• Intro

• History

■Bank of America’s core strategy for growth is focused on acquisitions.

Despite its difficulties during the financial crisis, the company continued to

buy companies such as Countrywide Financial and Merrill Lynch. As a

result, they are the largest bank holding company in the United States,

and if the government didn’t bail them out in 2008 they would have been

the biggest bankruptcy in US history. The government and various

agencies provided over $150 billion in funds to the banking giant.

• Issues

■Merger

• After the mergers Bank of America absorbed $100 billion in “toxic

assets” from Merrill Lynch. BoA also must decide the best way to

integrate such a large company. Which parts should be discarded

due to redundancy, or which parts should be promoted.

■Future Growth Strategies

• BoA has always relied on acquisitions as their main tool for

growth, but when are acquisitions no longer the most attractive

option? If not, then what should BoA focus on to recover and

advance from the recession?

■Prevention of Future Meltdowns

• BoA should analyze their own processes and how they let

themselves fall get in such a problematic situation and make plans

on how to stop, or minimize, damages from future crises.

• PESTEL

• Political/Legal

■BoA worked with forty states to set up a few programs focused on

diminishing the distress on homeowners. The Foreclosure Relief Program

gave $150 million to struggling mortgages created by Countrywide. The

National Homeownership Retention Program aimed to create reasonable

mortgage payments for homeowners who had subprime or adjustable

rates. Finally the third BoA program to provide cash to customers who

vacated their property voluntarily after foreclosure. The government is

taking back its subsidies on bigger banks now that the recession has

officially ended. They are also conducting “stress tests” of the top 19

financial institutions, tests that the largest companies like BoA, Wells

Fargo and Citigroup failed..

• Economic

■The National Bureau of Economic Research declared the recession over

in June 2009. They based this statement on higher productivity, lower

production costs, and increasing factor orders. There was also an

increase in private investment while decrease in imports. Unemployment

was slower to bounce back, but in March 2011 was at a two year low of

8.8%. The banking industry is still slow, with hundreds of banks closing

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Intro
- History ■ Bank of America’s core strategy for growth is focused on acquisitions. Despite its difficulties during the financial crisis, the company continued to buy companies such as Countrywide Financial and Merrill Lynch. As a result, they are the largest bank holding company in the United States, and if the government didn’t bail them out in 2008 they would have been the biggest bankruptcy in US history. The government and various agencies provided over $150 billion in funds to the banking giant.
- Issues ■ Merger - After the mergers Bank of America absorbed $100 billion in “toxic assets” from Merrill Lynch. BoA also must decide the best way to integrate such a large company. Which parts should be discarded due to redundancy, or which parts should be promoted. ■ Future Growth Strategies - BoA has always relied on acquisitions as their main tool for growth, but when are acquisitions no longer the most attractive option? If not, then what should BoA focus on to recover and advance from the recession? ■ Prevention of Future Meltdowns - BoA should analyze their own processes and how they let themselves fall get in such a problematic situation and make plans on how to stop, or minimize, damages from future crises.
PESTEL
- Political/Legal ■ BoA worked with forty states to set up a few programs focused on diminishing the distress on homeowners. The Foreclosure Relief Program gave $150 million to struggling mortgages created by Countrywide. The National Homeownership Retention Program aimed to create reasonable mortgage payments for homeowners who had subprime or adjustable rates. Finally the third BoA program to provide cash to customers who vacated their property voluntarily after foreclosure. The government is taking back its subsidies on bigger banks now that the recession has officially ended. They are also conducting “stress tests” of the top 19 financial institutions, tests that the largest companies like BoA, Wells Fargo and Citigroup failed..
- Economic ■ The National Bureau of Economic Research declared the recession over in June 2009. They based this statement on higher productivity, lower production costs, and increasing factor orders. There was also an increase in private investment while decrease in imports. Unemployment was slower to bounce back, but in March 2011 was at a two year low of 8.8%. The banking industry is still slow, with hundreds of banks closing

even after the recession ended. The housing market remains weak and show a downward trend in the second half of 2010.

Sociocultural ■ Baby boomers are the largest generation, but most of them already have homes, or are possibly in retirement/assisted living. The younger generations also come out of college with record breaking debt, which is a double edged sword for the baking industry. The banks can issue copious pricey student loans, which makes them considerable profit. However, after graduation the students are riddled with debt and unable to afford homes. Making modern generations prefer renting apartments rather than taking out a mortgage. In addition younger people have been flocking to cities, rather than rural or suburban areas, where apartments are standard.
Technological ■ Mobile pay has become a competitor of credit cards. It comes built in with every smartphone, which most people constantly keep on them. But, smartphones offer another way to offer convenient banking and keep in touch with their customers.
Environmental ■ There aren’t that many environmental factors that directly influence the banking industry. However the increasing concern over wildlife and nature preservation could stunt future development in the housing industry. On the other hand there are many existing homes that need to be sold, so the problem is fairly minimal at the time.
Analysis ■ The banking industry faces many challenges in the upcoming years, even after the recession. The economy may be coming back, but the banking industry is still lagging somewhat, but will hopefully recover soon. The sociocultural trends against mortgages and towards mobile pay hurt some of their potential income.
Resource Based View

(^) Tangible ■ Financial - Paid off TARP loans

the specific people are not. Sallie Krawcheck is one of the key additions and seen as one of the most powerful women in business, but there are other powerful women in business as well as other executives who have similar experience. The value added from the current board could be sustainable if they are able to keep up the increased performance.

Analysis
- The revamp of the officers gives BoA a temporary competitive advantage due to the value and talent replacing the questionable CEO. The new perspective should help shape BoA towards a better future in the post recession markets.
Intangible ■ Knowledge
BoA acquired many large companies like Merrill Lynch and Countrywide, thus gaining the knowledge that comes with the major companies. Knowledge is always valuable, and if rare enough, can help transition into competitive advantages within an industry. It is not easy to replicate due to the extensive experience needed to obtain it. The knowledge gained can be sustainable if BoA can maintain its position as a forerunner in the market. The knowledge that BoA gains through their many years of operation and leading their field is a sustainable competitive advantage as long as they can keep up their performance. ■ Reputation
Since BoA is the most prominent bank host in the US they have been deemed too big to fail. This title holds tremendous value, forcing the government to help the company when market wide failures ensue. It is a privilege offered to only the top percentages of businesses and similar aid is impossible to imitate. The reputation can easily be sustained if BoA continues its acquisitions and continues to grow.
The public image of BoA has been damaged due to questionable actions by Lewis. The ambiguous acquisition of Merrill Lynch, hefty bonus compensation and misrepresentation to shareholders all impaired the reputation of BoA. However, the opinion of the entire bank industry has declined after the crisis.
Analysis
BoA’s strategy for growth has paid off, and resulted in the government deeming them too big to fail. This gives them an advantage over many of the smaller regional banks that failed during the recession. However puts them on par with other too big to fail companies which are their main rivals. The public also has a lesser opinion of them, and many of

their competitors, due to their actions during the recession. Overall this leads to a competitive parity because the major banks are similarly affected by the stated considerations.

Capabilities ■ Innovation - BoA has been known for its innovations in the banking industry, shown through its development of online banking, mobile banking and advanced ATM technology. The ability to launch successful new ideas is valuable to keep BoA ahead of competitors. Well executed, good ideas are rare, but unfortunately relatively easy to imitate. BoA has been focused on innovation through their history, which makes it likely to be sustainable. Overall their dedication to develop fresh strategies and technology for their customers leads to a temporary competitive advantage. ■ Marketing - BoA is quite competent in marketing. They has had many well- received marketing promotions like Keep the Change and Privacy Assist. They are one of the best known banks in America and around the world. Their success in marketing is valuable and leads to new customers every day. The unique promotions are exclusive to Bank of America, at least until a competitor decides to copy. Keeping up good marketing may be harder after the recession, but all the banks face an uphill battle. Their above average marketing allows them to achieve a temporary competitive advantage.
Solutions
Don’t let same thing happen twice ■ BoA could educate higher executives about past financial crises and patterns. Then once they better understand the cause and their part in the meltdown, they can avoid making the same mistakes.
More transparency ■ Lewis was a problem and increased transparency could help prevent similar poor actions in the future. BoA already accepted a $150 million payment to shareholders and remedial actions for the next three years, but BoA could make them permanent. The increased transparency would be appreciated by stockholders and possibly help their future stock prices.
Continue Growth ■ BoA could continue their strategy of acquisition, there are many prime targets after the recession. The companies will probably never be as cheap as they are after the Great Recession. BoA would maintain its position of the largest bank holder and title of too big to fail. However the financial state of the company is not ideal, especially after so much extra cash was used to pay off TARP. The consequences of a failed acquisition would be devastating since they are barely keeping ahead of their major competitors. Even if they did pull of the acquisition smoothly, the government might intervene on account of the anti-trust act.

Bank of America Case Study and Analysis, Study Guides, Projects, Research of Management Theory

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