Wells Fargo Current Performance and Competitive Advantage
Background information on Wells Fargo Company
Wells Fargo is a banking operation that has grown over the years. This operation acquired part of its properties in 1989 and the rest in 1990 and 2010 respectively. Despite its success, Wells Fargo’s owner Warren Buffet, has stated categorically that the banking industry is one of the toughest industries to compete in and attributed its success to well managed system.
For instance the 2008 financial crisis troubled many banks including the Wells Fargo. However, since the company had avoided most of the mistakes that banks had fallen into it did not lose its assets. In fact, in 2010, the bank acquired the Wachovia bank in a major acquisition deal. Although this was a costly deal and Wells Fargo had to sell off some of its shares, it was still a profitable move for the bank. Like all the other banks in America, Wells Fargo has had to face difficult times including stress assessments and making payments through Troubled Assets Relief Programs (TARPS).
Nevertheless, these problems have not fazed Wells Fargo profits and growth. The bank is now positioned in fourth place amongst the bank holding companies and has branches in all the 50 districts in USA including Columbia District.
Its profits continue to grow as well and in 2010, Wells Fargo reported $85 billion in total revenues and $12.5 billion in net income. The company’s move to acquire Wachovia also expanded its services and increased its clientele. Currently, the bank has over 6000 branches in the USA and over $700 billion in deposits.
So far it has divided its banking system into three main categories:
- Community banking
- Wholesale banking
- Wealth, brokerage and retirement
Competitive advantages of Wells Fargo
Wells Fargo attributes part of its success to its competitive advantages. These include the following:
- Employee value. Wells Fargo values its employees and this is because it considers the employees as the key drivers of all planned activities. To this effect, the company takes up on varied training initiatives in order to enhance the skills and value of the employees. Additionally, Wells Fargo has a rigorous recruitment process to ensure that only the best human resource services are secured. The company sources for talents from different cultures and backgrounds in order to enrich its work environment. Most of the leadership staff has been with the bank for an average tenure of 27 years. This is attributed to the various rewards and recognition packages that the organization offers to employees who have outstanding performances.
- Customer retention. Wells Fargo also works hard to retain its clients. In fact, this company has an average 10 year relationship with at least 40% of its customers. This has largely contributed towards high cross-selling of products and services.
- Financial reserves and size. In spite of its high profits and large size, Wells Fargo bank uses its reserves and minimizes risks. The company is well aware of the high risks in the banking industry and thus asses its risk very carefully before engaging in any venture.
Recent reports show that Wells Fargo five year average profits stand at 15.4% while the industry average is 16.5%. This shows that the bank is on the right path given its competitive advantages.
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