S. banking industry." By 1974, the card has virtually assumed its contemporary form: "What an amazing transformation has taken place since Bank of America began marketing the precursor to Visa with its 1974 ad campaign 'BankAmericard. Think of it as money.'"
3. GOALS-OBJECTIVES-STRATEGIES. The companies overall strategy can be summed up in terms of its commitment to identifying what its customers want and being there on a "firstest-with-the-mostest" basis. Taken together, the company's various business segments are focused on attracting and deepening client relationships with the ultimate goal of becoming "America's advisor of choice." In this regard, the company recognized the advantages to be realized by providing its customers with online access to as much account information as possible early on. For example, in 2001, BOA began offering its retail and wholesale customers consolidated views of their accounts and financial records using a Web-based customer relationship management (CRM) system. The system was developed by the bank in partnership with Siebel Systems and (for wholesale customers) with YouCentric, Inc., and provided customer service associates and customers a more complete view of their relationship with Bank of America. According to "One-Stop Viewing for Customers," "The interface will help customers find the right product mix to meet their financial needs, let them view transaction and inquiry histories for all of their accounts, and facilitate such administrative requests as change of address, check reorder, and statement mailings."
Business MODEL. The company competes in the Money Center Banks industry and its multinational business model has been based in large part on recognizing its domestic and international consumers needs and identifying more effective ways of delivering products and services to satisfy them. In this regard, BOA has been an industry leader for years. For example, according to James Peterson's report, "What to Do When the Boom Is Over," "Sixty-eight percent of all American families own homes, the most ever, and a notable increase from 64% just ten years ago. And that market is being held aloft by a wealth of refinancings supported by low interest rates." Today, though, there are fully 70% more mortgage transactions than in an average home purchase-driven market and ten times more refinancings than in an average purchase-driven market. "Borrowers are becoming very sophisticated," says Angelo Mozilo, chairman, CEO and president of the national mortgage lender Countrywide Credit Industries Inc. "They're using the internet more and, even when they don't, they are coming to us very well informed. Now that they understand yield spread, they will lock in for a five-year or seven-year mortgage even though the 30-year is still the leader."
While the mortgage industry has been defying gravity, it also has been going through a big transition that the good times have made barely noticeable. Between 1985 and 1995, the third-party mortgage broker segment has grown from 10% to 50% of all home loans. According to Doug Naidus, the CEO of the national mortgage lender MortgageIT in New York, "The mortgage brokerage business really captured the origination channels. The small cottage mom and pop industry has evolved into the dominant origination platform." Likewise, Kevin Shannon, president of consumer real estate at Bank of America reports that, "The business is in transition all the time. Since Sept. 11 , we've seen three refi[nancing] booms and we might be facing another. We're also seeing some real changes in how customers view mortgages and in how they view their homes as a financing source. At the same time, technology has made lending easier, consumers shrewder and competition fiercer, and outsourcing has become a true profit booster."
COMPANY PERFORMANCE. The company has enjoyed robust growth and profitability across all measures in recent years as shown in Table 1 below; a bar graph of these respective metrics is provided in Appendix B and C. respectively. According to the Reuters Abridged Financial Summary for BOA, for the 3-month period ended March 31, 2005, interest income increased 54% to $13.15 billion; the company's net interest income after LLP also increased 41% to $7.29 billion. In addition, BOA's net income (applicable to Common) increased 75% to $4.69 billion. Finally, Reuters notes that BOA's net interest income reflected higher earning asset balances which were partially offset by higher deposits (3).
Cost of Revenue
Source: Yahoo! Finance, 2005.
Table 2. Operating Income or Loss - December 31, 2002 - December 31, 2004.
Operating Income or Loss
Income from Continuing Operations
Total Other Income/Expenses Net
Earnings Before Interest and Taxes
Income Before Tax
Income Tax Expense
Net Income From Continuing Ops
Source: Yahoo! Finance, 2005
The company's stock performance vs. The a&P 500 for the past five years to date and its performance in the Money Center Banks industry in which it competes are provided graphically at Appendix a.
Management CHARACTERISTICS. The company enjoys a highly experienced, skilled and trusted management team comprised of the following key executives as shown Table 2 below:
Table 2. Bank of America Key Executives.
Executive Name, Age, Title
Kenneth Lewis, 57
Chairman, Pres, Chief Exec. Officer 19.25M
Marc Oken, 58
Chief Financial Officer
Alvaro De Molina, 46
Pres, Global Capital Markets and Investment Banking
Liam McGee, 50
Pres of Consumer Banking
Brian Moynihan, 46
Pres of Global Wealth & Investment Management
Source: Yahoo! Finance, 2005
Not mentioned in the above, but clearly contributing the company's success, is Dorothy Brothers, Director of Supplier Diversity & Development. According to the recent essay, "Bank of America," the company's success has been largely attributable to the commitment of its senior management, including Dorothy Brothers, its, to increase the diversity of the suppliers that bid for the bank's products and services. "Diversity of supply allows us to increase competition, maintain the highest quality and get the best price. We view our support of supplier diversity not as a duty, nor as a charity, but as good business" Brothers said. Further, "Nor do the suppliers who own the companies with which we do business view our support as duty or charity," she added. "They view their relationships with us as good business -- a chance to build their enterprises, pursue their dreams and be rewarded for their hard work." In fact, to date, Bank of America has invested more than $1 billion as part of its Supplier Diversity & Development (SD&D) program, which was established in 1990. The company's programs have been effective as well; according to "Bank of America," the company increased its expenditures with minority-, women- and disabled-owned businesses from $11 million in 1990 to more than $400 million in 2002; there were more than 2,500 companies in 45 states involved. Because the company has an enormous amount of clout with its vendors and suppliers, it was also able to communicate these business goals throughout the country and around the world. Even when it was not the popular thing to do, Bank of America established an ambitious goal early on of spending 15% of its total procurement budget with minority- and women-owned businesses; however, BOA went further by also mandating that all companies doing business with the bank spend at least 15% of their own purchase dollars with minority- and women-owned suppliers. Brothers added that, "It's been an ongoing challenge to continue to raise the bar. But when your name is Bank of America you must aspire to the ideals of America. We welcome the challenge (emphasis added)."
SWOT & Analysis of Core Competencies, Capabilities, and Competitive Advantage. According to David Cravens, the purpose of SWOT analysis is to identify key issues that will allow an informed strategic approach. The SWOT analysis seeks to identify the strengths, weaknesses, opportunities, and threats related to the environment; strengths are comprised of positive aspects that are internal to the entity; weaknesses are those negative aspects that are internal to the entity; and opportunities are positive aspects that are external to the entity. Finally, threats are regarded as being negative aspects that are external to the entity. Based on the foregoing analysis, these concepts are applied to BOA's instant case below.
Expertise and dedication of key management personnel.
Extensive infrastructure already in place around the world.
Enormously experienced in the provision of online and credit services, having innovated many of them.
Expansive resources and cash.
Bank of America Corp's Corporate Governance Quotient is better than 71.2% of S&P 500 companies and 94.8% of Banks companies (2).
No apparent contingency plans in place for political upheavals or other disruptive events in other countries (4).
Strategic partnerships with financial institutions in other countries.
Reaping the potential from its existing online presence by fine-tuning its CRM.
Increasing competition from Citigroup Inc., Wachovia Corp (Charlotte) and Wells Fargo & Co as shown below.