Wells Fargo

BUSINESS STRATEGY FINAL

PROJEC
1) Misbah Bashir (0045)
2) Saira Ashraf (2051)

M. Com
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Wells Fargo
This is not a task. This is a journey. Every journey has a destination. To get to that
destination, you need a vision. Ours is an ambitious one.
Richard M. Kovacevich CEO and chairman of Wells Fargos

2) Company Profile of Related Case Study

History:
Origins
Soon after gold was discovered in early 1848 at Sutter's Mill near Coloma, California,
financiers and entrepreneurs from all over North America and the world flocked to California,
drawn by the promise of huge profits. Vermont native Henry Wells and New Yorker William G.
Fargo watched the California boom economy with keen interest. Before either Wells or Fargo
could pursue opportunities offered in the West, however, they had business to attend to in the
East.
Wells, founder of Wells and Company, and Fargo, a partner in Livingston, Fargo and Company,
were major figures in the young and fiercely competitive express industry. In 1849 a new rival,
John Butterfield, founder of Butterfield, Wasson & Company, entered the express business.
Butterfield, Wells, and Fargo soon realized that their competition was destructive and wasteful,
and in 1850 they decided to join forces to form the American Express Company.
Soon after the new company was formed, Wells, the first president of American Express, and
Fargo, its vice-president, proposed expanding their business to California. Fearing that American
Express's most powerful rival, Adams and Company (later renamed Adams Express Company),
would acquire a monopoly in the West, the majority of the American Express Company's
directors balked. Undaunted, Wells and Fargo decided to start their own business while
continuing to fulfill their responsibilities as officers and directors of American Express.
Foundation of Wells Fargo
On March 18, 1852, they organized Wells, Fargo & Company, a joint-stock association
with an initial capitalization of $300,000, to provide express and banking services to California.
The original board of directors comprised Wells, Fargo, Johnston Livingston, Elijah P. Williams,
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Wells Fargo
Edwin B. Morgan, James McKay, Alpheus Reynolds, Alexander M.C. Smith and Henry D. Rice.
Of these, Wells, Fargo, Livingston and McKay were also on the board of American Express.
Financier Edwin B. Morgan of Aurora, New York, was appointed Wells Fargo's first president.
They commenced business May 20, 1852, the day their announcement appeared in The New
York Times. The company's arrival in San Francisco was announced in the Alta California of
July 3, 1852. The immediate challenge facing Morgan and Danford N. Barney, who became
president in November 1853, was to establish the company in two highly competitive fields
under conditions of rapid growth and unpredictable change. At the time, California regulated
neither the banking nor the express industry, so both fields were wide open. Anyone with a
wagon and team of horses could open an express company; and all it took to open a bank was a
safe and a room to keep it in. Because of its comparatively late entry into the California market,
Wells Fargo faced well-established competition in both fields.
From the beginning, the fledgling company offered diverse and mutually supportive services:
general forwarding and commissions; buying and selling of gold dust, bullion, and specie (or
coin); and freight service between New York and California. Under Morgan's and Barney's
direction, express and banking offices were quickly established in key communities bordering
the gold fields, and a network of freight and messenger routes was soon in place throughout
California. Barney's policy of subcontracting express services to established companies, rather
than duplicating existing services, was a key factor in Wells Fargo's early success.
So in 1852, Henry Wells and William Fargo founded a financial services company that has
become a legendary part of the American West, and a part of thousands of other communities as
well. This heritage continues as part of Wells Fargos identity todayin our values, with our
service, and with our people.
Wells Fargo and Companys Express provided financial services by the fastest means available:
overseas by sailing ship or steamer; and overland by stagecoach, Pony Express or railroad.
Within a few years, business was transacted electronically by telegraph, which would later grow
to include radio, telephone and the internet.

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Wells Fargo
From the first day of business, Wells Fargo came through for pioneer miners, merchants and
ranchers in the West. And in a very short time, the company opened offices in mining camps,
towns and citiesthere were more than 10,000 Wells Fargo offices by 1918.
The current Wells Fargo is a result of a 1998 merger between Minneapolis-based Norwest
Corporation and the original Wells Fargo. Although Norwest was the nominal survivor, the new
company kept the Wells Fargo name to capitalize on the long history of the nationally recognized
Wells Fargo name and its trademark stagecoach (the company's previous slogan, "The Next
Stage," is likely a nod to the company's trademark). After the acquisition, the parent company
kept its headquarters in San Francisco. The company's current tagline, "Together we'll go far"
also references the stagecoach motif, its customers, and represents the company name itself in a
transposed way (Wells Far-go = we'll[s] go-Far).

Introduction:
Wells Fargo & Company is an American multinational banking and financial services
holding company which is headquartered in San Francisco, California, with "hubquarters"
throughout the country. It is the fourth largest bank in the U.S. by assets and the largest bank by
market capitalization. Wells Fargo is the second largest bank in deposits, home mortgage
servicing, and debit cards. In 2011, Wells Fargo was the 23rd largest company in the United
States.
In 2007 it was the only bank in the United States to be rated AAA by S&P, though its rating has
since been lowered to AA in light of the financial crisis of 20072012. The firm's primary U.S.
operating subsidiary is national bank Wells Fargo Bank, N.A., which designates its main office
as Sioux Falls, South Dakota.
Wells Fargo in its present form is a result of a merger between San Francisco-based Wells Fargo
& Company and Minneapolis-based Norwest Corporation in 1998 and the subsequent 2008
acquisition of Charlotte-based Wachovia. Following the mergers, the company transferred its
headquarters to Wells Fargo's headquarters in San Francisco and merged its operating subsidiary
with Wells Fargo's operating subsidiary in Sioux Falls.

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Wells Fargo
Wells Fargo is one of the "Big Four banks" of the United States, along with JPMorgan Chase,
Bank of America and Citigroupits main competitors. The company operates across 35
countries and has over 70 million customers globally. In 2012, it had more than 9,000 retail
branches and over 12,000 automated teller machines in 39 states and the District of Columbia.
As of July 12, 2013, Wells Fargo became the world's biggest bank by market capitalization,
worth $236 billion, beating ICBC.
In February 2014 Wells Fargo was named the world's most valuable bank brand for the 2nd year
running in The Banker and Brand Finance study of the top 500 banking brands.

Registered Head Office:

Wells Fargo registered head office located in San Francisco and California, United States and
served as worldwide.
Were headquartered in San Francisco, but we are decentralized so every local Wells Fargo store
is a headquarters for satisfying all our customers financial needs and helping them succeed
financially. (Companys statement)

Nature Private/Public:
If we talk about Wells Fargo nature, its Public. Kovacevich states, We are a big company. We
will continue to grownot to become bigger but as a result of getting better. . . . Regardless of
how big we are and how much territory we cover our team shares certain values that hold us
together wherever we are and whatever we do.

Auditor:
If we talk about Wells Fargo auditors, KPMG is still Wells Fargo auditor.
Functions:
Wells Fargo functions are;
Banking,
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Wells Fargo

Financial services.

Products:
Wells Fargo products are;
Consumer banking,
Corporate banking,
Credit cards,
Finance and insurance,
Foreign currency exchange,
Investment banking,
Mortgage loans,
Private banking,
Private equity,
Wealth management.

Main Brands:
Main Departments:
Business Volume (Countries in Which Company is Preforming its Operations):
Wells Fargo provides banking, insurance, investments, mortgage and consumer finance services
for more than 25 million customers through over 6,000 stores. If we talk about its area in which
he served to customers its Worldwide.
Revenue
Decrease US$ 83.78 billion (2013)
Operating income
Increase US$ 32.62 billion (2013)
Profit
Increase US$ 21.87 billion (2013)
Total assets
Increase US$ 1.527 trillion (2013)
Total equity
Increase US$ 170.1 billion (2013)
Employees
264,900 (2013)

3) Company Analysis

SWOT Analysis (Strategy of SWOT analysis):

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Wells Fargo

Strength:1. Leading innovator in the use of internet and e-commerce ( Online growth)
2. Servicing for more than 25 million customers through over 6000 stores. (Worldwide
3.
4.
5.
6.
7.

service)
Strong balance sheet (Strong financial position)
Strong national presence and credible reputation (Strong brand)
Values and treats its customer as friends (Loyal customers)
Values its people as its competitive advantage (Strong HR & management team)
Widely recognized as industry and market share leader (Industry leader)

Weakness:1. Cut its dividend payment in a move to attempt to solidify its balance sheet
(Diseconomies of scale)
2. Overcommitted in credit swap (Over leveraged financial position)
3. The reduction of Wells Fargo debt rating two levels during January 2009 (Weak
capital position)
4. The Wachovia Bank subprime mortgage problems (Over leveraged financial
position)
5. Too much focus on consumer/retail banking (Not diversified)
6. Weak International growth.
7. Wells Fargo basically did no securities business after merger (Not diversified)

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Wells Fargo
Opportunities:1. Growth and success of combined.
2. Increasing its extensiveness through mergers and acquisitions with recently owned
Wachovia or with other new bank (M&A opportunities)
3. Move the large national bank with an international presence forward or expansion
abroad (International growth)
4. The disappearance of investment banking and the
5. The use of internet banking and e-commerce (Online growth)
6. Wachovia and Wells Fargo will be one of the great financial services company
(National growth)
7. Wells Fargo announcement to significantly expand its security business (Product &
service diversification)

Threats:1. Lingering economic recession and changes in the banking industries (Economic
slowdown)
2. The lack of regulation today (External factors/PEST)
3. The large national bank have become larger while community banks still exist to
satisfy local customer (Intense competition)
4. There will be anticipated duplication of labor and functions (Companys
downsizing)
5. There would be continued downward pressure on housing price (Weak real estate
business)
When analyzing the strengths of Wells Fargo Company we noticed that Wells Fargos
overall size is their biggest strength. As noted under the company section, they are
physically the largest bank in America. We identify the banking industry as a still
expanding and growing market; therefore we see Wells Fargos banking services to be a
star instead of a cash cow when using the BCG matrix. When our team analyzed the
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Wells Fargo
advertising and marketing measures that Wells Fargo uses, we noticed that they are a
highly recognizable brand, and therefore their marketing recognition is a strength.
Weaknesses include the fact that they are not international when many of their
competitors are, as well as general banking weaknesses such as security, policies,
regulation, and problems with our current economy that banks face.
Opportunities that our group points out are easily brought down from our weaknesses, but
also from our research. When doing research we found that US Bank helps with
customers tax returns, perhaps Wells Fargo could follow the same type of idea. Maybe a
merger with a company like H&R Block could gain customers.
Finally, threats that we noted are mostly self-explanatory. One thing our team would like
to talk about though is the problem with brand loyalty. In the banking business the
biggest threat is that of brand loyalty. How does a company keep its customers loyal, and
what if a new competitors promotions exceed the companys? A big threat is that of
losing customer loyalty through such measures.
Ratio Analysis:
BCG Matrix:
Internal Evaluation Matrix & External Evaluation Matrix & CPM:

Wells Fargo Internal Factor Evaluation Matrix:-

Key Internal Factors

Weighted Rating

Weighted
Score

Strength
1. Industry Leader
2. Loyal Customer
3. Online Growth
4. Strong Brand
5. Strong Financial Position
6. Strong HR & Management Team
7. Worldwide Service

0.12
0.10
0.06
0.08
0.11
0.08
0.06

4
4
2
4
3
4
2

0.48
0.40
0.12
0.32
0.33
0.32
0.12

Weakness
1. Diseconomies of scale
2. Not Diversified
3. Weak capital position
4. Weak international growth
5. Weak real estate business

0.08
0.07
0.07
0.06
0.11

3
2
2
3
2

0.24
0.14
0.14
0.18
0.22
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Wells Fargo
Total

1.00

2.93

Wells Fargo External Factor Evaluation Matrix:-

Key Internal Factors

Weighted Rating

Weighted
Score

Opportunities
1. International growth
2. M&A opportunities
3. National growth
4. Online growth
5. Product & service diversification

0.12
0.14
0.09
0.11
0.12

4
3
3
3
4

0.48
0.24
0.36
0.33
0.48

Threats
1. Companys downsizing
2. Economic slowdown
3. External factors/PEST
4. Intense Competition
5. Weak real estate business

0.06
0.12
0.07
0.09
0.08

1
2
2
2
1

0.06
0.24
0.14
0.18
0.08

Total

1.00

2.42

SPACE Matrix:

Composition

Ratings

Financial Strengths (FS)

1. Liquidity
2. Leverage
3. Company Model
4. Return on Assets
5. Return on Equity
6. Stock Price
7. Net Income
FS Total
FS Average

6.0
5.0
6.0
4.0
4.0
6.0
6.0
37
5.3

Industry Strengths (IS)

1. Benefits Potential
2. Extend Leveraged
3. Economic Scale
4. Development Potential
5. Financial Stability

6.0
6.0
5.0
6.0
5.0
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Wells Fargo
6. Utilization of Recourses
7. Diverse Portfolio
IS Total
IS Average
Environmental Stability (ES)
1. Price Range of Competing Products
2. Competitive Pressure
3. Market Distribution
4. Advertising Success
5. The Employment Contract
6. Price Elasticity of Demand
7. Risks Involved in the Business
ES Total
ES Average
Competitive Advantage (CA)
1. Market Share
2. Globalization
3. Reputation for Strong Investor
4. Technology Innovation
5. Product life cycle
6. Customer Loyalty
7. Control over suppliers and
distributor
CA Total
CA Average

4.0
4.0
36
5.1
-2.0
-1.0
-3.0
-4.0
-1.0
-1.0
-1.0
-13.0
-1.9
-1.0
-1.0
-1.0
-1.0
-2.0
-2.0
-2.0
-10.0
1.40

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Wells Fargo
SPACE Matrix Diagram:

FS
Conservative

Aggressive

IS

Defensive

Competitive
ES

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Wells Fargo
IE Matrix:

EFE Score
4.0
Strong

2.42

Average

Grow

and

II

Weak
Build
III

High

Maintain

Medium

Hold

and

IV

VI

VII

VIII

IX

or

Divest

Harvest

Low
IFE Score

1.0 4.0

2.93

1.0

Hold & Maintain (Average/ Medium)

Market Penetration;
By increasing market share expansion or marketing way wider.

Product Development;
Namely by improving existing products or create new products, as described in the
article, that Wells Fargo develop financial securities products.

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Wells Fargo
QSPM (Quantitative Strategic Planning Matrix):
Market Penetration
Key Factors
Strengths
1. Industry Leader
2. Loyal Customer
3. Online Growth
4. Strong Brand
5. Strong Financial Position
6. Strong HR & Management
Team
7. Worldwide Service
Weakness
1. Diseconomies of scale
2. Not Diversified
3. Weak capital position
4. Weak international growth
5. Weak real estate business
Sum Weights
Opportunities
1. International growth
2. M&A opportunities
3. National growth
4. Online growth
5. Product & service
diversification
Threats
1. Companys downsizing
2. Economic slowdown
3. External factors/PEST
4. Intense Competition
5. Weak real estate business
Sum Weights
Sum Total Attractiveness Score
* Attractiveness Score

Product Development

Weight

AS*

TAS**

Weight

AS*

TAS**

0.12
0.10
0.06
0.08
0.11

4
3
2
4
4

0.48
0.30
0.12
0.32
0.44

0.12
0.10
0.06
0.08
0.11

2
2
1
3
3

0.24
0.20
0.06
0.24
0.33

0.08

0.24

0.08

0.24

0.06

0.18

0.06

0.12

0.08
0.07
0.07
0.06
0.11
100%

3
2
3
3
2

0.24
0.14
0.21
0.18
0.22

0.08
0.07
0.07
0.06
0.11
100%

2
2
3
3
2

0.16
0.14
0.21
0.18
0.22

0.12
0.14
0.09
0.11

4
3
3
2

0.48
0.42
0.27
0.22

0.12
0.14
0.09
0.11

0.12

0.24

0.12

4
3
3
2
3

0.48
0.42
0.27
0.22
0.36

0.06
0.12
0.07
0.09
0.08
100%

2
3
2
2
2

0.12
0.36
0.14
0.18
0.16

0.06
0.12
0.07
0.09
0.08
100%

2
3
2
2
2

0.12
0.36
0.14
0.18
0.16

5.66

>

5.05

** Total Attractiveness Score

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Wells Fargo
4) Strategy Recommendation Based On Company Plan
Wells Fargo need the companys growth strategy to win the competition in the industry and to
keep stronger their position in the market.

Recommended Strategies
Wells Fargo use Incentive Strategy by doing Market Penetration and Integrated Strategy by
doing
Horizontal Integration.
Follow by these Implementation Strategy:
1.
2.
3.
4.

Developing competitors acquisition program

Developing international offices abroad
Developing insurance business entry program
Developing marketing & publicity program

Recommended Decision
The Management has decided to allocate capital expenditure to develop:
1. Competitors acquisition program
2. Insurance business entry program
3. International office abroad

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Wells Fargo
Action Plan
1. Developing Competitors Acquisition Program:
i.
Acquisition Wachovia (the major competitor)
ii.
Start negotiation & agreement
iii.
Preparing the takeover funds
2. Developing Insurance Business Entry Program:
i.
Set up the organization & resources
ii.
Set up the 10 years business plan
iii.
Start the promotion of new business
3. Developing International Offices Abroad:
i.
Targeting New Markets in Europe, Asia &Australia
ii.
Set up the organization & resources
iii.
Set up the10 years business plan

**********

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