Chase Bank Analysis: A Case Study
Chase Bank, a subsidiary of JP Morgan Chase, has exhibited remarkable growth in the banking industry. The company’s stock price in the New York Stock market has increased steadily over the past few years. In the most recent annual report, the company’s chairperson and CEO, Jamie Dimon, acknowledged that the business had achieved much in terms of financial performance and dedication to clients (“Annual Report 2018”). One critical factor that enables the venture to thrive in a highly competitive industry is the ability to monitor and develop strategic plans for its internal capabilities. Despite facing multiple operational threats from other retail and commercial banking institutions, Chase Bank’s strong asset base, technological drive, and corporate social responsibility have been the pillars of success.
Resources Maintained by Chase Bank
Chase Bank’s asset base comprises tangible and intangible resources and has been an essential source of value in the company. The corporation’s tangible assets include cash, cash equivalents, securities, and equipment, which the firm owns in its subsidiary and parent establishment. By the end of the fiscal year 2015, the firm’s client assets stood at $219 billion (Matt). In addition, considering other types of resources that the corporation owns, such as wholesale and consumer deposits, the asset base can exceed $2 trillion in all its four operation segments. Chase Bank also possesses multiple intangible assets in the form of patents. By 2015, the institution’s application for patent rights had increased by 50% from 2014, with approximately 22 patents (Loftus). While the business operates in the banking industry, Chase Bank also develops technologies to enhance its activities. Hence, patents and client assets are essential to its competitive advantage.
Evaluation Against VRIO Framework
To understand Chase Bank’s competitive position, it is essential to evaluate the firm’s resources against the VRIO framework. VRIO is an approach to measuring excellence in which valuable, rare, and inimitable assets are sources of competitive advantage (Indartono et al. 7275). Notably, the company’s primary valuable resource is the clients’ assets, which were valued at $219 billion in 2015 (Smith). Therefore, client assets fund other investments, which generate interest and income to boost the corporation’s financial performance.
Although patents are also valuable assets of the firm, they are not rare because the existing and startup financial institutions are also investing in new technologies to create convenience in service delivery. However, with the fast pace at which Chase Bank is developing innovative ideas, it may be too costly for new entrants to imitate its core competency. The management also possesses the capability to coordinate its resources. For instance, the parent enterprise organizes its activities into corporate and four major reportable business segments (“Annual Report 2018”). Hence, each section, including the two sectors that Chase Bank operates in, is centrally regulated. Based on this analysis, it is evident that Chase Bank’s client assets, patents, and organizational structure pass the VRIO test.
The company’s technological drive constitutes its core competency. The firm’s executive regards technology as “the lifeblood of the organization,” which “drives the delivery of secure products, platforms and services to customers and clients value and trust” (“Annual Report 2018” para. 6). Due to the value that the corporation derives from technology, Chase Bank invests about 30% of its $9 billion technology budget in new ideas of investment (“Annual Report 2018”). The value of the venture’s technologies has also driven the management to patent many of its innovations. Chase Bank’s technology is an element that differentiates its operations from those of other traditional retail and commercial banking institutions.
Chase Bank’s main strength is embodied in technology and asset base. The technological innovations enable the company to offer quick and secure banking services to its clients (Zames). For instance, the web bank teller machine provides a seamless experience for customers since users’ profiles are stored in the ATM once the bank card is swiped (Justia). Hence, the technology makes it easier for such essential information to be retrieved during subsequent transactions conducted through the machine. The corporation’s asset base also constitutes its operational strengths. The firm maintains higher clients’ assets to facilitate its operations, such as issuing loans and taking advantage of investment opportunities.
One of Chase Bank’s weaknesses is an overreliance on a few markets. Although Chase Bank is a subsidiary of a multinational institution, the firm’s retail and commercial banking services are limited within the United States. By 2018, the bank had extended its products to approximately 50% of the country’s households (“Annual Report 2018”). Despite attracting a large customer base in the state, the company may incur huge losses if the current market begins to stagnate.
Chase Bank can benefit from the growing credit card market in the United States. Based on market analysis, the country’s credit card processing industry had reached $927 billion in purchase volume over the second quarter of 2018 from $844 billion in 2017 (Trefis Team). Thus, such a variation indicates a steady growth in credit card consumption in the state. The company can benefit significantly from this trend by issuing more credit cards to its customers.
The greatest threat that Chase Bank is likely to face is product and service imitation. While the company has numerous patent rights for its ideas, other industrial rivals may copy and enhance such innovations. Besides, some of the existing technologies may become obsolete in the upcoming years. Therefore, the management should proceed cautiously and indulge in further research and development to update its technological applications.
Based on the above analysis, I would advise the firm to dedicate a considerable portion of its budget to technological advancement. Today, a large percentage of consumers seek convenience and quality. Hence, by investing in advanced applications, Chase Bank can attract and retain a broader consumer base. The management should establish measures to ensure credit card safety to foster a sense of trust among its clients. The firm should also consider penetrating emerging markets, especially China, and opening subsidiary branches to promote its economic growth. If Chase Bank can incorporate these suggestions into its strategic plan, it would strengthen its market position in the banking industry.
Chase Bank’s Focus and Source of Success
Chase Bank appears to emphasize mainly two intertwined aspects. Firstly, the firm focuses on generating profits for its shareholders. The management links the success to the price of its shares in the stock market and the ability to satisfy customers’ demands. In the 2018 annual report, the CEO mentioned that tangible book value was the measure of value created for its shareholders (“Annual Report 2018”). Therefore, investors are at the core of the company’s operations. Secondly, the firm also focuses on value creation. Part of its mission is to enhance customer experience and reduce expenses (Matt). Although profitability and customer experience are the two significant focus areas, the bank also works towards economic value creation and accounting.
Corporate Social Responsibility
Just like other firms in the industry, Chase Bank also participates in corporate social responsibility (CSR). The management regards the practice as a “return to the community” whereby resources and capabilities are used to foster growth in areas of operation (“Annual Report 2018”). Examples of CSR include job creation and the provision of affordable housing. Besides, the corporation is an anchor of startup institutions (“Annual Report 2018”). Chase Bank’s CSR helps to build its image and reputation, thus facilitating its success in the banking sector.
Chase Bank’s industrial success is based on its strong asset base, technology, and corporate social responsibility. The company’s tangible and intangible assets provide the firm with a competitive advantage. In addition, technology acts as the venture’s core competency. Chase Bank’s primary operation focus has been profitability and value creation for its customers. With its involvement in CSR, the firm is likely to experience more growth in the coming years.
“Annual Report 2018.” JPMorgan Chase & Co, www.jpmorganchase.com/corporate/investor-relations/document/annualreport-2018.pdf. Accessed 7 Oct. 2019.
“Patent by Inventor JP Morgan Chase Bank N.A.” Justia Patents, www.patents.justia.com/inventor/jpmorgan-chase-bank-n-a. Accessed 7 Oct. 2019.
Inadtrono, Setyabudi, et al. “VRIO and THES Based Development of University Competitive Advantage Model in Formulating University Strategic Plan.” International Journal on Information, vol. 20, no. 10, 2017, pp. 7275-7285.
Loftus, Tom. “The Morning Download: J.P. Morgan Intensifies Tech Patent Drive.” The Wall Street Journal, 11 May 2016, www.blogs.wsj.com/cio/2016/05/11/the-morning-download-j-p-morgan-intensifies-tech-patent-drive/. Accessed 7 Oct. 2019.
Smith, Gordon. “Consumer & Community Banking.” www.jpmorganchase.com/corporate/investor-relations/document/ar2015-lettertoshareholders.pdf. Accessed 7 Oct. 2019.
Trefis Team. “Purchase Volume for U.S. Credit Card Industry Could Cross $1 trillion in Q4.” Forbes, 17 August 2018, www.forbes.com/sites/greatspeculations/2018/08/17/purchase-volume-for-u-s-credit-card-industry-could-cross-1-trillion-in-q4/#26ca2d221f07. Accessed 7 Oct. 2019.
Zames, Matt. “Investing in Our Future.” www.jpmorganchase.com/corporate/investor-relations/document/ar2015-lettertoshareholders.pdf. Accessed 7 Oct. 2019.