Page 137 - Flip Banks TG

Industry rivalry (Diagram 1) is high where the ‘big four’

players all have substantial market presence. However, BofA

has an important advantage in its total coverage of the USA

accrued through its earlier acquisitions.

However, the threat of substitutes posed a problem for the

industry as a whole as all banks offer a similar product

where switching costs are low at a time when customer

loyalty is declining. For BofA this has meant that the bank,

particularly under the stewardship of Moynihan, has sought
growth organically, whilst restructuring and rationalising the

operations.

Legal constraints subsume operations and conduct of all

bank businesses as the volume and rigour of these

regulations have ramped up since the financial crisis.

Pre-2008/9, BofA’s directional growth strategy used

horizontal concentration for competitive advantage in

increased market share through the acquisition of Merrill

Lynch and of Countrywide Financial. However, the flaw in

this lay not with their strategic fit but rather with the

inherent misconduct that would lead to major fines that

would burden the bank for a decade.

Post 2008/9 BofA abandoned growth by acquisition and

focused on organic growth concentrating on its customers.

BofA also faced changing dynamics and relationships of its

suppliers, distributors and buyers (Diagram 2). In particular,

distribution was undergoing rapid and fundamental change.
Mobile banking and the internet were likely to prove the

battlefield upon which bank success or failure was founded.