Environmental_Analysis

Abstract Environmental Analysis includes an assessment of the internal and external operating environments. This is most commonly achieved through a SWOT analysis. Strengths and weaknesses are assessed at the internal level while opportunities and threats are reviewed at the external level. For Chase, strengths include a strong balance sheet, depth of resources, and strong management. Weaknesses or vulnerable areas are the company’s size, finding and retaining qualified and talented labor, and large infrastructure. Opportunities for Chase include expansion into new markets such as the West Coast and Southern states where there is not a current market presence. This paper will assess the environment in which Chase operates. The Remote Environment The remote environment in which Chase operates is a highly regulated industry. The financial services industry is subject to rules and regulations set forth by lawmakers as well as financial and fiscal policy determined by government, the Federal Reserve. Economic pressures such as interest rates, political pressures such as war, technological advances such as immediate access to fund and instant information and social movements such as boycotts and bans all can have profound affects on the firm’s financial success. A dedicated team of risk managers should constantly evaluate these forces and their effect on the firm. The Industry Environment The industry in which Chase operates is the financial services industry. Since this industry is highly regulated, there are significant barriers to entry. Supplier power and buyer power are determined by the rates charged by the Fed and the level of consumer confidence as well as the overall health of the economy. For example, in a rising rate environment, consumers will invest money. In a decreasing rate environment, customers will borrow money. There is a delicate balance between what a bank will pay for a deposit account and what they will charge for a loan. Banks are in business to make money. Therefore, the spread between what the bank pays for depository accounts and charges for loans must be enough to cover the bank’s cost of funds, reserve requirements (amounts the bank must hold in cash and thus cannot be invested), loan loss reserves, and operating costs associated with those transactions. Since there is only one monetary system in the US, threat of substitute is low. But, when evaluating a global presence for Chase, the threat is high since it operates in foreign markets. Competition however is high since there are already several providers of the same or similar products. The Operating Environment The operating environment for Chase is a highly competitive environment. Every bank wants to be the premier financial services provider, however, there can only be one. This industry operates under strict guidelines from the Federal Reserve (also known as “The Fed”). The Fed has the authority to raise or lower interest rates which affects the rate banks charge each other as well as customers. This also affects the profitability of the bank. This presents a challenge for the firm since pricing is vital to the firm’s success. Chase operates within the industry as a leader. They carry a significant brand image as well as a long-standing, strong reputation. Being the third largest bank, Chase has a significant market share and trillions of dollars in assets. In order for Chase to successfully manage its assets, professional talent must be happy with their jobs and paid adequately. A happy employee bleeds over into customer service and contributes to happy customers. Conclusion Chase must be aware of the constant political and economical changes that affect monetary policy and eventually affect the firm’s profitability. Chase must be able to adapt quickly to these changes. Social and technological changes must also be monitored and addressed as needed to maintain the firm’s success. Within the industry, Chase must be aware of what the competition does and assess success factors of competitors as well as factors contributing to failure. Chase must also understand the consumers’ wants and needs for financial services and how consumer behavior affects supply and demand. The operating environment of Chase is filled with several competitors offering similar products to the same group of customers as well as attracting talent from the same labor group. In order to keep its competitive advantage, Chase must continue to support brand identity, excellent customer support for exceptional products, and retaining top talent. Chase continues to be a strong and valuable provider of financial services for individual and corporate consumers as well as institutional and governmental consumers. With a commitment to continued success and keeping a close eye on all factors discussed, Chase should maintain and grow their current market position and eventually reach the goal of the best financial services provider in the world.