Is the risk worth the reward?

 

Bank of America is the second largest bank in the United States but is currently facing many financial hardships. Under a new CEO since 2010, “Brian Moynihan has been working to streamline and reduce risk at a company that has lagged rivals in recovering from the financial crisis, largely due to mortgage-related losses” (Huffington Post). His plans are meant to eliminate roughly $5 billion in annual expenses and 30,000 jobs (Huffington Post).

After learning about the different ways managers can improve their bottom-line, it was interesting to digress on the situation that is going on at Bank of America. There are three major ways a company can look to improve during a financial hardship. They can look to marketing to increase sales, they can look to finance and accounting to cut expenses or they can turn to operations management and cut production costs.

In this case, Bank of American took the route of finance and accounting by making VERY drastic spending cuts. Was Bank of America smart in doing this? From a marketing perspective, with such a difficult and lackluster economy, increasing sales is probably not the most feasible option. From an operations management perspective, it is a service based company and therefore it would be difficult to cut operational costs. BofA could increase efficiency by closing certain branches or shortening the work hours, however this would be at the cost of its employees. As such, in this type of economy, job layoffs are a way to jump-start the company back to life. It is by no means the popular choice, but really seems to be the best option at this point in time.

 

Any thoughts, comments or rebuttals?

 

http://www.huffingtonpost.com/2012/09/20/bank-of-america-layoffs-16000_n_1899691.html

7 thoughts on “Is the risk worth the reward?

  1. In this case, i would have to agree with this post. Sometimes, closing down certain branches can have a positive effect on a company. A few years ago, Starbucks closed around 500 stores and they bounced back from that. Maybe after Bank of America implements this decision they will have the strength to grow to be the largest bank in America.

  2. Being the second largest bank having these hardships can figure how bad the economy is right now. I think decreasing a few branches might be a good idea for the hardships they are facing right now. Even though cutting jobs is never the best way, sometimes it needs to be done for the success of the company. Having previous experience working in a bank I know there are branches that company thought would be beneficial but in reality, it does not work out that way. So figuring out where they are making the least profit and close those branches might be a good way with their current hardship.

  3. I agree that cutting their expenses is probably the best solution to their current problem. It is especially hard for bank of america to just make more money simply because they make it by investing. Its not always easy to tell what is going to be a good investment and what is going to fall through. By closing off branches, bank of america can cut its ties with its least profitable parts and hopefully be able to increase their revenues.

  4. Cutting expenses would be a good decision if the economy allowed for it. However, I dont believe that cutting expenses could benefit their employees because that would result in loss of jobs and those could be people who are very educated in the banking industry. This could prove disasterous for it’s customers in the short and possibly the long run. I think the post was very well written and informational.

  5. Well I work in a financial institution and can’t help but feel the layoffs are the only viable course of action if they’re looking at a quick fix. It’s not good on a human level perhaps because some of those employees don’t deserve to lose their jobs but the corporation comes first in today’s society. However what they should do is make sure they continue to buy up bad mortgages as they have done and in their attempts at expansion they’ve damaged themselves. Now it’s time fore them to take the hard path and eliminate a huge amount of expense.

  6. Cutting expenses is always the first thing a company will do to help generate more cash for the business. it is the same idea as task management, in operation management this will help cost cutting and allow for the task at hand to be completed in a sufficient and cost effective manner. this is what Bank of America should do, and is doing.

  7. Given Bank of America’s current financial state, cutting expenses and reducing the number of employees is most likely the most surefire way to, at the very least, maintain their position as the second largest bank and give them the opportunity to advance towards first. However, Bank of America has implemented a number of different cost saving and revenue increasing initiatives since 2008; among these is charging account holders a more substantial fee monthly. Synonymous with what was discussed in class, there are multiple different ways to cut costs and it seems that Bank of America intends to implement as many of them as they believe would work.

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