Hello kids, today we will be discussing the future. Yes it is scary, I know. It gets worse. We will be discussing the future of...a financial firm!!! At this point you should be really scared. If not, then you're either not scared easily or maybe you don't watch the news. The collapse of the subprime mortgage market put a heavy strain on many banks and financial institutions, threatening the very existence of some. Some predicted it, many didn't believe it. JP Morgan Chase was one of the companies that was forces to write off over a billion dollars worth of debt. Now they have to deal with it and continue operations, although the extent of the damage may not be fully realized just yet. So what other events may occur in the future that will challenge JP Morgan Chase?
One possibility is a nationwide depression. The way things are going now, I would estimate that there is about a 5% chance of this happening. For this to be a serious problem most Chase customers will have to withdraw their deposits at once. Of course banks keep reserves on hand, but it might not be enough in case of a nationwide economic crisis. Its practically impossible to hedge yourself against such a loss of assets except to limit the percentage of assets held as short term deposits, and I'm sure they already do this. But I'm sure in such a situation, the firm's equity would be devalued dramatically regardless along with all other financial institutions.
Another event that could create very serious problems for JPM Chase is if their corporate headquarters in NY and their retail financial services and commercial banking headquarters in Chicago were completely destroyed in a terrorist attack. Considering the turbulent times we live in, the possibility of this is close to 0. Nonetheless, heavily armed guards throughout the buildings , anti-aircraft weaponry on top of the buildings, bomb proof glass and possibly electric fences might prevent this kind of incident.
Finally, its possible that in the future, people will not have a need for commercial banking or financial services. There might be no money in the far away future and everything will be bartered or free. The possibility of this in the near future is probably 0, but maybe 500 years from now, this will be the case. To protect themselves against this, Chase will have to create their own government and print their own money. But I don't think we have to worry about this any time soon. So don't get scared just yet.
Monday, November 26, 2007
Wednesday, November 14, 2007
Why do they have competitive advantage?
As mentioned in the assignment, competitive advantage is the advantage firms have over competing firms. There are various reasons why firms have it and ways this advantage is maintained.
One of the ways is to be the first entrant into a market. A good example of this is Microsoft. They had the first mainstream operating system for a personal computer. Today there is very few other operating systems used while Microsoft's remains the most popular. In addition to that, they are the number 1 software company in the world and the 3rd largest company in the world. So it is fair to say that they maintained their competitive advantage.
While on the topic of computers and Microsoft, the company Apple comes to mind. Macintosh computers that run on Apple's operating system managed to position themselves in a specific niche. They have always been considered better for professional video or graphics editing and apply to students and artsy crowds. They reinforced this concept through advertisements featuring the business IBM guy that never works, and the regular Mac guy that is always better at everything. So Apple managed to dominate that specific market which is a good example of niche dominance. They're also the 4th largest technology, hardware and equipment manufacturer in the world.
A good example of competitive advantage due to market share is the brewery, Anheuser-Bush. They own almost 50% of the market share in the US, this allows them to dominate distribution channels, forcing wholesalers into exclusive contracts and making it very difficult for smaller companies to sell beer on a larger scale.
Google is a good example of a firm with government protection. The patent on the software algorithm for their search engine protects other firms from copying their invention and no other search engine as simple to use and as effective has been made. Due to this and advertisers' interest in google's search engine, Google became the number 3 software company in the world, just from a search engine.
One of the ways is to be the first entrant into a market. A good example of this is Microsoft. They had the first mainstream operating system for a personal computer. Today there is very few other operating systems used while Microsoft's remains the most popular. In addition to that, they are the number 1 software company in the world and the 3rd largest company in the world. So it is fair to say that they maintained their competitive advantage.
While on the topic of computers and Microsoft, the company Apple comes to mind. Macintosh computers that run on Apple's operating system managed to position themselves in a specific niche. They have always been considered better for professional video or graphics editing and apply to students and artsy crowds. They reinforced this concept through advertisements featuring the business IBM guy that never works, and the regular Mac guy that is always better at everything. So Apple managed to dominate that specific market which is a good example of niche dominance. They're also the 4th largest technology, hardware and equipment manufacturer in the world.
A good example of competitive advantage due to market share is the brewery, Anheuser-Bush. They own almost 50% of the market share in the US, this allows them to dominate distribution channels, forcing wholesalers into exclusive contracts and making it very difficult for smaller companies to sell beer on a larger scale.
Google is a good example of a firm with government protection. The patent on the software algorithm for their search engine protects other firms from copying their invention and no other search engine as simple to use and as effective has been made. Due to this and advertisers' interest in google's search engine, Google became the number 3 software company in the world, just from a search engine.
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