Graduate Research Paper: Credit Unions in the Financial Market
Literature Review
Knowing the history of credit unions and how they were originally structured, it is important to understand where credit unions will be going in the future. It is anticipated that there will be less than 3,000 credit unions in the next 25 years. This is down considerably compared to the more than 6,000 existing credit unions in 2015 (Strozniak, 2015). Competition for credit unions will continue to be other financial institutions and financial services providers, but there will also be competitors entering the market, such as Peer-to-peer lenders and other fintech start ups that will begin to take over some of the existing credit union market space (Strozniak, 2015). Consumer lending is a core line of business for credit unions and in addition to traditional competition, sophisticated start-ups are starting to impact the market in terms of unsecured loans, mortgages and business loans (Strozniak, 2015). There are many economic principles that impact credit unions’ ability to compete in the financial services industry. The focus of this paper will be on market in which credit unions operate, the impact this market has on the credit unions’ ability to differentiate its products and or services in terms of pricing or features and the barriers credit unions face in their market that impact a credit union’s ability to grow and remain profitable in their market.
The Market Structure
Market structure is classified according to the degree of competition firms encounter in their industry (Baker College, 2016). There are four main market structures: pure competition, monopolistic competition, oligopoly and a pure monopoly. Pure competition is where fir...
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...t, and corporate values (Baker College, 2016). It is also critical to understand that strategic plans are not “one time” events. Changes in the economy and market require management to re-evaluate the strategic plan of the organization to ensure the plan is effective and will meet the objectives that have been set (Baker College, 2016). Credit unions and their managers must understand that sales revenue depends on the demand for its products and services. It is crucial that credit union continue to evolve and remain competitive in the financial services industry to continue to grow. Jim Marous, Partner at the The Financial Brand and Publisher of the Digital Banking Report states, “Organizations are responding by making significant investments in core systems replacement, digital channels and data analytics to ensure their ongoing competitiveness” (Marous, 2014).
Seidman, L. W. (1986) Lessons of the Eighties: What does the evidence show? Retrieved July 25, 2010 from http://www.fdic.gov/bank/historical/history/vol2/panel3.pdf
This organization belongs to the oligopoly market structure. The oligopoly market structure involves a few sellers of a standardized or differentiated product, a homogenous oligopoly or a differentiated oligopoly (McConnell, 2004, p. 467). In an oligopolistic market each firm is affected by the decisions of the other firms in the industry in determining their price and output (McConnell, 2005, P.413). Another factor of an oligopolistic market is the conditions of entry. In an oligopoly, there are significant barriers to entry into the market. These barriers exist because in these industries, three or four firms may have sufficient sales to achieve economies of scale, making the smaller firms would not be able to survive against the larger companies that control the industry (McConnell, 2005, p.
Along these lines, the state of perfect competition that items must be indistinguishable from firm to firm is not met. The restaurant, apparel and shoe commercial ventures all display monopolistic competition. Firms inside those businesses endeavors to cut out their own particular sub industries by offering products or services not copied by their rivals. From numerous points of view, monopolistic competition is nearer than oligopoly to perfect competition. Boundaries to section and exit are lower, singular firms have less control over business sector costs and purchasers, generally, are learned about the contrasts between firm’s products. Monopoly and oligopoly are counterpoints to monopoly and oligopoly. Rather than being comprised of numerous purchasers and couple of buyers. These extraordinary markets have numerous dealers however couple of purchasers. The resistance business in the U.S. constitutes a monopoly; numerous organizations make products and services and endeavors to offer them to a particular purchaser, the U.S. military. A case of an oligopoly is the tobacco
In addition, a number of years ago owning a gold American Express card was a status symbol, however today people are less inclined to try to impress others by owning a certain type of credit card. So people go with the best rate they can find and the one that gives them the most monthly credit. Because major competitors are starting to offer the same type of special services that American Express is known for, is can pose a risk on the company’s future growth. Therefore, I find the future of American Express very interesting because in order to compete against the companies who control most of the market share, American Express will have to keep innovating and differentiating their products and services.
The company promotes an aggressive strategy that they believe is the basis to accomplish their vision. Also incorporating a successful business model and a plan of execution to tie together the general strategy for Wells Fargo. The company values their customers above all else, wanting to gain their trust and deepen relationships with each and every one of them. Along with their extensive community involvement, Wells Fargo has other strengths that have helped them become so successful. The explosion of the bank began in San Francisco and soon expanded nationwide. Eventually, Wells Fargo developed into an international company. They provide multiple different networks that help attract potential customers to their company by having a service that can apply to everyone. Another strength that the company has executed would be the art of cross-selling. When it is finalized legally, it can be a great attribute to the company and the customer by letting them access the new services Wells Fargo provides. However, if there are strengths the weaknesses will follow in a major corporation. Wells Fargo has an international basis, it is very narrow in
The oligopoly market is a few relatively large firms that have adequate to significant market power and that they recognize their interdependence. Each firm know that their choice of actions or changes in their outputs will have an effect on other firms and in response to the change, other firms will take actions accordingly to adjust therefore will affect its sales and revenue. (Thomas 428) To closely define, the oligopoly characteristics consist of (a) a few large dominant firms; (b) a product or services either standardized or differentiated; (c) firm’s decision on price and output affect the demand and marginal revenue of other firms in the market and vice versa; and (d) the entry barriers to become a dominant firm consist of substantial involvement of technology and economical terms. With these characteristics, there are usually as few as two and as many as ten firms that make up large market shares in any one particular industry.
By doing so, the organization can understand its competitive environment and create a strategic plan to succeed. Within an industry there may be several competitors that provide similar products and services. Within the financial services industry, competitors or Wells Fargo & Co. would be other banking institutions such as JPMorgan Chase and Bank of America. Because Wells Fargo offers a wide variety of products and services, its competitors may also include specialized firms such as Scottrade, e-Trade, Quicken Loans, and Loan Depot which specialize in specific products such as investment banking and mortgage products. Rivalry among these competitors is a positive factor for the consumer because each organization will focus on the activities of its competitors to provide superior service to its
The banking industry is under pressure in today’s business climate. Banks have been through big changes. There is opportunity, but there is also increasing competition. To be the preferred bank means changing “good enough” into a unique value proposition. And that means changing the way people have always done things, change on this level requires cutting edge technology. Change cannot be achieved with a simple directive or surface adjustment especially within the banking industry. It requires an innovative rethink of the entire system, in a strong partnership between bank leaders and their change agents. New systems and policies must support the strategy to be successful. The real test of a good strategy implementation plan is whether the people understand the strategy, are motivated and enabled to implement it, and actually start achieving its goals.
Topic A (oligopoly) - "The ' An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies.
In 2015, Wells Fargo was named as the world’s most valuable bank being worth around 2 trillion dollars (Fortune, 2015). Wells Fargo started out of San Francisco with growth in the right direction for the U.S. economy. They are a financial services company that has banking, insurance, investments, mortgage, and consumer and commercial finance through 8,700 locations, 13,000 ATMs, the internet (Securities and Exchange Commission, 2015). With Wells Fargo progressing and gaining prosperity, it is a shame that they took a negative method to get to this point. The Wells Fargo scandal has caused many to look at the company poorly. They have lost copious clients due to their bad ethical misconduct and not treating customers with respect following
Initially the bank’s core banking system was product oriented, but the need of the hour was to develop a customer oriented system, because the challenge is to build customer loyalty, cross sell, and enhance repeat business.
This paper will analyze the mission and vision statements of JPMorgan Chase & Co against the performance of the organization. An evaluation of how well the company lives out its mission and vision statement will be provided. The organization’s strategic goals link to the company’s mission and vision will be assessed. An analysis of the company’s financial performance to determine the link between the company’s strategic goals, strategy, and its financial performance. A competitive and marketing analysis of JPMorgan Chase & Co will be conducted to determine its strengths and opportunities.
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
By this time,banks realised that carving niche segments might have to be done to standout in the proliferated growth of the credit card businesses:
Banks provide loans which are very flexible to the customers; they also provide many other facilities that will help them to get the needful asset that they intended to buy from the market. Overall, the financial service sector is on a high growth mode is showing signs of significant improvement over the years to come.