The formulation of good strategies is very important in business. There are five elements that must be considered when making decisions, which include arenas, differentiators, vehicles, staging and pacing, and economic logic for a diamond strategy to stay competitive, increase market share, and profitability (Hambrick & Fredrickson, 2001).
Wells Fargo begun operation in California (1852) and later formed the Overland Mail Company in 1857 to delivers its mail. In 1905, banking became a separate entity and had since grown and survived many financial crises over the years to emerge as one of the most valued banks in the United States. The company has diversified banking and financial products and services with an asset value of over $1.8 billion by 2015, which saw the company's stock and financial performance grow (Hambrick & Fredrickson, 2001).
Wells Fargo's Arenas
Wells Fargo became the largest financial institution in the United States, offering financial products and services to a majority of U.S households and employment as well. By 2015, the bank was serving more than 70 million customers in over 130 countries and also had team members in 36 countries. It was ranked among the top ten public companies worldwide in relation to assets owned, sales revenue, profitability, and market value. Products and services offered range from banking, investment, insurance, mortgages, internet banking and mobile banking, consumer and commercial financing. The bank has 8,700, or more locations and more than 13,000 ATMs through which it can offer and channel its financial products and services to customers with ease, and this ensures customer satisfaction as the customers can rely on the company giving it a competitive advantage (Hambrick & Fredrickson, 2001).
Wells Fargo's Vehicles
Wells Fargo was able to acquire Wachovia during the financial crisis of 2007-08 as the bank was facing operational problems. The acquisition was completed in December 2008 after many dramatic events as it faced opposition from Citigroup. It took three years to integrate the operations of Wachovia with that of Wells Fargo. The acquisition, which cost $15.1 billion, had a great impact as Wachovia had a large network in the service industry. These complemented Wells Fargo well, and it became America's largest financial distribution channel (Gujarathi & Barua, 2017). A combination of the best in service and sales and cross-selling gave Wells Fargo an added advantage, and the extensive network meant more branches and a wider geographic region, increasing its market segment share.
Wells Fargo's Differentiators
For profitability, differentiated products and services offered by Wells Fargo attracted various groups of clients from low to ultra-high-net-worth clients increasing business opportunities and creating new market segments. The bank has the best business network and most advanced e-banking system and mobile banking services where online services are offered. The company has over 80 customer-centered units that cover all major financial needs at different stages. This creates a competitive advantage over competitors (Gujarathi & Barua, 2017).
The bank has three major segments that offer different financial products and services to customers from the community to wealthy citizens and also the government. These segments are; Wholesale banking, Community (Retail) banking and Wealth, and Investment management. Financial products and services range from normal banking to personalized solutions for big businesses and high-net-worth clients. The increase in the stock price in 2015 reflected on how these products and services had brought value and increased revenues.
Wells Fargo's Economic Logic
In July 2015, Wells Fargo became a valuable bank worldwide as a result of increased sales, asset, profitability, and market value. The efficiency ratio to the cost incurred to generate revenue was low compared to its competitors JPMorgan, Citigroup, and the Bank of America. The bank had impressive stock and financial performance with community banking, contributing to most of its revenue, operating, and net income.
Cross-selling played a big role in creating customer satisfaction and loyalty and maximized revenues. It enabled earning more business from their current clients. Employees were offered incentives in the form of bonuses as a way of motivating them to work harder to meet sales quotas. Financial fraud occurred, which led to penalties of over $185 million due to having opened many bank accounts without customer consent by employees trying to meet sales quotas to earn bonuses or retain their jobs (Gujarathi & Barua, 2017).
Even with the fraud case that rocked the company and led to the company CEO and Chairman John Stumpf resignation and firing of over 5,000 employees, Wells Fargo has continued to perform well because of its business model, which incorporates the five elements of the diamond strategy. These elements enable designing of a comprehensive and integrated activity system which involves functional policies, operating programs, organizational arrangements, and other support processes. Unethical conduct and incentives need to be eliminated on time and effective policies and strategies put in place to avoid misconduct when it comes to cross-selling and employee motivation. Leaders need to take responsibility for their actions as well as those of their employees to maintain proper work ethics and good customer relations that ensure the company's image is upheld, so the company's revenues and returns are not affected, and the customers are protected.
Gujarathi, M. R., & Barua, S. K. (2017). Wells Fargo: Setting the stage coach thundering again. HBS No. NA0467-PDF-ENG. Boston, MA: Harvard Business School Publishing.
Hambrick, D. C., & Fredrickson, J. W. (2001). Are you sure you have a strategy?. Academy of Management Perspectives, 15(4), 48-59. Doi: 10.5465/ame.2001.5897655
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