Corporate New-Venturing

       

    J.P. Morgan Chase is planning to acquire M-Modal, which offers a cloud-based voice recognition program that uses natural language processing.  The equity investment branch of J.P. Morgan, One Equity Partners, has agreed to take M-Modal private, buying all of its shares for $1.1 billion.  This is said to be the biggest capital venture deal in health IT this year.
     Dick Cashin, managing partner of One Equity Partners says the reasoning for making the deal is, "M-Modal presents a unique opportunity to acquire a market leader in clinical documentation at a time when the company has successfully released its new generation of speech understanding solutions for healthcare."  There will be a tender offer for all outstanding shares of M-Modal no later than July 17, 2012.

Read more: JPMorgan Chase unit to acquire M-Modal in $1.1 billion transaction - FierceHealthIT http://www.fiercehealthit.com/story/jp-morgan-chase-acquires-m-modal/2012-07-03#ixzz1zuZFJAHz

Organizational Structure

    Of the four basic forms of organizational structure discussed in the text, functional, multidivisional, matrix, and network, JP Morgan has somewhat of functional structure and a multidivisional structure combined.  With a functional structure the organization revolves around specific value-chain functions.  Although, "functional structures tend to work best in smaller firms and those with few products or services."  It probably works well for JP Morgan because they started small and grew over the years.
    With a multidivisional structure divisions are organized around geographic markets, products, or groups of related businesses.  They are often self-sufficient, where division heads are responsible for the strategy of a group of businesses or markets.  JP Morgan Chase & Co. owns 5 bank subsidiaries in the U.S.  Their business activities are organized into 6 business segments, one which is investment banking.  The investment banking division is divided by teams:  industry, M&A, and capital markets.
    Operating in more than 60 countries, JP Morgan has also met the challenge of executing globalization strategies.  They have had to adopt one of the four structural forms discussed in the text.  I would say they chose to emphasize local responsiveness where assets and resources are decentralized.  "Control and coordination are managed primarily through the interactions of home-office corporate executives and overseas executives, who are usually home-country managers who've been dispatched to run foreign offices." Whatever structional solution they've used, it has proven to be successful.

Acquisitions: To do or not to do, that is the question?

    How does this acquisition help our firm earn profits?  Should would develop the new business internally rather than buying it?  What are the hazards?  I'm sure these are some of the questions J.P. Morgan's management team mulled over before deciding to acquire Bear Stearns after the affects of the global financial crisis and recession in 2008.  Bear Stearns was on the brink of financial collapse.

    In a matter of days, about 200 JPMorgan employees worked on a deal.  They assessed  the strengths of Bear Stearns business and the risk of bad mortgage securities.  The offering price, at $2 a share was an extreme drop from Bear Stearns' book value of $82 a share.  But it would provide a cushion for JPMorgan and provide "margin for error."

    The deal was expected to close by the end of June and expected to generate about $1billion in after-tax earnings for JPMorgan.  But, JPM would have to focus on keeping clients in that division and working out costs between businesses that both institutions have in common (i.e investment banking, mergers and acquisitions, and research).  They will have to find avenues for growth, especially since JPMorgan did follow through with the acquisition.  They stopped using Bear Stearns name in 2010.

Strategic Alliances

    In 2006, JPMorgan, the investment banking team of J.P. Morgan Chase & Co. and Fidelity Brokerage Company, one of the nation's leading brokerage firms, formed a strategic alliance.  This alliance made a way for Fidelity's clients to participate in new issue equity and fixed income deals lead-managed by JPMorgan. 

    In the past, JPMorgan's fixed-income and equity products were distributed primarily to institutions, hedge funds, and "ultra-high-net-worth" investors through the JPMorgan Private Bank.  Now, JPMorgan is the primary provider of new issue equity and fixed-income products to Fidelity's clients, brokerage and retail.

The importance of forming the alliance:
1.  JPMorgan and it's clients have access to Fidelity's extentsive distribution network.
2.  JPMorgan's clients have the opportunity to reach a far broader set of investors.
3.  It gives JPMorgan a competitive advantage.

    It sounds as if the alliance was a strategic to JP Morgan and only operational to Fidelity Brokerage.  Whatever the case may be, it seems to have been a successful venture.

Going Global

J.P. Morgan Chase has a global mindset.  They
knew the importance of global strategy long
before the new breed of firms that emerged in
the 1990s.  Indeed they were "born global." 
The firm's relationship with China dates back to
1911.  First, they underwrote Huguang Railway's
US$7.5mm bond in 1911.  Next, they opened
offices in China in 1921. Then, they became the
first US Bank to be designated as Bank of China's correspondent bank in 1973.

J.P. Morgan established its presence in Taiwan in 1992 and provides advisory services through Taiwan's largest Investment Bank Firm. The firm has established a presence in Sub Saharan Africa, Europe, and so on.  The Global Corporate Bank was implemented to manage the firm’s relationships with large corporations, financial institutions and public sector organizations globally to solve problems for clients and help them grow.  It seems that they had a Transnational Vision because indeed they developed global efficiency, flexibility, and worldwide learning.

Synergy and Diversification

J.P. Morgan has achieved diversification through internal development and acquisitions.  They offer many products and services that are related.  Their corporate strategy has maintained coherence across business units.  It is one the firms, as read in the text, "are amalgamations of business units operating in multiple product, service, and geographic markets (often globally)."
The firm is positioned for success and is expected to hit new highs in 2013.  They have developed cost-saving synergies and use them to grow its business lines. Follow this link to read 3 Reasons JP Morgan Will Hit New Highs in 2013:  http://seekingalpha.com/article/563881-3-reasons-jpmorgan-will-hit-new-highs-in-2013

Rescaling the Industry

As we read in the text, the financial services industry is currently in the middle of a major rescaling.  Banks went from being heavily regulated to deregulation, giving them room to venture into national economies of scale.  Rescaling in this industry has mainly come through mergers and acquisitions.  Some agencies attempt to rescale primarily through internal growth.

J.P. Morgan is a leading mergers and acquisitions firm.  Their M&A transactions  include asset purchases and disposals, restructuring and reorganization.  The M&A business is critical in strengthing the firm's globally integrated model and  it's growing financial franchise in India. 

The firm itself has a history of mergers and acquisitions.  They started out as the Chemical Bank of New York and have since then undergone reorganization and several mergers.  Here I will highlight a few:

• Chase Manhattan Bank & J. P. Morgan & Co. (merged 2000)
• Bank One (acq. 2004)
• Bear Stearns (acq. 2008)
• Washington Mutual (acq. 2008)

Differentiation is Key

When unique products are targeted to a particular market segment, the positioning strategy is called focused differentiation.  J.P. Morgan has used this strategy in the financial sector, by developing and implementing several different entities under one umbrella.  Such as their Investment Analytics and Consulting (IAC) group.  This group offers various tools to help clients manage risk within portfolios.  IAC group's 3 key differentiators are:

• the utilization of an award winning flexible risk engine that incorporates sophisticated quantitative risk and scenario analytics with multi-level, drill-down capabilities.
•  a proven and time-tested production and data validation process that drives accurate and timely reporting and analysis, as well as extremely responsive client service.
• their investment expertise and unique skill set across our broad product offering; their commitment to a consultative approach and their focus on innovative solutions.

J.P. Morgan is a trusted name that has been reliable.  The firm's legacy dates back to 1799.  They managed to weather the storm of the 2008 financial crisis and they continue to grow and expand the brand.  One of the company's principal operating subsidiaries is located in the UK.  Their activities are organized into six business segments. The Company’s wholesale businesses include the Investment Bank (IB), Commercial Banking (CB), Treasury & Securities Services (TSS) and Asset Management (AM) segments. The Company’s consumer businesses include the Retail Financial Services (RFS) and Card Services & Auto (Card) segments. In June 2012, the Company’s asset management business created a new unit.  They have truly saturated the market.

Banking Industry

   Within the banking or money center banks industry there are a group of firms that offer similar products and services to the same the market.  Such as investment banking, online banking, asset manage, and more.  The top competitors in the industry are J.P. Morgan Chase, Bank of America Corporation, Barclays PLC, and Citigroup, Inc.  J.P. Morgan seems to be at the forefront, boasting of being the leading financial institution worldwide. 
    It appears that the banking industry is no longer a competitve business but more of an oligopy, meaning the industry is controlled by a small number of firms.  Is it a concentrated industry? According to Lynn Parramore, an AlterNet contributing editor, it is.  She says the signs that "competition has left building in a given industry" are concentration of power, cost vs. returns, and risk of failures.
    There was a massive trend of consolidation in the mid 80's which led to a shrinking of banks in the U.S.  Now the biggest banks control a larger share of deposits.  Parramore states that there is a huge gap between the cost of goods and services provided by the firms and how much they profit from it.  She also says that the bigger banks have become "too big to fail."  To read more about the article "Banking Has Become an Oligopoly Instead of a Competitive Business -- And That's Really Bad News for Us 99%," click here:

http://www.alternet.org/economy/152695?page=entire

Resources and Capabilities

   In order to meet the challenges of international trade, J.P. Morgan has established a Web-based global platform called the Trade Channel.  It allows instant access to critical trade flow information.  According to Gerry Scalgione, Managing Director and Product Executive at J.P. Morgan Global Trade, “For clients that are expanding internationally the Trade Channel platform provides a portal through which they can fund and manage their trade activities end-to-end.”  They've also felt it economically necessary to "build a green treasury."  At the forefront of the sustainability movement J.P. Morgan began a "Go Green" initiative in 2007.  By helping more than 10,000 clients worldwide transition from paper functions to electronic operations, they have improved efficiency and cut costs.  Organizations of all sizes can learn more about the "Go Green" initiative and how to implement sustainable treasury solutions by accessing the Go Green Resource Center site.  You can read more about it here:

http://www.jpmorgan.com/tss/General/Go_Green_Resource_Center/1320490152410

The Mission, The Culture, and The Approach

Mission Statement:

"At J.P. Morgan Chase, we want to be the best financial services company in the world.  Because of our great heritage and excellent platform, we believe this is within our reach."

According to J.P. Morgan Jr, the company is committed to "the idea of doing only first-class business, and that in a first-class way."  The firm and its employees are held to the highest ethical standards in support of clients and claims this is what makes them one of the world's most trusted and respected financial services institutions.  The firm's corporate responsibilty lies in being a leader in market-driven environmental solutions for clients; leadership and innovation to the broader affordable housing and community development sectors; and employee engagement.

The Business of J.P. Morgan Chase

J.P. Morgan is a leader in financial services, offering solutions to clients in more than 100 countries.  As a leader in asset management, investment banking, private banking, treasury and securities services, and commercial banking, they have been helping clients do business and manage their wealth for more than 200 years.

                    "Our aim is to be the world's most trusted and respected financial services instituion."
                             Jamie Dimon, Chairman and Chief Executive Officer

As a firm, J.P. Morgan has a proven of showing leadership, especially during times of financial crisis and continue to build on that legacy.  The firm is has always been driven by the desire to do the right thing for today and tomorrow.