Merger, Acquisition, and Internal Strategies – JPMorgan Chase And Bank One

This paper focuses on banking industry in which it discusses JPMorgan Chase, which acquired Bank One a decade ago. It also discusses City National Bank and why it should consider a merger with Royal Bank of Canada. JPMorgan Chase & Co. is the second largest American based multinational financial and banking services holding company. On the other hand, City National Bank is a Los Angeles based bank solely operating in the US with branches in various parts of the country. It is worth noting that most twenty first century companies have continued to embrace mergers and acquisition as their most preferred technique of growth. However, a merger only becomes a success when it causes the value of the acquiring firm to increase. In view of Pearl and Harris (2013), mergers have a beneficial history to both consumers and competition because they improve the efficiencies of the operations of most firms. It should, also, be noted that the competitive capacities of some firms may decrease drastically after a merger and acquisition. Therefore, not all mergers and acquisitions are beneficial to business operations.

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JPMorgan Chase & Co. had its banking opportunities expanded following the merger with Bank One in 2004. After the merger, JPMorgan Chase acquired an opportunity to reach clientele and banking markets situated in regions where it had previously not made its appearance (Pearl & Harris, 2013). It benefitted from the merger in the sense that it enabled it to achieve additional growth thereby increasing its competitive advantage against other players like Citigroup and Bank of America. The strategy that led to the JPMorgan Chase-Bank One merger was influenced by the changing nature of competition in the global banking industry. Given that mergers and acquisitions had become a norm in the banking industry, JPMorgan and Chase needed to remain competitive by increasing its market share. This decision was also influenced by the October 2003 merger between FleetBoston and Bank of America. The strategy for the merger between JPMorgan and Bank One was to combine both commercial and investment banking and consumer banking. In this case Bank One’s strength was consumer banking and JPMorgan Chase’s main strength was commercial and investment banking.

Talent search for senior management positions was, also, a strategic reason for the merger between JPMorgan Chase and Bank one. At the time of the merger, JPMorgan Chase chief executive officer William Harrison was 60 and had not identified his suitable replacement from within the company (Mishkin & Eakins, 2014). Therefore, Bank One’s CEO Jamie Dimon, 47 years at the time of the merger appeared to be William Harrison’s perfect replacement. Besides, the merger between JPMorgan and Chase Manhattan had been a complicated process that had resulted into losses, therefore the bank needed a professional expert to steer it through the challenges. The moment Jamie Dimon became the group chairman at JP Morgan Chase & Co.; he started embracing radical cost-reduction technique where he reconfigured the company’s compensation levels. This ensured that no low performing manager was over compensated. The merger between JP Morgan and Bank One increased their joint assets to $1.1 trillion (Mishkin & Eakins, 2014). Before the merger, Bank One activities entailed institutional, corporate and consumer banking, investment management, lease financing, issuance of credit cards, consumer finance, insurance and brokerage. Therefore, the merger with Bank One was a wise choice for JP Morgan Chase. This is because it strengthened its market position in respect to its two key competitors-Citigroup and Bank of America (Pearl & Harris, 2013). Besides, the merger enabled JP Morgan Chase to access South and Midwest regions as well as improve its retail operations into mortgage lending, auto loan writing and card issuance.

City National Bank, a property of City National Corporation, is a well-established complete service community bank valued at $32.6 billion on assets (Mishkin & Eakins, 2014). City National Bank offers trust, investment and banking services to its clients. Royal Bank of Canada (RBC) is the most profitable candidate to merge with City National Corporation. The merger with RBC is a compelling opportunity that will maintain and strengthen value proposition of City National Corporation. This will, in turn, improve the services offered to the clients and citizens at large. City National has various branches in various U.S. entertainment centers like Nashville and New York where it has been the main facilitator of Broadway productions. Therefore, merging with RBC will result into the most preferred entertainment Banks for the entire region in North America. Besides, Royal Bank with its $800 billion in assets makes it a profitable candidate for the merger with City National (Mishkin & Eakins, 2014). This combination will enable City National to make and retain huge corporate credits or loans. This will provide City National’s clients with an opportunity to utilize RBC in extending their business operations to Canada. The merger will, also, enable City National to work with and be able to support various minority groups such as Latinos, Asians, and African-Americans. In considering these groups as well as faith-based organizations, the bank will be able to identify, participate and support establishment of affordable housing as well as other sponsored initiatives in economic development. Generally, the merger with Royal Bank will enable City National garner tax advantages, eliminate inefficiencies, combine complimentary resources, and achieve economies of scale. It will be able to penetrate into new geographical regions and enable its managers to acquire new opportunities for advancing their careers.

For the corporation that operates internationally such as JP Morgan Chase & Co., having an international business-level strategy and international corporate-level strategy is a critical requirement. The most effective international business-level strategy is product differentiation. This strategy enables the company to provide value to the customer through attaching unique characteristics and features to its products and services. Some of the product differentiation techniques include high customer service, high quality, advanced technological features, rapid product innovation, image management and many others (Galbraith, 2014). For instance, following the merger with Bank One, JP Morgan Chase was able to differentiate its services into institutional, corporate and consumer banking, investment management, lease financing, issuance of credit cards, consumer finance, insurance and brokerage. It also improved its retail operations into mortgage lending, auto loan writing and credit card issuance. For such a company that operates internationally, recommendation for improvement will be for it to combine product differentiation with cost leadership strategy. The corporation requires making consistent efforts to reduce its costs of investment as compared to its competitors in order to become efficient in cost leadership.

Global strategy is the most effective international corporate-level strategy for a corporation that operates internationally such as JP Morgan Chase & Co. According to Campbell and Goold (2014), global strategy requires a corporation to emphasize efficiency more than it may be required to respond to the local market requirements. In this case, the corporation that embraces this strategy may not be required to make minor adjustments and improvements on its product and services in order to suit particular markets. This is because global strategy demands the corporation to continue providing similar products and/or services in every market so that it can achieve economies of scale. An appropriate example is displayed by Microsoft, which provides similar software programs globally, but only modifies them in order to match the languages that are spoken locally (Campbell & Goold, 2014). For such a company that operates internationally, recommendation for improvement will be for it to combine global strategy with transnational strategy. Through transnational strategy, the corporation attempts to create a balance between the desire to meet various local preferences in different countries and the need for efficiency.

For a corporation that does not operate internationally, the most appropriate business level strategy worth consideration is product differentiation. This strategy enables the company to create value for its products. This is because emphasis on the value highlights product durability as well as cost savings as compared to other products in the market (Galbraith, 2014). Proper implementation of product differentiation strategy establishes and maintains customer loyalty to the brand. For the company to achieve this, it requires remaining consistent in providing quality to consumers in order to retain their loyalty. Product differentiation, also, enables the company to profitably engage in non-price competition. Therefore, a company can maintain its competitive advantage without reducing prices. In a situation where product differentiation emphasizes product design and quality, it creates the impression of ‘no perceived substitute’ in the market. For the corporation that does not operate internationally, mass market will be the most appropriate corporate-level strategy. This strategy allows a business to appeal to wide range of consumers in various geographical and demographical categories (Campbell & Goold, 2014). Mass marketing enable the company to make profits easily since there will be many customers for it to manage. This corporate strategy will enable the company to acquire new customers on a regular basis. This happens in cases where customers appreciate the products or services being offered by the company. This is because; the existing customers will be ones telling the next person about the product. Mass marketing is a corporate strategy that, also, enables a business to save time. This is possible in a situation where a company creates and promotes its products through Radio or Television adverts. A single advert can reach millions of people making them aware of the presence of such a product in the market.

In conclusion, most twenty first century companies have continued to embrace mergers and acquisition as their most preferred technique of growth. The strategy that led to the JPMorgan Chase-Bank One merger was influenced by the changing nature of competition in the global banking industry. The strategy for the merger between JPMorgan and Bank One was to combine both commercial and investment banking and consumer banking. In this case Bank One’s strength was consumer banking and JPMorgan Chase’s main strength was commercial and investment banking. Royal Bank of Canada (RBC) is the most profitable candidate to merge with City National Corporation. The merger with RBC is a compelling opportunity that will maintain and strengthen value proposition of City National Corporation. The most effective international business-level strategy is product differentiation. Global strategy is the most effective international corporate-level strategy for a corporation that operates internationally such as JP Morgan Chase & Co.

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