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ATHE Level 7 Diploma in Strategic Management GLOBAL BUSINESS STRATEGY Unit Code: 7.2
Submitted by:
Sangeeta sharma Registration number: 72200484s7235
TABLE OF CONTENTS
INTRODUCTION.. 02 Analysis of Macro environment. 03 Analysis of Micro environment.. 05 Investment banking industry and its operations.. 06 Economic effects of globalisation on the investment banking system 07 Analysis of market in which investment banking works 08 The key issues, opportunities and threats for investment in this organisation. 08 Moral and ethical issues caused by operating in an international environment.09 Conflicts between corporate strategy and social responsibility09 Guidance relating to corporate social responsibility.10 Conclusion. 11 References...11
INTRODUCTION
JPMorgan chase & co is an American multinational banking corporation of securities, investments, and retail. The J.P. Morgan brand is used by the investment banking and as well as asset management treasury and security services divisions. J.P. Morgan is a leading global investment bank with one of the largest client bases in the world. We serve nearly 20,000 clients, including corporations, governments, states, municipalities, healthcare organizations, education institutions, banks and investors, one of the most important functions of JP Morgan investment banking are to extend credit to companies to help them grow. As J.P. Morgan looks to take on a leadership role in the amorphous and evolving field of sustainability, its pioneering history supplies a useful template for future endeavours (Morrison, 2007). The companys origins date back to 1799, when the Manhattan Companythe firms earliest precursorbegan banking operations in New York City. Over a half century later, in 1861, J. Pierpont Morgan established JPMorgan & Co., which served as the sales and distribution office for the European securities underwritten by the firm owned by J. Piermonts father. Environment analysis means the gathering of data and information about and the companys micro and macro environments to plan for the actions which will benefit the company in the future course of action. It will help the company in understanding the future threats, opportunities, and can improve short-term and long term planning. Organisations scan the information regarding the environment, to develop the effective responses for the external forces and to improve or secure the business aspirations and positions.
Political factors are related to government policies, rules and regulations of that place of operation of an organisation. The formation of European Union and increase in the global trade has changed the scope of political influence. Business can reach out to many countries with these changes in the political scenario. Economic: Since economy of the countries in which JP Morgan operates is related to each other, economic changes in country influence the business in other counties also (Finacialtimes, 2011). An example is 2008 mortgage disaster in USA and this disaster influenced the business not only operating in USA but in whole world. Social: Social factors include the things like demographics, consumer interest and their buying behaviour, spending capability etc. the demographic changes such increased number of working woman have influenced the business. Technology: Technological changes have influenced the business in a big manner. There are two types of technological improvement; one in information technology and second in manufacturing. Both of these changes have increased the efficiency of businesses (NetMBA.com). Also, it has increased the opportunities for the business to attract more customers. Legal: Abiding by the law has become more essential for the businesses as a small mistake cost big amount. The national laws, EU laws, global laws are to be followed the organisations. With the increase in the globalisation, businesses are becoming more exposed to international laws.
1. The bargaining power of customers This force is manipulated by the many factors related to the consumers. It can be volume they buy or information available about them or their sensitivity towards the prices. Thus customers can influence the organisations in this way (NetMBA, 2012). This power is low in case of JP morgan as these types of organisations are few. 2. The bargaining power of suppliers Suppliers can manipulate the business to some extent with the factors like reputation of business, number of suppliers available, cost of the supplying material and geographical coverage. 3. The threat of new entrants The threat of new entrants is the force that is manipulated by the ability to make profit and initial cost of business. However, there are some more factors that influence this force for example legislation. 4. The threat of substitute products In the banking sector the threat of substitute product is low especially in investment banking. Reason is again same which is fewer investment banks. 5. Intensity of competitive rivalry Following are the factors that influence the competitive rivalry force:
number of competitors rate of industry growth exit barriers diversity of competitors informational complexity and asymmetry brand equity fixed cost allocation per value added level of advertising expense
4. The different approaches by national regulators to applying global standards will continue to be particular challenge for the banks, which are looking for consistent interpretation. Some jurisdictions are also going beyond the global standards. 4. One of the considerable challenges for banks is different national regulations to apply for the multinational companies. These regulations need consistent interpretation.
The big entities of banking sector are capable of influencing the market trends everywhere in the world due their size, economic power and performance. They also can influence the growth of banks globally. The globalisation in banking sector does not mean that they abandon the domestic market but they move to make banking services available across the national boundaries. This increases their economic power and their national position many times as compared to other industries. Investment banks assist businesses in merging and acquiring other businesses, expanding by providing them with funds and advice. They are directly influenced by the state of economy as well do influence it. In USA there are about 2000 investment banks of different types. At the moment the major ones are Morgan Stanley and Goldman Sachs. Some of them provide specialised services for example they advice in bond trading. The business of these investment banks involves Corporate Finance Sales and Trading Merger and Acquisitions Analysts Research
2.3 The key issues, opportunities and threats for investment in this organisation
Strengths or Weaknesses
Opportunities or Threats
infrastructure quality staff productivity corporate culture management expertise or lack of expertise delivery time price point capacity relationships with customers/suppliers brand strength multi-lingual capabilities ethics patents, licenses, permits exclusive access to natural resources distribution networks
interest rates industry mergers or joint ventures change in customer demographics strategic alliances expectations of shareholders/public technology advances closing of geographic markets changing customer tastes
But the ethical considerations are very important for them because they have big role in causing big financial crisis that leads to influencing the economy. There must be some kind of bodies to monitor and enforce the ethical and moral laws on these firms. Running in international environment makes it more serious for the investment banks. This can be seen in the 2008 crisis as many business around world collapsed due to financial crisis in USA.
Corporate Social Responsibility (CSR) CSR is also a kind of corporate responsibility towards the community. This involves the activities like charities and environmental stewardship. It is also seen as a unsaid contract between community and organisation in which community gives it permission to operate business in exchange of employment and taxes. According to Noterdaeme (2004) corporate social responsibility includes the all liabilities towards the stakeholders as well as towards environment, society. It also includes the business practices to be ethical. At present it is found that the European firms are adopting CSR activities more than firms doing in USA. Community expects businesses to make its place, a better place to live and not harm the environment. With people becoming more aware of environmental issues as a result of advanced information technology there is increased pressure on the organisations to follow ethical practices. Sometimes, it can also influence their profits.
3.3 Guidance relating to corporate social responsibility Investment banking organisations has greater liability towards public as it has much more power to influence the economy as compared to organisations other industries. There must be control variables identified by them to avoid the unethical practices. Also the policies must be made in case of any negative event. This is responsibility of firms in this sector to control its own business (Voien, 2007). They must not fall for quick profit making strategies but all the aspects must be considered. It becomes more important for firms in this sector because their operations are quite complex and even one wrong act can initiate a chain of negative reaction. The other aspect of CSR for the investment baking could be rescuing the other businesses in need. Also, it can indulge in the charities that do some work for such businesses. The traditional CSR activities are always there to take up for example helping poor, integrating with community, and development of area in which it operates.
Conclusion
The sub-prime crisis like one happened in 2008 is a hammer blow for the investment banks like J.P Morgan. By doing the companys environmental analysis like micro and macro environments to plan for the actions which will benefit the company in the future course of action. It will help the company in understanding the future threats, opportunities, and can improve short-term and long term planning. A public equity or debt issue is the logical source of fund in this situation and investment banks J P Morgan can tap this opportunity of growth. The investment banking in the global scenario is most influential sector. Funds are always big requirement for the business and this is provided by investment banks. Thus, they have capability to influence whole economy of an area. With the globalisation, they have changed the economy of many areas in this way.