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Why Edward Jones Should Retain Its Current Business Strategy

Essay by   •  April 25, 2013  •  Research Paper  •  2,077 Words (9 Pages)  •  1,419 Views

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Why Edward Jones Should Retain its Current Business Strategy

By Paul Pagliaro - 912777592

You do not have to be in business to know that today's financial atmosphere is inhospitable, and not just on a domestic level. If you are a brokerage firm like Edward Jones, and you have managed to survive the initial crash, this is a good indication you did something right, even if it was just convincing the government that you needed a bailout. Still, no one is safe, and companies that have been deemed too big to fail might just turn out to be too crooked to survive, that is, if they do not make significant changes to their business models and ethical practices (Taibbi). Edward Jones on the other hand has weathered the crisis-turned-recession quite well. Their conservative culture and sensible business practices have put them a step ahead of their competitors for the foreseeable future, so any major changes would be very difficult and foolish.

Of course they should be attempting to grow organically in a financial sense, but the point is Edward Jones can and should do this without any major strategic changes. After all, what is there to change when you are doing everything right? By reading about Edward Jones history, their strategies, culture, hiring practices as well as examining competition and the overall market I was able to analyze their firm and conclude that Edward Jones needs to make little changes outside of striving to maintain organic financial growth.

Edward Jones was established as a partnership in 1922, and remains one today. Every carefully chosen, well-trained employee is eligible to become partner (Collis & Smith, 4). This makes Edward Jones strong for several reasons. First, the company is in charge of its own future and gets to make its own decisions, that is, they do not have to answer to Wall Street or a Board of Directors. Secondly, when the power of the company is in the hands of its employees, therein lays an incentive to value the customer. This in part is responsible for the culture of volunteerism that exists at Edward Jones (EdwardJones.com). Former CEO Ted Jones, son of founder Edward T. Jones, actually refused to let his sisters in on any company ownership because they did not work for the firm (EdwardJones.com). That happened in 1974, and since then, any employee was eligible to take part in the ownership of the firm. By 1986, they had opened 1000 branches; they hit the 8,000 mark in 2001 and the 10,000 mark in 2008. They have consistently made it into the top 10 of Fortune magazine's list of the best companies to work for since the start of the new millennium and also consistently earned J.D. Power and Associates highest accolades for customer satisfaction (Edward Jones Expands in Recession).

Their success and accreditations from publications like Fortune arise from a well- constructed business model. Edward Jones has nailed a niche market. They have aimed to serve only individual consumers, and have referred to these customers as retirees, pre-retirees, and small-business owners (Collis & Smith, 5). In other words, Edward Jones caters to household investing and helping individuals rather than taking part in corporate functions or investment banking. To put it a third way, Edward Jones mission is to serve the risk averse and money conscious; those who will not be ok if their money is lost (Edward Jones HR Material). They achieve this by building personal relationships with customers face-to-face, in local branches that employ a single financial adviser to aid with financial advice.

They aim to take a long-term conservative approach. "As of December 31, 2005, Edward Jones's mix of client holdings was 51% mutual funds, 17% stocks, 9% annuities, and 8% other" (Collis & Smith, 6). Aggressive trading for short term gain is discouraged and riskier market tools such as penny stocks, commodities, options and hedge funds are not managed under Edward Jones (Collis & Smith, 6). In 2009, Edward Jones put out an article for use by their financial advisers outlining investment tips for the recession that should be passed along to customers, and its content adequately conveys their approach. It outlines specifics such a "don't cut back on your 401(k)", "diversify, diversify, diversify", "think long term", "don't reach for high yields" and "look for opportunities" (How to Invest during a Recession). And all their strategies are working (Fischer).

All these strategies have worked since before Edward Jones was established in 1922. They should stick with what works, because for these reasons it does not make overwhelming sense to change, and if they did try to change, it would be suicide. Many companies try and force changes whether it is the wrong time, or for the wrong reasons. Of course when businesses are struggling, everyone wants to know why? and what they can change to improve their situation, but not infrequently the whole macroeconomic environment is on a downturn, and what can be done about that realistically speaking?

Gillette, for example, experienced declining profits and market share after the turn of the 21st century much to their consternation. In response, they fired their CEO, laid off employees, closed factories, slashed advertising budgets, re-organized, and otherwise turned the company upside down in an attempt to recapture former glory. The catch is that not just the whole personal hygiene industry, but the entire macroeconomic environment was facing similar problems. Gillette's almost century of glory is fantastic, especially through the volatile years between 1960-1980, and so was their steady growth through the next two decades, but it parallels the growth of the whole economy. The Dow Jones climbed at a steady 60 mathematic degrees on a graph until topping out around the turn of the century at 12,100 points. Their woes after that mirror the Dow Jones as well.

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