Page 9 - Bank of America E Teaching Note
P. 9
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.
