Bank of America Strategy Bank of America\'s

Bank of America Strategy

Bank of America's Strategic Initiatives Against Competitive Forces in the Global Economy

Bank of America is one of the largest financial institutions in the U.S. As with many other financial institutions, such as Chase, Citigroup and credit unions, Bank of America faces many dynamic forces in the economy, both domestically and globally and Bank of America must engage in several strategic initiatives in order to retain its core competencies, competitive advantage, and operations that continue to drive Bank of America's business toward success.

To do so, Bank of America must continue to be aware of the recent trends such as sovereign debt, housing, unemployment, durable goods, and energy / commodity prices affecting the global marketplace, ensure the strategies they develop are quick to adapt to these changing conditions, and hedge against the risk that economic forces bring.

Bank of America's Strategic Initiatives Against Competitive Forces in the Global Economy

Bank of America provides financial services to customers across the globe in over 40 countries (Bank of America, Annual Report, 2011, pg. 2). By providing financial services to their clients and customers, Bank of America has positioned itself to develop several strategies to weather the economic downturn.

Recent Trends Upsets the Global Economy

Bank of America has faced a number of disturbing trends in the marketplace and there has been no shortage of bad news. Since the Great Recession started, the news has ranged from dismal to "dreary" (Bank of America, U.S. Economic Weekly, 2011, pg. 2). Even as the economy has shown signs of stabilization and growth, a number of recent trends continues to provide caution to Bank of America's operations -- sovereign debt issues, unemployment, housing, durable goods, and energy / commodity prices.

Sovereign Debt Issues.

Globally and domestically, debt is a big issue and a threat to the recovery (Bank of America, Annual Report, 2011). In Europe, several countries are still at risk of default and even though Greece has been bailed out, they are still on the brink of default (The Economist, 2011). This has created significant pressure on many countries to get their houses in order and to deal with their sovereign debt (International Monetary Fund, 2010, pg. 4).

The U.S. is also mired in debt and has become a topic of political debate with the risk of a possible default by August (G.I., 2011). In their report, U.S. Economic Weekly by Bank of America (2011), should the nation default, the repercussions will be wide spread in which there will be another recession. So far, the issue that has Bank of America worried is the political fighting surrounding the debt ceiling (Bank of America, U.S. Economic Weekly, 2011, pg. 3).

Unemployment.

Since the Great Recession started, unemployment skyrocketed to 9% has remained at that rate. Some economists consider 9% the new norm because the base unemployment rate has shifted (Weidner & Williams, 2011). With high unemployment, consumers will not spend, lack confidence in the economy, and generally ineligible for loans and credit. With a lack of confidence in the economy and the high unemployment rate, many goods and products offered by companies will have to be offered at lowered prices and some goods and services will suffer (Bank of America, U.S. Economic Weekly, 2011).

Despite the high unemployment, Bank of America has become somewhat optimistic that hiring and growth will continue into 2011 and 2012 (Bank of America, CFO Outlook, 2011).

Housing.

Bank of America's confidence in a housing recovery is fading according to their latest U.S. Economic Weekly report. Bank of America estimates that it will take 17 months for the current housing market to unwind itself, assuming 1) that foreclosures will slow and 2) that delinquencies in mortgages will be resolved without foreclosure process (Bank of America, U.S. Economic Weekly, 2011). Both of these scenarios are unlikely and Bank of America continues to predict this trend in the coming years (Bank of America, U.S. Economic Weekly, 2011).

Durable Goods.

Because of high gasoline prices and other inflationary energy prices, durable goods such as cars (and the loans to get them) remain out of the reach of consumers and affects consumption. Many consumers, already reeling from 9% unemployment and high energy prices are not likely to purchase or hold of their purchase of a new car (Bank of America, U.S. Economic Weekly, 2011).

Energy / Commodity Prices.

2011 has seen energy prices such as gasoline sky rocket. Commodity prices around the world has also created ripples in the global economy. Consumers who are directly impacted by the increases in energy and commodity prices are not likely to increase their consumption and becomes a factor in real wage slowdown (Bank of America, U.S. Economic Weekly, 2011)

Bank of America's Strategy in This Complex Market

Bank of America has developed several strategies based on their outlook. Some are more fundamental such as further development of their employees (Bank of America, Annual Report, 2011) to more specific such as targeting wealthy clients with their investible capital (Dealbook, 2010).

One of the core strategies as defined by Bank of America's 2010 Annual Report on page 3 is to "be a customer-driven company." So what does this mean? Bank of America seeks continuous feedback from their customers, increase the business relationship with the customer, and create more opportunities to anticipate needs from their customers (Bank of America, Annual Report, 2011).

An example, according to Dealbook, is further develop the relationship with the bank's affluent customers to bring their investible capital into Bank of America's wealth management business estimated to be "$7 trillion held by other institutions" (Dealbook, 2011).

How Human Capital Becomes a Strategy

In the 2010 Annual Report, one of Bank of America's strategy toward the 2011 and future years' outlook is to "be the best place for people to work" (Bank of America, Annual Report, 2011). Bank of America has implemented several programs to initiate this broad strategy. By "aligning our training, reward and recognition programs to our customer strategy," Bank of America intends to "create a more engaging workplace" (Bank of America, Annual Report, 2011). Examples that Bank of America has provided was to "make health care coverage more affordable" and "strengthen our leading diversity and inclusion programs" (Bank of America, Annual Report, 2011).