College of Advanced Studies

ATHE Level 7 Diploma in Strategic Management GLOBAL BUSINESS STRATEGY Unit Code: 7.2

Submitted by:
Sangeeta sharma Registration number: 72200484s7235

TABLE OF CONTENTS

INTRODUCTION.. 02 Analysis of Macro environment. 03 Analysis of Micro environment.. 05 Investment banking industry and its operations.. 06 Economic effects of globalisation on the investment banking system 07 Analysis of market in which investment banking works 08 The key issues, opportunities and threats for investment in this organisation. 08 Moral and ethical issues caused by operating in an international environment.09 Conflicts between corporate strategy and social responsibility09 Guidance relating to corporate social responsibility.10 Conclusion. 11 References...11

INTRODUCTION
JPMorgan chase & co is an American multinational banking corporation of securities, investments, and retail. The J.P. Morgan brand is used by the investment banking and as well as asset management treasury and security services divisions. J.P. Morgan is a leading global investment bank with one of the largest client bases in the world. We serve nearly 20,000 clients, including corporations, governments, states, municipalities, healthcare organizations, education institutions, banks and investors, one of the most important functions of JP Morgan investment banking are to extend credit to companies to help them grow. As J.P. Morgan looks to take on a leadership role in the amorphous and evolving field of sustainability, its pioneering history supplies a useful template for future endeavours (Morrison, 2007). The companys origins date back to 1799, when the Manhattan Companythe firms earliest precursorbegan banking operations in New York City. Over a half century later, in 1861, J. Pierpont Morgan established JPMorgan & Co., which served as the sales and distribution office for the European securities underwritten by the firm owned by J. Piermonts father. Environment analysis means the gathering of data and information about and the companys micro and macro environments to plan for the actions which will benefit the company in the future course of action. It will help the company in understanding the future threats, opportunities, and can improve short-term and long term planning. Organisations scan the information regarding the environment, to develop the effective responses for the external forces and to improve or secure the business aspirations and positions.

1.1Analysis of Macro environment

Macro environment: PESTLE analysis provides a framework for investigating and analysing the external environment for an organisation (Businessballs.com, 2012). The six key areas that constitute for the external environment according to this theory are as follows Political:

Political factors are related to government policies, rules and regulations of that place of operation of an organisation. The formation of European Union and increase in the global trade has changed the scope of political influence. Business can reach out to many countries with these changes in the political scenario. Economic: Since economy of the countries in which JP Morgan operates is related to each other, economic changes in country influence the business in other counties also (Finacialtimes, 2011). An example is 2008 mortgage disaster in USA and this disaster influenced the business not only operating in USA but in whole world. Social: Social factors include the things like demographics, consumer interest and their buying behaviour, spending capability etc. the demographic changes such increased number of working woman have influenced the business. Technology: Technological changes have influenced the business in a big manner. There are two types of technological improvement; one in information technology and second in manufacturing. Both of these changes have increased the efficiency of businesses (NetMBA.com). Also, it has increased the opportunities for the business to attract more customers. Legal: Abiding by the law has become more essential for the businesses as a small mistake cost big amount. The national laws, EU laws, global laws are to be followed the organisations. With the increase in the globalisation, businesses are becoming more exposed to international laws.

1.2 Analysis of micro environment

This framework was work of Michael Porter (Harvard Business School, 1979). This framework is used to evaluate the Micro environment of a business and can be applied to the both small and big organisations. The forces can be measured as low, medium and high.

1. The bargaining power of customers This force is manipulated by the many factors related to the consumers. It can be volume they buy or information available about them or their sensitivity towards the prices. Thus customers can influence the organisations in this way (NetMBA, 2012). This power is low in case of JP morgan as these types of organisations are few. 2. The bargaining power of suppliers Suppliers can manipulate the business to some extent with the factors like reputation of business, number of suppliers available, cost of the supplying material and geographical coverage. 3. The threat of new entrants The threat of new entrants is the force that is manipulated by the ability to make profit and initial cost of business. However, there are some more factors that influence this force for example legislation. 4. The threat of substitute products In the banking sector the threat of substitute product is low especially in investment banking. Reason is again same which is fewer investment banks. 5. Intensity of competitive rivalry Following are the factors that influence the competitive rivalry force:

number of competitors rate of industry growth exit barriers diversity of competitors informational complexity and asymmetry brand equity fixed cost allocation per value added level of advertising expense

1.3 Investment banking industry and its operations

Invest banking deals with providing the security to other businesses, government, and individual in order to enable them raise funds. They act as clients agent and issue them security. These banks are different from commercial banks and do not take deposits. In 19th century there were very few such firms that were dominating the market. In first half of century the big players were Rothschild, Baring and Browns. These organisations originated in Atlantic trade in eighteenth century. These firms used to deal with the essential goods required by European manufactures and used export their finished goods (Williams and Mark, 2010). These prominent companies Atlantic at that time were considered pioneer in the business as environment was not very suitable for the business in European Markets. The laws were such that it was difficult for creditors to chase the debtors in court. They had their own ways of enforcing the binding agreements with the debtors. 1. Demographic challenges widely reported, most developed economies are struggling to come to terms with seismic demographic challenges (Fleuriet, 2008). To varying degrees, these are set to transform the way people live and work. Life cycle savings and ageing populations point to the need to save in developed economies, making asset management an increasingly vital source of revenue growth for investment banks. 2. Emerging markets growth Economies experiencing rapid growth, combined with little well established competition, offer exciting opportunities for investment banks. But the risks, and operational challenges, of expansion into these new geographies are still being potentially underestimated. 3. Technology commoditisation Technology has repeatedly demonstrated its ability to commoditise banking offerings particularly in non-relationship, low value added areas (Fleuriet, 2008). With commoditisation increasingly dominating flow businesses, clearsighted strategic decision-making is vital. Banks must either make the substantial investments in straight- through processing capabilities needed to achieve economies of scale, or concentrate on areas such as advisory, that cannot be commoditise

4. The different approaches by national regulators to applying global standards will continue to be particular challenge for the banks, which are looking for consistent interpretation. Some jurisdictions are also going beyond the global standards. 4. One of the considerable challenges for banks is different national regulations to apply for the multinational companies. These regulations need consistent interpretation.

2.1 Economic Effects of Globalization on the Investment Banking System

Banking has changed significantly in the last few decades due to many reasons. One of the prominent reasons is international trade that has made to operate globally. The globalisation has made non capitalist economies to accept market economies (Rosenbaum et al, 2005). The technological advances in the information and baking have increased the scope for their business. The banking industry both in USA and international has more opportunities due to globalisation. However, opportunities are coming with the competition pressure for them. With investment banking getting globalise, there is increased risk of operating in different countries. The regulations of some countries are soft on the debtors and banks finally loosing a significant amount. As every good thing accompanies with it negative affects, globalisation is no exception for investment banking industry. The economy crisis like one faced by banks in 2008 can influence their business in whole world. The crisis led to questioning of the business model of the investment bank (Jager & suzy, 2008)

2.2 Analysis of market in which investment banking industry works

According to Kenawy (2009) baking is a sector that most responsive to change as well as influential irrespective of their area of operations.

The big entities of banking sector are capable of influencing the market trends everywhere in the world due their size, economic power and performance. They also can influence the growth of banks globally. The globalisation in banking sector does not mean that they abandon the domestic market but they move to make banking services available across the national boundaries. This increases their economic power and their national position many times as compared to other industries. Investment banks assist businesses in merging and acquiring other businesses, expanding by providing them with funds and advice. They are directly influenced by the state of economy as well do influence it. In USA there are about 2000 investment banks of different types. At the moment the major ones are Morgan Stanley and Goldman Sachs. Some of them provide specialised services for example they advice in bond trading. The business of these investment banks involves Corporate Finance Sales and Trading Merger and Acquisitions Analysts Research

2.3 The key issues, opportunities and threats for investment in this organisation
Strengths or Weaknesses

Opportunities or Threats

resources/technology prowess customer service/loyalty efficiency

changes in government policy tax increases/decreases currency fluctuations

infrastructure quality staff productivity corporate culture management expertise or lack of expertise delivery time price point capacity relationships with customers/suppliers brand strength multi-lingual capabilities ethics patents, licenses, permits exclusive access to natural resources distribution networks

interest rates industry mergers or joint ventures change in customer demographics strategic alliances expectations of shareholders/public technology advances closing of geographic markets changing customer tastes

3.1 Moral and ethical issues caused by operating in an international environment

Investment banks provide the advice along with the funds to other business. It is their responsibility to train bankers to comply with the moral and ethical laws. Otherwise, society will continue to suffer results of bankers excesses. For example in financial crisis are caused by complex causes but unethical practices of investment banks in one the contributions. It was found in the investigation that the unethical practices like too much borrowing, reckless banking, poor corporate governance, and no crisis policies led to the 2008 finical crisis. Thus the ethical role of investment banks is criticized. The heavy pay received by the investment bankers for creation and trade of highly flawed products was a contributing factor in the disaster (Reynolds and Newell, 2011). Behaving ethically for the investment banks could make them loose on the project where they can profits quickly.

But the ethical considerations are very important for them because they have big role in causing big financial crisis that leads to influencing the economy. There must be some kind of bodies to monitor and enforce the ethical and moral laws on these firms. Running in international environment makes it more serious for the investment banks. This can be seen in the 2008 crisis as many business around world collapsed due to financial crisis in USA.

3.2 Conflicts between corporate strategy and social responsibility

Businesses do come across the situation where there is conflict between their corporate strategy and social responsibility. Corporate Responsibility Business has obligations towards their stakeholders for example investors want to increase their wealth by investing in the organisation (Voien, 2007). They have to make the policies to fulfil this responsibility. The situation where they have make profit but have to protect the environment is common in todays business scenario. Thus deciding that whether making profit for stakeholders is important or protecting environment for society is important.

Corporate Social Responsibility (CSR) CSR is also a kind of corporate responsibility towards the community. This involves the activities like charities and environmental stewardship. It is also seen as a unsaid contract between community and organisation in which community gives it permission to operate business in exchange of employment and taxes. According to Noterdaeme (2004) corporate social responsibility includes the all liabilities towards the stakeholders as well as towards environment, society. It also includes the business practices to be ethical. At present it is found that the European firms are adopting CSR activities more than firms doing in USA. Community expects businesses to make its place, a better place to live and not harm the environment. With people becoming more aware of environmental issues as a result of advanced information technology there is increased pressure on the organisations to follow ethical practices. Sometimes, it can also influence their profits.

3.3 Guidance relating to corporate social responsibility Investment banking organisations has greater liability towards public as it has much more power to influence the economy as compared to organisations other industries. There must be control variables identified by them to avoid the unethical practices. Also the policies must be made in case of any negative event. This is responsibility of firms in this sector to control its own business (Voien, 2007). They must not fall for quick profit making strategies but all the aspects must be considered. It becomes more important for firms in this sector because their operations are quite complex and even one wrong act can initiate a chain of negative reaction. The other aspect of CSR for the investment baking could be rescuing the other businesses in need. Also, it can indulge in the charities that do some work for such businesses. The traditional CSR activities are always there to take up for example helping poor, integrating with community, and development of area in which it operates.

Conclusion
The sub-prime crisis like one happened in 2008 is a hammer blow for the investment banks like J.P Morgan. By doing the companys environmental analysis like micro and macro environments to plan for the actions which will benefit the company in the future course of action. It will help the company in understanding the future threats, opportunities, and can improve short-term and long term planning. A public equity or debt issue is the logical source of fund in this situation and investment banks J P Morgan can tap this opportunity of growth. The investment banking in the global scenario is most influential sector. Funds are always big requirement for the business and this is provided by investment banks. Thus, they have capability to influence whole economy of an area. With the globalisation, they have changed the economy of many areas in this way.