SWOT Analysis

Fidelity Investments Inc.

Fidelity Investments, Inc. is a privately owned organization that provides both individuals and institutions with services and financial resources through investment professionals from various financial institutions. A SWOT analysis examining the company’s key structures and business model gives a comprehensive overview of the company’s strengths and weaknesses alongside the organization’s opportunities and threats.

Strengths

One of the major strengths of Fidelity Investments Inc. is having a presence in the retirement market, which largely increases their competitive advantage (Fidelity Investment Inc., 2017). Ideally, consumer behavior research indicates that consumer retirement preferences have constantly been rising for a long time now. The trend reflects a continued desire for security and flexibility. As the number one provider of retirement plans and services in the United States, Fidelity Investments Inc is strategically placed in the competitive market.

The other major strength for Fidelity Investments Inc. is having a diversified business portfolio, which reduces the business risk. According to a report by Fidelity Investment Inc. (2017), the company has made huge investments in management, retirement planning, brokerage, and benefits outsourcing among other financial services and products. By diversifying their products and services range, the company shields itself from business risk in case one area faces financial instability.

Weaknesses

One of the major weaknesses that expose Fidelity Investments Inc. is having a relatively high equity exposure, which may trigger asset loss and underperformance. The organization is an equity-centric firm that has invested heavily in the U.S. equity mutual fund. Unfortunately, because of the instability of the financial market returns, the company is overly exposed to equity and money market funds, which have been struggling for redemption.

Another weakness that is affecting Fidelity Investments Inc. is the high tax rate imposed on corporate going as high as 35 percent (“The 25 U.S. Corporations that pay the highest taxes,” n.d). Combined with state and local taxes, the tax rate hits an average of about 40 percent depending on which state the company operates. With its headquarters in Boston, Massachusetts and its wings flung across the United States; the company is likely to be affected by the high tax rates just like some of the giant companies in the U.S.

Opportunities

Fidelity Investments Inc has a history of launching new products and services focused on retaining and expanding their customer base. For instance, in May 2011, the company launched the Pyramis Global Advisors, followed by the global equity income funds in 2012 January (Fidelity Investment Inc., 2017). Other products and services that the company has launched over the years include the Fidelity VIP Target Volatility Portfolio in May 2013, the NetBenefits for iPad and iPad Mini tablets in March 2014, and Fidelity Go in January 2016 among others. The launch of new products and services strategically helps the company to improve consumer satisfaction and loyalty and customer retention.

The company is also known for having a positive outlook on asset management and custody banks. The area has been experiencing a steady growth as the global asset management is forecasted to grow with at least 5.4 percent by 2020 (Fidelity Investment Inc., 2017). By having a positive outlook for asset management and custody sector, the company has an upper advantage for profit expansion opportunities.

Threats

Over the years, the company has experienced consolidation in the fund’s management sector. While the mergers are necessary to expand the size and the specific company’s market share, it could also be a threat to Fidelity Investments Inc. In particular, the ongoing consolidation is likely to create bigger rivals with diversified businesses who might take a larger market share from the company.

Along with that, there has been an increase in intense competition in the U.S. markets. For instance, in 2015, over 873 financial firms from all over the globe were trying to penetrate the U.S. market to provide investment management services(Fidelity Investment Inc., 2017). Virtually, as the competition intensifies and becomes dynamic, margins are expected to remain under pressure for investment funds companies.

References

“The 25 U.S. Corporations that pay the highest taxes.” (n.d). Forbes. Retrieved from: https://www.forbes.com/pictures/mef45kghl/which-corporations-pay-the-highest-taxes/#20d4fcdf1c9f

Fidelity Investment Inc. (2017). Company Profile: Fidelity Investment Inc. Marketline.