Cost Leadership

Cost leadership is a very essential strategic consideration for the success of a business in any industry. As I ave said from the outset of this blog, it is, sometimes, difficult to assign tangible values to a financial service company's strategies. This especially applies to cost leadership, as the products that UBS offers are based on their role as an intermediary between two parties a lot of the time. The service they provide is compensated by fees and sales loads, and UBS does not have to maneuver the same way a merchandise company (for example) may have to by dealing with suppliers, logistics, and product maintenance. Oddly, UBS is a company that provides both a service, at times, and a product, at times. Economies of scale do not seem to affect a business like UBS, as their products are specific to the consumer's needs and the inherent design and quality of the product itself(e.g. a mutual fund). I have been very intrigued by analyzing UBS with respect to the format and expectations of this blog. With continued excellence in company management, UBS will continue to thrive on a more applicable strategic focus: product differentiation.

The UBS Brand

According to the text, firms can be thought of as bundles of productive resources, and different firms possess different bundles of these resources. Resources vary from management assets, product resources, strategic tools, and other tangibles and intangibles. UBS's greatest strength, bar none, is its brand name recognition. UBS, which is a relatively young company, holds top market positions in the global economy structure. As previously stated in this blog, reputation and brand name recognition are vital components to success in the financial services industry. UBS’s brand portfolio strategy has been a great success to the company, and placing their resources into a viable and correct strategic approach is, in itself, a strength of the company, not to mention the success of the strategy itself.

Another aspect of the resource-based model approach discussed in the text that UBS is attempting to hone to its advantage is the value of the general manager. They have put into place an incentive program to middle management, which consists of approximately 5-600 individuals, to motivate them to perform and enhance their brand model marketing approach.

UBS has fallen short on identifying correct marketing targets at time, perhaps because they have, historically, targeted more sophisticated, high income-earning clients. In order to capture a higher share of the market, UBS is working towards developing a broader range of brand communications to identify more closely with the general public.

Hoover's World

Gary Hoover, professor in the McCombs School of Business at the University of Texas at Austin, discusses the financial services industry and its competitive nature.

http://www.youtube.com/watch?v=0f60l_m5XDA

Environmental Opportunities: The UBS brand as an Advantage

In the financial services industry, environmental barriers are less tangible than, say, any manufacturing industry. Brand name recognition, though, transcends industry type, and the UBS name is not only widely recognizable, but also it is a respected name in financial services. With regard to the five forces model, a competitive model can be constructed for this industry, but prevention of entry and product variance(as applied to substitutes) is a difficult factor to manipulate to a company's advantage due to the incredibly wide variety as well as similarity of products that are offered by financial services companies.

The financial services industry, in recent years, has been extremely volatile and tumultuous, as the economy has faltered as a result of questionable investment practices among financial services companies themselves. In an industry already dominated by fierce competition among a wide variety of services and products, e.g. mutual funds, retirement products, etc, the loss of public trust hit the industry hard. But there was more a less an even distribution of profit reduction. So now, a company like UBS relies heavily on its reputation as distinguished firm for its assurance of continued success in a highly competitive and highly damaged industry.

In the financial services industry, different firms compete more on the performance of their products than on the basis of price, i.e. share loads and trading fees. Individual and institutional investors alike are more concerned with long term profitability of their investment products and are less concerned with the fees associated with their transactions. This may seem like a contradiction to what was previously stated about the similarity of the products offered by companies, but when I say similar products I mean product types and structure, not product performance.

As the financial services continues to recover, the threat of buyers will become less a source of competition for competing firms. Because of this fact, UBS can continue to direct its energy to research and less of its energy to product differentiation.