and make all the same services available. The apps are also available on all devices such as Android products, the iPad, iPhone, the Kindle, Windows Phone, and the BlackBerry (MacLennan, 2014).

In addition to extensive wealth management services, both banks have substantially managed investment services that are self-directed. Wells Fargo markets their self-directed financial management services under the brand of WellsTrade, while Ban of America uses the Merrill Edge brand, paying homage to Merill Lynch, which BofA purchased during the financial crisis. Merrill Edge provides cheaper trades only taking a $6.95 per trade commission, compared to WellsTrade, which is based on an $8.95 per trade commission (MacLennan, 2014). Both platforms changed their policy in regards to offering free trades for clients with $25,000 in assets or more. Wells Fargo’s WellsTrade system stopped allowing customers with $25,000 balance accounts or more to have free trades, while Bank of America’s Merrill Edge system kept the policy intact but limited the trades to 30 trades per month. Wells Fargo and Bank of America fiercely compete with one another over acquiring new customers. As the new frontier of banking is the online sector, both Wells Fargo and Bank of America are pushing towards this frontier and adapting their traditional business model to mobile devices as well. Warrant Buffet has over a billion dollars invested in each of them, which is a credible statement that both companies are sound investments.

What happened to your company?

As previously stated Wells Fargo is still prominent as one of the leading banks in the world in regards to assets, currently 26ths worldwide. The reason for this success has to do with two main factors, the first being that Wells Fargo, through being so readily available all around the world. The fact that Wells Fargo has so many branches makes it more likely to garner a larger customer base than smaller bank systems with a lesser reach. Likewise, by Wells Fargo offering a wide range of services they become even more convenient to use.  They are largely increasing their human capital by outsourcing to professional service firms for a wide range of activities. In reference to human capital in business and how to enhance it through the use of professional service firms Radulovich (2008) argues that the professional service firm industry provides invaluable support to banks, the author further points out that, human capital develops advanced levels of knowledge pertaining to a certain field and on issues concerning the markets and customer needs. He points out this is an exception factor which professional service firms, banks, and financial institutions count on for value creation, and it “plays an important role in domestic and foreign market growth. In the case of professional service SMEs in India, service value derived from the knowledge and skills possessed by professional service personnel positively influenced international expansion and service innovation for enhanced financial performance” (Radulovich, 2008). This is one of the main competitive strategies Wells Fargo has used to develop a slight edge within its industry. There are some other current aspects of the Wells Fargo business model that can be attributed to its current positioning and success within the banking industry. For example, the company’s current target market, current pricing strategy, current distribution strategy and its current promotion strategy.

Current Target Market Defined

The current target market of the company is all individuals who have money or a way to make money throughout the globe. This includes individuals, small businesses, and large corporations. In respect to checking accounts and savings accounts, Wells Fargo’s target market is primarily the United States, and just those individuals with a social security number, mailing address, and who provide a signature. For alternate services, the bank utilizes a credit score to identify those who they recognize as eligible for and loan worthy.

Current Pricing Strategies

The company’s current pricing strategy entails a system through which Wells Fargo determines pricing for different products based on interest rates set by the Fed. These interest rates are also referred to as the prime rates. Following this aspect of the pricing strategy Wells Fargo then assess the prices of their competitors relative to the market and the industry to best determine the optimum way to charge consumers. Wells Fargo considers optimum to be the price that best draws the consumer’s interest towards being more interested in taking part in a particular service or purchasing/investing in a specific product.

Current Distribution Strategies

Wells Fargo has a significant number of banking chains distributed throughout the United States making it convenient for all consumers to easily access products or services they might need. The current strategy Wells Fargo has in regards to distribution right now is to actually reduce the number full-sized branches it has throughout the country to mini-branches that utilize mobile and tablet technology to allow customers to self-serve their need.  Their hope eventually is to replace many banking stores in the United States with these mini stores. Their distribution strategy also extends to their activities online, which ties into their promotion strategy as well, since Wells Fargo utilizes their website both as a promotional advertisement tool and as a resource for customers to access their accounts.

Conclusion: In retrospect what did you learn? What did the company do right and wrong?

In sum, Wells Fargo has established itself within its market as a successful banking institution and this is especially true as it relates to the Southern California era. The chairman and CEO of Wells Fargo, Dick Kovacevich, recognizes the company as a team, in respect to the how the company shares responsibility and common values. Wells Fargo has become a well-known publicly traded banking business, based on the adversity founders Henry Wells and William G. Fargo, were able to overcome early on in 1852. Today, the stagecoach symbol of the company, symbolic of how Wells Fargo safeguards money from risk. One of the key things I learned about Wells Fargo and banks in general in drafting this report was the state of the banking industry today is so influenced by the internet, that it’s actually more affordable and profitable to close down branches and transition operations online.  Banks are entering the mobile sector as well as utilizing e-commerce and m-commerce setup trades and transactions making banking much more pertinent to the direction society is heading.

References

Johnson, V. T. (2013). Assessing risk, liability and asset management investments among US and Foreign Banks: Bank of America, Wells Fargo, and Wachovia. Berkeley Electronic Press, 1(1), 1-84.

MacLennan, A. (2014). Wells fargo vs. bank of america: which bank deserves your account? Fool.com

Radulovich, L. A. (2008). An empirical examination of the factors affecting the internationalization of professional service SMEs: the case of India(Doctoral dissertation, Cleveland State University).

“The Forbes 2000.” Forbes Inc., 30 March, 2006. Forbes LLC, 10 March, 2007 <http://www.forbes.com/lists/2006/18/06f2000_The-Forbes-2000_Rank.html >

Wells Fargo & Company (2014). Wells fargo investors relations. Wellsfargo.com