External and Internal Environmental Analysis: JP Morgan Chase Final

External and Internal Environmental Analysis

STR 581

External and Internal Environmental Analysis

The organizational environment involves both internal and external factors. Organizations need to scan their environment to determine developmental strategies and forecast factors influencing the success of an organization. Environmental scanning involves the possession and use of information about trends, patterns and relationships within the internal and the external environment of an organization (Hill, 2014). It helps managers determine the organization’s future path. Scanning will identify the opportunities and threats that exist in the environment. The strategies developed should take advantage of opportunities while minimizing threats.

J.P. Morgan Chase needs to develop strategies to adapt to changes that exist in the banking industry. This will enable them to maintain its market share and remain competitive in the industry. These strategies are developed after environmental scanning. J.P. Morgan Chase needs to gather information regarding changes or trends in the environment and implement it in the development of strategies. By gathering the right information, J.P. Morgan Chase will be able to determine their viability in the future (Hill, 2014).

Our team conducted an internal and external environmental analysis with the case of J.P. Morgan Chase. We identified the most important external factors in the external operating environment and the remote industry and analyzed them. We also identified the internal strengths and internal weaknesses including the banks resources and analyzed them. We assessed the competitive position of J.P. Morgan Chase and finally analyzed the organizational structure of the bank indicating its effects on the performance of the organization.

External Environmental Factors

After conducting an external environmental scan, the important factors that affect how JP Morgan Chase does its business in the banking industry were identified. One of the most significant factors is regulatory environment. Political factors shape the way the banks operate. The banking sector is federally controlled. The local, state and federal governments enact laws that govern how banks conduct their business. In 2010, the federal government passed the Dodd-Frank Act, banking reform that contains about 1,500 provisions and 400 rule mandates that affect how banks operate (Pollard, 2011).

Another important external factor is competition. The banking industry has become very competitive in the recent years because of the innovative nature of the industry and the advancement in technology. Competition is stiff in the banking sector. The final factor relates to employee retention. Retaining competent employees with the necessary skills and knowledge affects the organization. JP Morgan Chase needs this pool of people for it to continue growing in the commercial and private banking sectors.

Internal Strengths and Weaknesses

In the internal analysis, the various strengths and weakness regarding the organization’s operations, mission, and internal guidance were identified. JP Morgan Chase aims to maintain its image and to improve its operations. One of the internal strengths of the banks is its financial health and high return on investment. The company is financially healthy, and it has been very profitable over the last years of operations. The organizational infrastructure also enables the bank to focus on developing repeatable and sustainable approaches to implements in their operations and processes (JPMorgan Chase & Co.., 2015).

One of the main strengths of JP Morgan Chase is its broad customer base. The bank is the biggest in the United States. Iterative mergers of different banks to form JP Morgan Chase have allowed the bank to have a huge number of customers and large infrastructure. The size of the bank and its assets has made it a stable, premier financial institution that can deal with fiscal shocks both in the short-term and in the long-term. The bank has branches and ATM facilities all over the world. They have employed over 200,000 people. These factors ensure that JP Morgan Chase is connected to a vast market.

One of the internal weaknesses is its bad reputation. Over the years, JP Moran Chase damaged its reputation due to its numerous scandals. In 2002, the bank paid $80 million to the states government in fines after deceiving investors with biased market research. It also had a hand in Enron’s heavy losses. In 2011, the company also admitted overcharging mortgages to military personnel. The overcharged families were paid a total of $27 million (JPMorgan Chase & Co.., 2015). Banks should avoid such penalties and fines by reviewing its policies and consider consumer feedback to judge their reputation.

Another weakness of JP Morgan Chase is in their IT infrastructure. Their IT system has been inadequate to sustain their business operations. The primary cause of the failure is the cancelation of their outsourcing agreement with IBM. Productivity decreased after this, and the new consultants produced additional expenses to the company. The problem would only be addressed by allowing a large IT company like Microsoft or IBM to do the IT work. A bid to outsource alone will cause JP Morgan problems in the end.

Competitive Position

J.P Morgan Chase has gained a competitive advantage in the banking industry due to their position as a top bank in The U.S and the new services that they are unrolling to their customers. The recent diversification of the company enabled them to become well established in the industry, and they excelled in many different banking areas. Another factor that has allowed J.P Morgan Chase to maintain its competitive position is the fact that it is an innovator in the banking industry. This will help them to eliminate potential threats since the bank comes up with new ways they will improve their services and please their clients.

J.P Morgan Chase offers many perks, and this helps it to maintain the competitive advantage over their many competitors. Also, the bank markets itself as a loyal and stable bank. They say that they are there for their clients and the communities at all times. They aim at investing in the business and building a company that everyone is proud of (JPMorgan Chase & Co.., 2015). It will help J.P Morgan Chase to build trust with its clients, and this makes them very competitive.

Structure and Organizational Performance

The organizational structure of J.P Morgan Chase is a multidivisional and functional structure. The functional structure means that the company uses specific value-chain functions in its organization (Pearce, 2013). This organizational structure has been efficient for the bank since it has achieved growth over the years. The multidivisional structure means that the divisions are organized to groups, products or geographic markets of related business. This structure is self-sufficient since the heads of departments handle the divisions’ strategy about the market or business (Chase, 2013). In The US, J.P. Morgan Chase has five bank subsidiaries. The company is also divided into business segments that include investment banking and retail banking. The multi-divisional structure has also enabled the bank to succeed in its globalization. The company has been very efficient in their global control strategy due to their structure. Functional structure allows for thorough interactions between home corporate executives and the overseas executives.

Conclusion

Organizations need to scan their environment to determine developmental strategies and forecast factors influencing the success of an organization. J.P Morgan Chase is affected by both internal and external environmental factors. The major environmental factors include the regulatory environment and competition. The internal strengths of the bank include its high return on investment, huge customer base, and its huge size. The internal weakness includes its damaged reputation and failed IT infrastructure after canceling the outsourcing agreements with IBM. The banking industry is a very competitive industry. J.P Morgan Chase has been able to maintain its competitive advantage through diversification and innovativeness in the industry. The functional or multidivisional organizational structure has also enabled the company to perform well and achieve growth over the years.

References

Chase, J. M. (2013). Report of JPMorgan Chase & Co. Management Task Force Regarding 2012 CIO losses.

Hill, C., Jones, G., & Schilling, M. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

JPMorgan Chase & Co.. (2015). Environmental Sustainability at JPMorgan Chase. Retrieved from http://www.jpmorganchase.com/corporate/Corporate-Responsibility/environment.htm

Pearce, J. A., & Robinson, R. B. (2013). Strategic Management: Planning for Domestic and Global Competition (13th ed.). New York, NY: McGraw-Hill.

Pollard, A. M., & Daly, J. P. (2011). Banking law in the United States (Vol. 1). Juris Publishing, Inc.