Introduction
American Express Company also called AmEx, which has its name derived from their first initial names and is diversified global financial services company in the world. It has its headquarters in New York City. The following were the founders of American Express Company Henry Wells, William Fargo, john Warren and Butterfield, formed American Express Company in 1850.
It is widely known for its credit card, change card, and traveler’s cheque businesses. According to Hill (2005), “the company’s mascot, adopted in 1958, is a roman gladiator, and its image is placed on the company’s travelers’ cheques and credit cards” (p. 180).
American Express is a public industry that deals with the banking and financial services in the market. The products that the American Express Company was involved in were the financial sectors, travel services, and insurance services.
Aim of the report
The aim of the report is to analyze the PESTEL analysis of American Express Company in New York with the current factors affecting the external and internal environment conditions facing the firm.
The report also analyzed the SWOT factors affecting the company by evaluating the company strengths and check on the weaknesses of the company. Analyzing and evaluating the company global strategies, recommendations, explanations and justifications of the firm should do.
History of American Express Company
American Express was founded as post trading company in the year 1850 in the city of Albany, New York. It was created as an amalgamation of the Express Firms owned by’ William Fargo who had Livingston Fargo and company and Henry Wells who owned Wells and Company, and finally was the Wells Butterfield and Company owned by John Warren Butterfield’.
American Express wanted to extends its operations to California but Butterfield and some other directors of the company opposed this proposal and decided to form their own company called Wells Fargo and Company in 1852. In the New York state, American Express had a monopoly on the movement of shipment goods, securities and currency as it was the only company by that time in the market.
According to Hill (2005) “American Express Company decided to shift its headquarters to 65 Broadway that was the financial District of Manhattan” (p.181).
In 1854, the American Express company bought Vesey Street in New York City as the place for its stables, which was constructed at 4-8 Hubert Street. In 1874, American Express prospered effectively and it decided to shift its headquarters from the wholesale shipping district to a financial district.
In 1880, American Express established a new storehouse at the back the of “Broadway Building at 46 Trinity Place, between Exchange Alley and Rector Street and also bought Broadway buildings and site in 1903, as the company assets were approximately $28 million making it the second financial institution in the city” (James 1994, p.26).
American Express was able to stretch its services on a national scale by making associations different express firms for example the Wells Fargo, which substituted the additional two firms that combined to form American Express, also, the “railroad and steamships companies also merged” (James 1994, p. 25).
In 1882, the firm ventured into in the monetary section as one of their plans to increase their market share by launching money order trade thereby emerging as an archrival of “United States Post Office’s Money Orders.”
James D. Robinson III managed the firm from the between 1977 and 1993, and Harvey Golub took over as the chief executive officer between the year 1993 and 200, later in the year 2002 Kenneth Chennault took over the leadership of American Express as the chief executive officer the position he has held up to date.
Strategic challenges facing American Express Company
The strategic challenges that are facing American Express Company include the lucrative merchant charges that are attacking the company. In addition, the process of signing up the U.S. banks is very slow in giving out its cards as its competitors like the Visa international and master cards international are faster compared to them in the market (McCunn 1998, p. 59).
The supreme court declared that it was going to give cards through banks made more investors to stop investing in the company because they would like to invest in an independent company than in American Express which is controlled by BofA’s.
The sharing of the billions of cash that should be charged by all credit-cards companies and share with the banks as a motivation for them to give the cards. The company fears the threat that it is going to be forced to cut its fees in the merchants win, as it collects more bills from their customers by 0.6% compared to the charged fees levied by their rivals in the market.
PESTEL Analysis of American Express Company
PESTLE analysis stands for Political, Economic, Social, Technology, Legal, and Environmental factors affecting the business or company’s activities in the market. The Political issues are the factors affecting the company business in terms of the government taxations or grants in the country that have affected the business process.
Economic factors are what the status of the population income or economy of the country that have affected the way the population or customers to be able to purchase goods and services of the business as the demand and supply of the goods and services changes. Better economic means better standard of living that results to increase in the demand as one can get access to loans.
The level of interest rates are low which encourages one to borrow a loan and also the economy increase as there is employment opportunities in the country. Social factors of the population will increase or decrease the demand of the products in the market. The social factor of the demographics was favorable to the product due to social mobility in the ethics and religious differences in the country.
Technology of the business will help the business in producing better qualities of goods and services to the customers by use of the new or modern technologies in producing those goods and services (Hill 2005, p. 180). The legal factors are the legislation requirements needed in the business to operate in the country without interference with the regulatory bodies governing the business operations.
Regulatory bodies are responsible for ensuring that any business operations meet the trading policies as to ensure that they followed. The environmental factors of the business were considered as it well situated to consumers access and mobility was easy and faster. They also considered the current and future environmental legislative changes were considered in the market.
Strengths in American Express Company
American Express strengths in the business include the things that a business does best to compete in the market with their competitors. Strength of the business will help the entrepreneurs to attract more customers than the competitors as they are able to meet the customers’ needs and wants. These strengths are the experience the business has in a specified field and this will be the area of specialization in the market.
American Express Company had enough capital to run the business effectively helped the firm to compete with their competitors and outweighing them due to its financial status in the market. It managed to venture in different investments in the country that help to attract many customers, as it was widely known in the country.
Improving the quality of goods and services directly targets the consumers and a manufacture/entrepreneur is bound to nurture and retain customers through defining their needs, understanding and interpreting customers into technical terms, identifying and developing criteria for technological processes in manufacturing and determining the results and the state of customer satisfaction.
In addition, it is vital to provide user-friendly and reliable devices to the customers, timely and eligible technical services, and characteristics corresponding to product prices. The company had a good balanced system of operation and a continuous growth of their strategy management process with innovative system.
Defend against weaknesses
In this age of new and wide technologies, it is barely possible to offer consumers predominantly new products in the prevailing market conditions.
This has been made more difficult by the fact that a new product incurs increased expenses under conditions of expansive competing actors, risk premiums, time consuming, and expensive research undertakings on market conditions; considering that, an entrepreneur primary purpose is making profit..
Although the cost of improving quality for products and services is considerably high, technological advancements and innovative measures that is employed to cut down on these costs.
Current issues indentified with in American Express Company include; monitoring of many employees outside the companies and identifying their knowledge and skills of those employees. An influence on the employees inside the company affects outsiders’, external employees, or lower level management levels (McCunn 1998, p. 59).
Company self-assessment of employers based on employing educated personnel who have knowledge and skills on the company strategies by identifying their strengths and weaknesses. This process enabled the company to have a good leadership process at the same time have easy task-managing employees.
Leaders of each department have strict relationships with in the office as no tribalism or nepotism in the office. The operational plan of American Express Company was successful because they used modern strategy processing and planning process in the company.
Sustainable of the current strategy
American Express had business strategic unit that involves the processes of inventing new products and services in the market and involving the process of planning how to compete with their competitors in the market. Current strategy includes planning on how to use their expenses and income in running their business to meet their customers’ needs and wants (Craig et al 2008, p. 136).
Their strategy should be by use of new technology in inventing new products and services to create new opportunities for their customers’ needs and wants. Business strategic unit should set their pricing of their services so as it can be affordable to their customers, by do so they will win more customers.
Decision making of the business may hire specialist’s decisions makers to support them in decision making in the business of the company (Bossidy, Charan & Burck 2002, p. 98). American Express also included the following factors in their current strategy is to use many directions and techniques in their firms to market their services and to meet stakeholders’ expectations.
American Express took the following business strategy methods to compete in the market: They choose the best countries to set up their firm, to get access to their customers easily in different countries where they can easily do their business.
Choosing the best firm to market their services made the company become more popular and this attracted more customers to transact with their firm. American Express firm strategy of employing employees with knowledge and skills in different firms really helped the company to compete in the market. American Express firms had enough resources and facilities to establish different firms in different countries.
American Express firm had different employees using their knowledge and skills who helped the firm in strategic decision making in their respective department.
Strategic analyses used by American Express firms included; the PEST analysis that was done in different countries and knowing what the external factors needs and wants. They did their market research and it assisted American Express to identify different industries that needs or does not need their services through market segmentation.
Michael porter’s five forces and generic strategies in American Express Company
Michael Porter’s forces are used to determine the primary force that shows the competitiveness with in an industry and explains how they affect each other in the market. Porter’s model gives managers of the company on the best and effective strategies to tackle the external factors that is affecting the company activities within a competitive industry.
American Express Company had sufficient resources in running and operating its business activities in the market. Company resources and employees abilities in running the business helped managers to analyze the internal and external environments of the company. Market leadership strategies of the company are the market shares and its industry in the market by producing new products and services in the market.
American Express had better technology advancement to produce quality products and invent innovations in the market to meet customer’s needs and wants. The company tackled most the threats in the market by doing more research in the customer’s needs and wants as they introduced new products and services in the market compared to their competitors.
They also handled their customers in the best way by offering quality services to them and following if they were served in the best way possible. American Express Company had different types of services that can accommodate different customer’s tastes and preference in term of its costs and give their customers discounts that attracted more customers (Cheese, Thomas, & Craig 2008, p. 123; Wood 1992, p. 101).
American Express Company’s global strategies include
A firm’s profitability can be determined by the way the industry operates and its position within the industry sectors in the market. The firm’s strengths can be divided into groups as cost advantage and differentiation strengths as either a broad or a narrow scope.
The three generic strategies applied in American Express company result to cost leadership, differentiation and focus which are applied in the business activities and they are usually industry dependent. American Express Company used a cost leadership strategy to penetrate the market as they produced and market their product and services at a cheaper cost than their competitors in the market.
The top managers of the company used a cost effective method to market and produce their products and services to gain a greater margins of the profits in the market industry than their competitors produce. Managers had enough capital to run the business, the already acquired skills, and knowledge of running the business and low cost of distribution of services in the market.
The second strategy was a differential strategy that they used by producing and introducing a unique products and services in the market (Aguilar 1992, p. 124). They improved their brand image, advance technology in performing their services that makes them superior and improved its features than their competitors.
The company had qualified employees who had skills and knowledge of marketing their products and services that were more creative in inventing new ideas in the market.
Company’s employees were motivated to do research on the customer’s needs and wants that they are to help the company attract more customers than their competitors. The last strategy of the company is focus strategy that focused on the market segmentation of their products and services in the market (Bracket 2005, p.23).
Company’s global strategy involves the use of human resource managers in making decisions of the company business in operation in a market viable in order to outweigh their competitors.
American Express corporate strategic planning was structured as follows; American Express firm directors had the mandate of designing mission of their company, goals and objectives of American Express that were firms were decided according to different firms to meet needs of the management team and shareholders of the company.
American Express Company had written missions that were known by all the employees of their firm and that mission was short and clear to understand. Their mission was structured according to their goals and objectives of the firm. They were able to protect their working internal and external environment that can affect their firms within and outside the company decision making.
Company’s global strategies also included analysis of their competitors’ environment, evaluate their strategy, and know the procedure on how to handle them. American Express firms were able to plan the corporate long-term objectives with short-term objectives of the company that were to be met by different firms.
Their corporate strategy included firms’ strategic plan in terms of their economy and scope of the company in terms of its environment and business capabilities.
They had a well-organized management levels that were assigned specific roles and duties to be done by each managers in their respective department and firms. In addition, American Express Company is an equal opportunity employer in the market as it employs people according to their qualifications.
Corporate strategic managers should put in mind if their strategy will get more capital resources in funding, employees, time management and the required communication. This funding procedure includes the risk of getting or not getting financial or nonfinancial stakeholders of their company and their evaluation should involve planning in order to tackle the risk.
Corporate strategy is planned using the SWOT analysis to know the best business and how to run that business in the best method to outweigh their competitors in the business market (Grant 2004, p. 182; Brown 2009, p. 56). Human Resource Managers of different American Express firms encouraged all employees to work towards their mission and vision of their firms.
The managers through a good communication channel did this to all their employees in the firms, as they promised better awards to all employees who have managed to achieve their goals and objectives in their respective firms.
The employees had previously undergone promotions in various departments and offered good allowance be provided with better working conditions in their respective firms which, the Human Resource Managers also supported this appraisal. American Express had a long-term corporate strategy and good direction of operating their opportunity communicated to all employees.
Strategic planning involves the process of directing employees of American Express Company to perform business activities and day-to-day operations for the better success of the business.
Strategic planning is linked directly to the day-to-day activities of the company procedures to be followed systematically for correct and proper manner of running the business. These processes also consider the following areas that are influenced include; the stakeholders of the company, plan the employees’ roles and regulation and know how they do their work.
Strategic recommendations in American Express Company
Customer satisfaction is a very important aspect for evaluation and management of quality for goods and services. However, it is not obvious that high quality of goods and services will automatically lead to customer satisfaction; hence, it is important for an entrepreneur to understand a consumer’s initial expectations.
When a consumers experience is matched with his/her expectations, three scenarios are bound to be experienced.
These will be a positive confirmation where the quality of goods and services is higher than consumer’s expectations, simple confirmation achieved when the consumers’ expectations exactly match with the quality of goods and services; and Negative confirmation-where the quality of goods and services is worse than a consumer’s expectations (Capon 2009, p. 67).
Successful tactics employed by American Express Company some of the best techniques in expertise and clientele requirements and desires, which are making new conduits of sharing, communication, and purging entry hurdles to invention.
Conclusion
American express company managed to compete effectively in the market as it diversified its investments in various types of services and products in the market. The company had enough capital which they got from the mergers they established enabled them to attract more customers as it became popular in the market.
In addition, the top management committees were well organized in running and operating the company business activities and made better decision making of the company processing activities.
They also hired their employees basing on the qualification of the candidate rather than hiring their friends or relatives really helped the company in investing in the market as the employees had the required skills and knowledge of performing their duties and roles in the company.
List of References
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