the management and organizational shareholders

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I.Overview of Company DarbyAlly Bank is a subset of Ally Financial, a bank holding company. Ally Financial beganas General Motors Acceptance Corporation (GMAC); an auto financing and autoinsurance business in the 1920’s that has evolved over the years. They now offer autoand corporate financing, insurance, mortgage services, and online banking. After theeconomic crisis that occurred in 2008 and the following years, Ally (formerly GMAC)rebranded as Ally Financial, and subsequently Ally Bank, with the mission to “beobviously better”. Ally Bank offers the entirety of their banking services online. Theydon’t have any physical branches for their customers to conduct business at, and that’swhat they believe makes them better. This allows them to keep their competitive rateslow and offer around the clock customer support. In 2012, Ally Bank reached amilestone 1 million customer accounts, and they are continually growing.2. Stakeholders JesseAs of 9/23/15, Ally bank has 504 institutional shareholders and 19 insider shareholders,the management and organizational shareholders that make up only .17% of sharesoutstanding. From a Capital Market Standpoint, Ally bank’s largest shareholder isStephen A. Feinberg, hedge fund manager, followed by Blackrock and Vanguard GroupInc. A majority of ownership is domestic with 91.63% ownership in the United States,which is understandable because its banking and financial service activities areethnocentric for the most part. One past, notable shareholder used to be the US treasury,however it sold off its final shares in Ally Bank in December 2014, following thefinancial crisis and its failed stress test in 2012. In total, Ally is owned 51.87% byInvestment Advisors and 44.31% by hedge funds.Product Stakeholders includes the Auto owners whom Ally bank offers its loan servicesto, even extending to the Automotive manufacturers since Ally used to be GMAC. TheirCorporate Finance function aids in transactions to the business stakeholders in thefollowing target markets: Automotive, Business Services, Consumer Products,Distribution, Healthcare, Industrials, Manufacturing, and Retail. Finally, Ally’s arguablymost important group of product stakeholders includes their retail banking customers thatreceive all of Ally bank’s checking, saving, and other financial services online.3. Analysis of External Environment CorinneGENERAL ENVIRONMENTDemographic changes in the external environment include an increase in personal incomelevels of Americans, a rise in aggregate household debt, and the transition of atechnology-reliant generation into adulthood. These are factors that Ally Bank should beaware of when creating corporate business strategies. For example, US personal incomehas been on the rise (a change from previously) for the last couple of years. This typicallyindicates an increase in consumer savings and investment. Also, aggregate householddebt is slowly rising which increases interest revenue for banks. As the youngergenerations enter the job market and begin to make money, banks will be forced to adaptto this demographic’s affinity for technology as well.Another significant external environment factor for Ally Bank is the health of theeconomy. Demand for banking services is closely tied to economic activity, especiallyinterest rates. When interest rates are low, banks like Ally are faced with increasedindustry costs. When interest rates are high, there is a lower demand for services likeloans. Much of Ally Bank’s revenue comes from the “spread” between the rate at whichthey can lend money and the rate they must pay to acquire money. Currently, the bankingindustry is continuing to recover from the late 2000s financial crisis.Following the global recession in 2008, there has been increase in government regulationof the banking industry. Such regulations have increased cost of doing business andtherefore may slow growth/recovery for banks like Ally. The Dodd-Frank Wall StreetReform & Consumer Protection Act (2010) and Basel Committee on BankingSupervision (2013) expanded government power and influence within the industry.Higher capital requirements have been instituted in order insure the security of banks inthe event of a downturn, which has influenced banks ability to issue loans. Thegovernment has also encouraged separation of commercial and investment bankingfunctions. cap on interchange fees.The political sphere also shapes Ally Bank’s strategy and success. Following the globalrecession in 2008, there has been an increase in government regulation of the Americanbanking industry. While such regulations add a layer of economic security, they haveincreased the cost of doing business for banks and, therefore, may slow growth andrecovery for companies like Ally. The Dodd-Frank Wall Street Reform & ConsumerProtection Act (2010) and Basel Committee on Banking Supervision (2013) expandedgovernment power and influence within the industry. Higher capital requirements havealso been instituted in order to ensure the security of banks in the event of anothereconomic downturn. However, this has influenced banks’ ability to issue loans. Inaddition, the government has encouraged separation of commercial and investmentbanking functions.Changes in the technology environment are especially influential to Ally’s business. Newtechnology is allowing for increased automation in banking. For example, market leadersare trading in their older ATM models for new ATMs with added mechanisms forcustomer ease-of-use. Mobile banking is becoming more mainstream as consumersbecome more and more dependent on their devices. However, this reliance on technologybrings an issue of hacking and information security into play. It is important for Ally tomaintain a sense of trustworthiness with their customers in spite of this.FIVE FORCESIndustry rivalry is high in the banking industry. There are many competitors in the onlinebanking industry in which Ally bank operates. Competitors include: ING Direct, CharlesSchwab, Sallie Mae, and FNBO Direct. These competitors are constantly offering newdeals and specials on their services in order woo customers away from other banks. Forexample, ING Direct is currently offering a $75 referral bonus for new customers. Thehigh degree of advertising in the banking industry also promotes such a strong rivalry.Furthermore, customers face low switching costs when considering their banking options.This means customers can switch relatively easily and cheaply from one bankingcompany to another. Low switching costs intensify the industry rivalry, because bankslike Ally are uncertain of the longevity of each customer’s accounts.Barriers to entry in the commercial banking industry are of a medium to low severity andnot expected to change drastically soon. This means that Ally Bank’s threat of newentrants is not of critical concern. One of the largest barriers for new entrants is gainingapproval from and complying with government institutions. Federal regulations and acomprehensive government approval process prevent new banking companies fromentering the market quickly or easily. It takes a new bank a significant amount of timeand money to gain a charter from the United States government. Commercial bankshoping to operate in the U.S. must first receive approval from the Board of Governors ofthe Federal Reserve System. Following this, new entrants must pass regular inspectionsto ensure they are upholding all government requirements. The Dodd-Frank Act (2010)alone established 400 new regulations for banks to comply with. In addition tocomplying with such strict entrance and compliance requirements, new entrants mustobtain huge amounts of capital to begin operations. The saturation of the market byexisting banking firms is another barrier to entry. Existing companies can leverage theirstrong customer base and well-established operations to compete and push out newentrants. The 50 largest U.S. commercial banks currently hold 75% of the industryrevenue. This leaves little to be made by smaller, new banks looking to enter the market.Brick-and-mortar banks that already have a charter and capital still struggle to enterAlly’s online banking industry due to other factors. Interest rates for savings andchecking accounts for these brick-and-mortar banks are usually lower than for onlinebanks. In general, it is also expensive to be successful concurrently in the brick-andmortar and online banking realm.There is a high threat of substitute services for Ally Bank. Brick-and-mortar banks are acommon substitute for online banking companies like Ally. These brick-and-mortar banksare able to offer similar banking services in addition to building strong, personalrelationships with customers. Customers may value this face-to-face relationship over theease-of-use of Ally’s banking operations. Brick-and-mortar banks also offer more peaceof-mind for customers worried about online security breaches. Another commonsubstitute is non-financial competitors such as investors, NBFCs, and small co-op banks.Such institutions offer alternative borrowing and savings avenues rather than thetraditional bank account. Customers may also choose to purchase big ticket items likeelectronics, cars, or jewelry instead of putting money in a bank.Because Ally Bank’s major supplier is the United States government, there is a highdegree of bargaining power of suppliers. Specifically these suppliers include the FDIC,Federal Reserve, and the Office of the Comptroller of Currency. These agencies have thepower to distribute and take away national bank charters as well as impose mandatorybusiness regulations. There is no replacement supplier for this so Ally is forced tomaintain a healthy relationship with them. Along with the government, Ally relies on ITfirms that supply its banking software and hardware. These technology suppliers arecritical to the company’s success. Any defect or breach of security in Ally’s bankingsoftware would result in a massive loss of customer trust and ultimately business.Lastly, bargaining power of buyers is relatively high for Ally Bank. Customers of thecompany incur little to no costs when switching from Ally to another online bank. Thismeans Ally must meet customer demands completely in order to keep their business.Furthermore, customers are able to open multiple accounts with multiple online banks.This increases their knowledge and awareness of industry trends so that they can holdAlly accountable to any service discrepancies. Buyers who deposit large sums of moneyinto an Ally Bank account are especially powerful. These high-profile customers havesignificant bargaining power of the terms and conditions of their deposits because Allydoes not want to lose their business to a competitor.C) Competitor Environment-large economies of scale has encouraged industry consolidation (market share of largestU.S. banks rose from 41% in 1992 to 75% in 2014)-big banks are more dominant (smaller banks/credit unions are only successful wherelocal knowledge is beneficial)-in each industry segment the 50 largest firms generate nearly 75% of revenues4. Analysis of internal environment/organization (resources, capabilities, corecompetencies) ElizabethThe internal environment of an organization includes resources, capabilities, and corecompetencies. When combined or employed effectively, these factors of the internalenvironment can put firms in strong competitive positions. In the case of Ally Bank, thefirm possesses various value-adding tangible and intangible resources that make the bankcompetitive in its industry. An intangible resource that Ally has is the Bank’s reputationof excellent customer service. As stated on its website, the Bank promises to “Be an allyto our customers.” Although Ally takes an entirely online approach to banking, theystrive to create meaningful relationships with their customers, as well as provide theircustomers with personalized products and services. The above-average customer serviceis enhanced by a 24/7 call center, which offers customers the opportunity to speak with areal person at any hour of the day. Ally Bank’s reputation of putting their customers atthe heart of everything they do is evident to consumers, as well. In two quarters during2015, Ally received the Forrester Award of Best in Class for Overall CustomerExperience. This is an outstanding recognition, as it is based on the opinions of 45,320respondents in the US.Ally realizes that customer satisfaction alone is not enough to generate and sustainbusiness; great customer experiences must be matched with great products. Therefore, inaddition to their reputational resource of high customer service at a low cost, Ally Bankhas strong technological and web design capabilities. These technological capabilitiesallow the organization to create and maintain an intuitive and easy-to-use website foronline banking. As a direct bank, one of Ally’s top priorities is to ensure that theirwebsite is the most convenient for customers to use and best serves customers’ needs. Todo this, Ally researches and examines numerous sources that reflect the preferences ofcustomers. The Bank is then able to tailor its online services exactly to consumeropinions. Ally’s technological capabilities strive to offer an online experience that theircompetitors do not. Customers of Ally Bank can use a computer or mobile device toinstantly check account balances, deposit and withdraw money, pay bills, or receiveaccount alerts 24 hours a day.Ally Bank is also able to obtain a competitive advantage through capabilities that lead toa core competency in cost savings for customers. The core competency in cost savingsclearly distinguishes Ally from its competitors. Ally returns savings to customers bygranting no minimum account balance, unlimited check writing, no monthly maintenancefees, and no fees associated with any ATM. The Bank is able to pay higher interest rateson interest bearing accounts, as well. The Bank is in the position to offer these costsavings because of the absence of expenses traditionally connected with brick-and-mortarlocations. Therefore, these cost savings are relatively rare and would be expensive fortraditional banks to imitate. Ally largely utilizes its core competency in cost savings, andconsumers recognize and appreciate that Ally can give them the most bang for their buck.5. Analysis of business level strategy and structure: SophieAlly Bank’s business level strategy has allowed them to exploit their core competenciesand gain a competitive advantage within the market. Ally Bank employs an integratedcost leadership differentiated strategy. Ally provides low cost products through the lowinterest rates they offer, but their products are tailored to the customers’ needs. Ally isable to offer such low costs because they are entirely online, cutting the costs of operatingand running brick-and-mortar stores. The customers play an integral role in Ally’soperations. They serve as suppliers of money but also as buyers of different products.Ally offers checking and savings accounts, as well as IRAs, so customers are able tochoose different banking options for what best suits their individual needs. Ally’s use ofan integrated cost leadership differentiated strategy allows them to offer a variety of lowcost options that allow their customers to custom fit Ally to their banking needs.The biggest threat in using an integrated cost leadership differentiated strategy is that acompany becomes stuck in the middle, not offering substantial value in either cost ordifferentiated value. Ally has partially fallen victim to this. Their low cost products arestill a strength, however many other banks operate online and offer the same products.Additionally, many large banks, like Bank of America and Wells Fargo, now offercomprehensive online banking options, in addition to in-person services. Theseplatforms could threaten Ally’s position as a convenient online banking service. WhileAlly still has an advantage in its low cost options, its competition is threatening itsdifferentiated position.6. Analysis of corporate level strategy and structure CaseyThe two key issues corporate level strategies deal with are which businesses do theycompete in, and how should headquarters manage the business? Ally Bank competes inthe banking industry. Although it originally stemmed from GMAC, the main provider orauto financing to General Motors, Ally Bank expanded to insurance, direct banking,mortgage, and commercial finance. GMAC headquarters eventually changed its name toAlly Bank to distance itself from the automobile company, due to the approachingbankruptcy of General Motors.After the re-branding phase to Ally Bank, the bank developed a new philosophy. “Ourcustomers are at the heart of everything we do, including the three principles ourcompany is built on: We talk straight. We do right by our customers. We strive to beobviously better.” The bank had to build a mission to accomplish the new goals set forthby corporate.Ally Bank offers three main financial products: checking, savings and CD’s, and IRA’s.The bank relies on a small number of products to generate revenues and profits. Inrelation to checking accounts, Ally Bank includes unlimited check writing, no monthlymaintenance fees, no ATM fees, and free balance alerts in order to provide cost savings totheir customers. Satisfaction, loyalty, and customer trust are transparent when the bankprovides these services. The bank offers competitive rates for its CD’s, no penalty CD’s,and “raise your rate” CD’s. The bank also offers competitive rates for savings, and offersoptions to individuals who cannot let their savings account accrue until the maturity date.Regarding IRA’s, the bank provides its customers with the ability to raise their rates forcertain CD’s, daily interest compounding, and the option to choose the highest rate withinten days of the CD renewal date.With over 6,000 commercial banks in the United States, Ally Bank certainly feels thepressure to outperform its competition. Ally’s corporate leaders are concerned with itsmajor rivals and how to compete with them. ING Direct, USAA, and Charles Schwabbank are just a few of its many competitors. The strategic leaders of Ally Bank wonderwhat strategies ING Direct might take to maintain its positive image with customer, whilealso wondering how to compete with a Fortune 500 name such as USAA.When determining Ally Bank’s placement in the Boston Consulting Group Matrix(BCG), one must compare market share to business growth. Ally Bank has a muchsmaller market share than its competition considering its $16 million loan from thefederal government that has yet to be paid back. Its competitors have all paid back theirbailout loans. In contrast, Ally Bank is in a rapidly expanding industry. Online banking isexperiencing explosive popularity and growth. In 2011, 62% of customers preferredonline banking rather than banking at a branch office. This small market share andrapidly expanding industry would classify Ally Bank as a Question Mark in the BostonConsulting Matrix. Investors hopefully will invest more money hoping to gain greatermarket share to eventually become a Star.Ally Bank operates under a related constrained diversification strategy. 65.7% of AllyFinancial Inc.’s revenues come from the dominant business, their global automotiveservices. Their three product lines include checking, savings, and IRA’s which are allproducts sharing technological and distribution linkages. All three are offered through theInternet, and each product is committed to provide its customers with the highest level ofcustomer service with the lowest cost possible. Value is created with moderate to highlevels of diversification. One of Ally Bank’s core competencies is their design offinancial products to add value to customer investments. Ally shares its cost savings focuswith its customers, describing the bank’s economies of scope. The executives and keymanagers at Ally Bank have over 183 years of banking experience and expertise, addingconsiderable value to the corporate structure.7. Analysis of international level strategy and structure: Carina and Fiona (as a domesticcompany, may have to talk to me and do something else, like bullet point #9)8. If applicable (it is), acquisitions, restructuring, cooperative AndyDating back to the late 1990’s, Ally bought The Bank of New York’s lending unit; whichcreated the Corporate Finance Division.Some restructuring in the modern day, post-bailout period, includes the filing of Chapter11 bankruptcy on some of its assets, including the mortgage assets, which was primarilybelieved to pull the company back. In addition to the liquidation of their assets, Ally hasbeen active in some of its international ventures – recently, in 2013, agreeing to theacquisition of their Canadian line “Ally Canada,” to the Royal Bank of Canada. Afteraccounting for closing adjustments, and excessive capital, the total paid was near $3.7billion. Earlier in this year, a completed transaction with GMAC UK, agreed to acquireAlly’s 40% equity interest. Also during this year, a successful completion of the of thejoint venture in China:“The close of the joint venture in China completes our acquisition of Ally’s internationaloperations that began in November 2012. This is an important step in our evolution asGM’s global captive finance company and in supporting its growth strategy. China is asignificant market for GM and we want to ensure the availability of competitivefinancing for its customers and dealers,” said President and CEO Dan Berce.9. Recommendations (Business level, corporate level, international) Togetherfor international corporate strategy:Progressing internationally can be a struggle for many banking entities. Many companieshave chosen to work together in providing coverage abroad as opposed to expandingdirectly overseas. Some such as Deutsche Bank limit their US offerings in order to limittheir international exposure and risk. Banks face large obstacles with overseas expansionsuch as legal issues, brand recognition, and banking culture. For Ally Bank to improve itsstandanding abroad it has 2 major options.First, Ally Bank can engage in a cross-border alliance with companies in other countriessuch as; Canada, Australia, and China. Historically, Ally Bank has participated in asuccessful joint venture in China. Further ventures like this will increase bank namerecognition and give Ally Bank greater regional knowledge. Ally Bank should also workwith banks in culturally related banks. This means that the banking culture in thesecountries is friendly to online banking and is related to already developed corecompetencies. Canada and Australia tend to be closely related in banking culture thusmaking them friendly to US banks such as Ally Bank. Ally Bank should participate incross-border alliances with online banks in these countries to gain more internationalexperience. Cross-border alliances are also another way for banks to improve coverageinternationally thus making them more friendly to customers. This way they have a bankally in these regions they can rely on.Ally Bank should ultimately aim for a multidomestic strategy by entering a foreigncountry through the development of an international subsidiary. The subsidiary wouldoffer a limited menu of options and would be tailored to the country. It would also remainto a certain extent legally separate from its parent company, Ally, allowing to to expandand adapt to the local environment. The location of this subsidiary would come down tothe mix of legal issues, banking culture and corporate knowledge. Some countries arehostile towards online banking and rely on cash (example: Germany), and others havedirect competition from government supported banks (example: China). However acountry like Canada is more friendly to online banking and thus better for long termgrowth. A subsidiary that is more for long term growth and value creation would be wellsituated in Canada. First it has a similar percentage of internet users and demographicmake up. Also there are many similarities when it comes to the law codes. Strugglescould be there importance of developing a french website for Quebec, and higher taxburdens. However, Ally Bank would find it in there best interest to follow the trend inmoving to Canada as it is a simple proving ground to American corporations looking toexpand internationally. By engaging in a multidomestic strategy through the

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