This article is going to discuss different ways and situations of analyzing a company’s, profitability, sustainability and its moving forward.
The article is also going to highlight different types of analysis and how they differ from one another in relation to purpose and profitability. The article is going to have a look at Well Fargo’s analysis.
There are different situations, which lead to the company’s analysis. The company might choose to assess various sections that constitute to the whole company for various purposes. One of the main purposes of conducting an analysis on a company is to determine its position in relation to profitability. A company’s profitability is never stagnant; a company is moving either forward or backwards. A company will never be at the same position in relation to profitability.
There are different types of analysis; they differ from one another in regards to purpose and methodology. A research will always have a unique way through which it looks at the details presented in the aim of research. The SWOT system of analysis is one of the most effective methods of analyzing a business organization. The SWOT analysis highlights strengths, weaknesses, opportunities and threats. Through this analysis an organization is evaluated into the fine details.
The company’s strengths can be seen in the ranking it has received from world renowned financial analysts. The company is listed as the best small business lender, best agricultural lender, second best debt card issuer, second best prime home-equity lender, third best mutual fund provider among the U.S. Banks.
For instance, the company is the 18th most respected company in the world. This was a ranking established by Barrons. Wells Fargo has been ranked as the 17th most profitable company all over the United States. The organization has received the “Aaa” credit rating from Moody. The company has a good relation with the community, the customers, and the team members.
The company has been ranked as the 41st in relation to revenue in the United States. This ranking was given by the Fortune 500. Another area where the company’s strength is displayed is in relation to organization. The company’s organization structure is set up in a manner that helps various departments and branches to work as a single body. The Wells Fargo Bank has been established as the first bank in the United States as of 2008 (Fradkin, 2002).
The company has two major weaknesses. These weaknesses are presented in bad mortgages and low debit card market share. One of the major areas where other competitors beat this company is in relation to debit cards. Whereas other financial institutions are focused on providing debit cards for their customers, this company has been left behind. For this cause, Wells Fargo has been constantly loosing customers.
The market share that the company continues to lose every other day where debit cards are being used in the market is a loophole through which competitors continue to enjoy other benefits. The other weakness of the company is in relation to bad mortgages. As a lender, there are mortgage problems that the company continues to face every day as the credit market continues to experience problems (Navarro, 2006).
The opportunities the company is presented with, include reduced competition, cross-selling options, consolidating industry, international expansion, and Wachovia. In relation to international expansion, the company is looking to establish a strong presence in the international market as well as increasing the growth and profits.
In the event the company is to venture out into international markets, it would experience improved synergies and the customer base would increase. The opportunities would also improve the company’s financial stability as well as enhancing the individual economies in the countries where it has been established. Innovation will increase the company’s profitability (Ferrell & Hartline, 2010).
The threats that the company faces include mortgage issues, credit market crisis, slow expansion of mortgages, credit cards write offs, housing crisis, and government intervention. The credit market is perceived as a threat mainly because of the effect it has on cost of borrowing. Shareholders fail to benefit mainly because the free cash flow is interrupted.
This also affects margins adversely. The housing crisis has two major effects that qualify it as a threat to the operations of Wells Fargo. The housing crisis is responsible for the decrease in value of equity and company assets as well. This has the effect of making business slow and reducing its profitability.
The pressure also affects the growth of equity and cash flow. Although the government is a big customer for the company, there is always some pressure on the intervention it provides. In the event the company intervenes, the effect is felt on stock. The stock is usually under pressure in the event such intervention is launched. The government involvement in business also comes with its adverse effects.
For instance, the government has been associated with past problems and these have led businesses to experience huge losses. In the event the company ventures into a market where the industry is regulated by the government, there are adverse effects that the company is set to experience. These adverse effects are usually rooted in the manner the government makes its decisions.
In the light of the fact that the government makes decisions, various businesses are set to flourish. Taking into consideration that these decisions are not based on the welfare of the citizens, the businesses will suffer, too. The involvement of government in business is also a risky affair as it brings it political risks. Credit card write offs also decrease the profitability of Wells Fargo (Fradkin, 2002).
Ferrell, O.C. and Hartline, M. (2010). Marketing Strategy. Ohio: South-Western Cengage Learning.
Fradkin, P.L. (2002). Stagecoach: Wells Fargo and the American West. New York: Simon & Schuster Publishers.
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Navarro, P. (2006). The Well-timed Strategy: Managing the Business Cycle for Competitive Advantage. New York: Wharton School Publishing.
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