PEST Analysis of JP Morgan Chase

This paper provides a PEST analysis of JP Morgan Chase, focusing on the external political, economic/financial, social, and technological factors that affect the company. It discusses government regulations and interest rates as political factors, inflation rate and investments as economic/financial factors, customer satisfaction as a social factor, and advances in smartphone capabilities as a technological factor. The paper also prioritizes these factors and evaluates JP Morgan Chase's readiness to handle them.

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Abstract
This paper will be a PEST analysis of JP Morgan Chase, in which I am an outside
contractor looking into JP Morgan Chase. This paper will specifically identify the
external political, economic/financial, social, and technological factors that affect JP
Morgan Chase.
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6-2 Final Project Milestone Three: PEST Analysis
Introduction
In this paper we will attempt to create a PEST analysis for JP Morgan Chase. The
paper is
broken up into three sections, in the first section we will list and describe each of the
factors that have been found during the analysis. In the second section we will
prioritize those factors, with the highest priority at the beginning of the section and the
least important at the end of the section. In the third and final section we will discuss
how ready JP Morgan Chase is to handle each of the factors that were identified
during the first section.
Overview
The PEST analysis is actually short for PESTEL analysis but for this paper we
will focus on the PEST partition of the analysis. A PEST analysis is a tool that
companies use to assess macro-environmental factors. These factors are all external
and they include; political, economical/financial, social, and technological. After the

analysis is complete companies then use that information to determine how ready they
are to handle each and every factor that has been found (Vileta, 2017).
External Factors: PEST Analysis
For the first part of this PEST analysis, I will discuss the political factors that I
believe have the most impact on JP Morgan Chase. These factors are government
regulation and interest rates.
Government regulations are the largest political factor that affects not only JP Morgan
Chase, but all companies in the banking industry. At any given point in time Missing
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introductory clause in this sentence. Consider adding a comma. An introductory word
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long phrases must always be followed by a comma, while single words and short
phrases may or may not. Introductory phrases and clauses usually begin with a
subordinate conjunction (such as after, because, though, or when). a government can
decide to pass a new regulation Missing comma in compound sentence: It appears that
you are missing a comma before the coordinating conjunction and in a compound
sentence. Consider adding a comma. A compound sentence includes two independent
clauses joined by a coordinating conjunction (for, and, nor, but, or, yet, so). In a
compound sentence, the conjunction is in most cases preceded by a comma. If both
independent clauses are short, we can omit the comma. and JP Morgan Chase will be
forced to follow it. Following these regulations can be difficult for a company like JP

Morgan Chase due to the fact that they are a global company and have to follow
different sets of regulations for each country that they operate in. In recent years, the
US and many other countries have started to implement stricter regulations due to the
world financial crisis that the banking industry created in the late 2000s. Some of these
regulations that have been put in place include; raising the minimum capital required to
be on hand at each of the commercial banks, and doing a more thorough job of credit
checking before issuing a mortgage or loan. I chose to place government regulations in
the political sector of the PEST analysis since they are created and enforced by the
federal government (Hatch, 2016).
The second political factor that we will be discussing is interest rates. Now many
people would think that interest rates should be an economic or financial factor,
however they would be wrong since the interest rates that banks, like JP Morgan
Chase, offer to their clients is based off of what the Federal Reserve Interest Rate is at
that time. The Federal Reserve Interest Rate is the rate that the Federal Reserve
makes banks charge other banks to borrow capital from each other. One may ask why
one bank has to borrow capital from another bank, but that has to deal with
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regulations, specifically how much capital a bank has to maintain on hand at all times.
This
Federal Funds Interest Rate then affects the interest rates that banks charge to their
clients based on the risk of that client. For instance if a bank is going to lend to a
corporation who is a very safe investment like Apple, then they will offer them an
interest rate close to the Federal Funds Interest Rate. However if that same bank was
going to lend to a given individual who has a bad credit score then they will charge

them an interest rate much larger than the Federal Funds Interest Rate (Federal
Funds, 2013). Good job on the research
For the second part of the PEST analysis, I will be examining the economic and
financial factors that affect JP Morgan Chase. These factors include; the inflation rate,
and investments. The first factor we will discuss is the inflation rate. This is a major
economical factor that affects JP Morgan Chase and every other bank in the banking
industry. The reason that the inflation rate is such a major factor for banks is that it
affects all of their day-to-day operations. For instance if the inflation rate begins to rise
in the United States, then the currency in the United States will be devalued, causing a
banks normal customer to withdraw more money than normal to buy necessities, like
food and water, once each of their customers take out more and more money than the
bank will have to begin borrowing from other banks to supplement the capital that was
taken out of their bank. Another way that inflation can affect a bank is by devaluing
their assets in other countries, for instance if a bank has $200 million worth of assets in
Chinese currency, and then the United States currency appreciates, or the inflation rate
decreases, then that same $200 million in Chinese currency is now worth less in US
dollars, so the bank now has to carry a loss (Boyd, 2006).
The second factor that we will be discussing is the investment market. The
investment market is an external finance factor for JP Morgan Chase and many other
banks due to the fact
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that they have departments that invest heavily in the investment market. Changes in
the investment market can drastically affect how a company is able to do business.

In JP Morgan Chase’s case, they are invested in a few areas of the investment
market, these include; derivatives, mutual funds, and initial public offerings (IPO).
The derivatives portion of the investment market mostly deals with buying and
selling futures and forwards of commodities
and natural resources. This part of the market can have an effect on JP Morgan Chase
because if they choose the wrong side of buying or selling then they could cost their
company money. The mutual fund portion of the investment market is a factor for JP
Morgan Chase because it is something that they offer their cliental clientele to help
grow their money in a safe way. However if they aren’t able to get returns similar to the
market itself Missing comma after introductory clause: It appears that you are missing
a comma after the introductory clause in this sentence. Consider adding a comma. An
introductory word (Unfortunately), phrase (Before the party), or clause (If you can join
us) sets the stage for the sentence. Introductory clauses and long phrases must always
be followed by a comma, while single words and short phrases may or may not.
Introductory phrases and clauses usually begin with a subordinate conjunction (such as
after, because, though, or when). then their clients could move on to a different bank for
their investing needs. Lastly Missing comma after introductory clause: It appears that
you are missing a comma after the introductory clause in this sentence. Consider
adding a comma. An introductory word (Unfortunately), phrase (Before the party), or
clause (If you can join us) sets the stage for the sentence. Introductory clauses and
long phrases must always be followed by a comma, while single words and short
phrases may or may not. Introductory phrases and clauses usually begin with a
subordinate conjunction (such as after, because, though, or when). the investment
banking portion of the investment market is a factor for JP Morgan Chase because if

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they are able to maximize a company’s IPO then that company will choose another
investment bank to run their IPO so that they get the most money (Broughton, 2017).
For the third part of the PEST analysis, we will discuss a social external factor
that affects JP Morgan Chase. This factor is that customers want to feel like they are
heard and understood. This factor basically means that when customers choose to do
their banking with any given bank, such as JP Morgan Chase, they want to make sure
that any ideas they have in regards to making their banking endeavors easier and more
missing a hyphen pain free get implemented. They also want to make sure that even if
they don’t necessarily have a specific idea to make their banking endeavors easier, the
bank will continue to strive to find ways to do just that. One way that banks like JP
Morgan Chase can ensure that its customers are happy and have no issues with
banking is by training their employees on all aspects of what the bank does, like the
loan department or the asset/wealth management department, along with the normal
commercial banking department (Andriotis, 2016).
For the fourth and last part of the PEST analysis, we will discuss a technological
external factor that affects JP Morgan Chase and that is the advances in smartphone
capabilities. This can be considered an external factor for JP Morgan Chase because
they may not be the company that creates a new advancement in what a smartphone
can do for banking purposes. In the world today, technology is always advancing and
coming up with better and safer ways to do one’s banking needs, which makes JP
Morgan Chase have to always consider technology as an external factor (Kamisha,
2016). You have provided a good background upon which to build the assignment.

External Factors: Prioritized List
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Now that we have completed the PEST analysis, we can focus how I feel JP
Morgan
Chase should prioritize these factors. It is in my opinion that JP Morgan Chase should
prioritize the technology factor first. Once they have that completed, they can move
onto the social factor of making sure their customers are heard and understood. The
third priority would be to focus on the inflation rate. Finally at the lowest priority would
be government regulations.
The reason that I would make the technology factor JP Morgan Chase’s highest
priority is because as they are doing that they will be simultaneously working on the
social factor. With the advances in technology and the resources that JP Morgan Chase
is putting into their technology department to create a new teller-less banking atm, and
smartphone apps that can do any banking needs that you may need, they will not only
help out the technology factor but it will make banking much easier for their customers
and allow their customers to feel heard (Kamisha, 2016).
After JP Morgan Chase has worked through the technology factor, they can then
focus more on the social factor of making sure their customers feel heard and
understood. One way that they can do this is by using their app, banking tellers, or
customer service representatives, to allow the company to have a direct line to
customer feedback. However this line is not all that needs to happen, they also need to
set up a team or a department whose whole focus is to answer any and all questions

that their customers may ask, while also moving any suggestions up to senior
management that they feel should be implemented (Andriotis, 2016).
The third item on JP Morgan Chase’s priority list should be to worry about the inflation
rate. I feel that the inflation rate should be third in priority due to the fact as to how
much it changes. The problem with inflation is that there is no way to solve it, it is just
something that will always be around and you have to deal with it. One way JP
Morgan Chase can try and deal
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with it is by making sure that they don’t have a lot of capital or assets in foreign
markets that have high changes in inflation, like Argentina, Brazil, China, or Mexico,
however instead they
should try and keep most of their assets and capital in countries that have a very sound
economic and financial standing, like the United Kingdom or the European Union
(Boyd, 2006). The last factor in priority for JP Morgan Chase is government regulations.
I feel that this should be last in priority because it is something that you can’t plan for at
all. Regulations can be implemented at any given point and time, and they may or not
be known about before they get passed. This causes companies to just have to deal
with whatever regulations come out as they happen (Hatch, 2016). Well-done! Good
analysis contained in this section. External Factors: Readiness
As it stands right now, I feel that JP Morgan Chase is definitely ready to compete
in the banking market domain and environment. JP Morgan Chase has a great
corporate structure, and has departments that play major roles in every part of the
banking market domain, that allow them to withstand any internal factors that may be

presented to them. Their corporate structure and multiple departments allow them to
withstand any external factors that may be presented to them, such as political,
economic, social, or technological.
When it comes to political external factors it is clear to see that JP Morgan Chase
is ready to handle anything that is dealt to them, like when the 2008 financial crisis hit
and United States forced all of the large banks into dealing with tons of new
regulations. Some of these regulations included forcing some banks to merge with other
banks to lessen the financial blow to make sure
they didn’t go bankrupt. However JP Morgan Chase was not one of those companies,
and they were one of the few that were able to make it through that period relatively
unscathed (Hatch, 2016).
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When it comes to economic and financial external factors, it is also clear to
see that JP Morgan Chase is ready to handle those since they have been in
business since the late 1800s.
This means that for over a hundred years they have been able to withstand all sorts of
financial and economic external factors, like the Great Depression, and other financial
crisis (Company History, 2017).
When it comes to social external factors, I also feel that it is quite clear to see that JP
Morgan Chase is able to handle them, again because they have been in business for
over a hundred years and have now risen to one of the top banks in the entire world. I
feel that if they were not able to handle these social factors, then they would have lost
all of their customers a long time ago and gone out of business, instead of continuing

to rise in the ranks of the top banks in the world in each and every aspect of the
banking industry (Annual Report, 2017).
Lastly Missing comma after introductory clause: It appears that you are missing a
comma after the introductory clause in this sentence. Consider adding a comma. An
introductory word (Unfortunately), phrase (Before the party), or clause (If you can join
us) sets the stage for the sentence. Introductory clauses and long phrases must always
be followed by a comma, while single words and short phrases may or may not.
Introductory phrases and clauses usually begin with a subordinate conjunction (such as
after, because, though, or when). when it comes to technological external factors, I feel
that JP Morgan Chase is able to handle This should be one word any one that is put in
front of them due to the fact that they consider themselves to not only be a banking
company but also a technology company. This means that they strive to create new and
better technologies day in day out to make sure their customers receive the best
service. They are able to do this by funding their technology department with over $9
billion annually for research and development (Kamisha, 2016).
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Conclusion
After completing the PEST analysis for JP Morgan Chase, I feel that they have set
themselves up perfectly as a company to handle any factor that is thrown their way,
whether that be an internal/external factor as seen in the previous SWOT analysis or
any external factor that was seen in this PEST analysis.
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References

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in 2016. Retrieved April 27, 2017, from
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financial-industry-is-watching-in-2016/
Federal Funds and Interest on Reserves. (2013, March). Retrieved May 21, 2017, from
https://w ww.newyorkfed.org/aboutthefed/fedpoint/fed15.html
Boyd, J., & Champ, B. (2006, March 15). Inflation, Banking, and Economic
Growth[PDF]. Cleveland: Federal Reserve Bank of Cleveland.
Broughton, K. (2017). Even JPMorgan couldn’t bigfoot the middle market. American
Banker, 1(40). Retrieved May 21, 2017, from
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gr120&
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39016 86&db=edsgao
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customers-want-from-their-banks-ease-1464980843
Kamisha. (2016, November 18). East vs. West: Can JPMorgan Chase protect its lunch

from the FinTech startups of the world? Retrieved April 27, 2017, from
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ission/east-vs-west-can-jpmorgan-chase-protect-its-lunch-from-the-fintech-startu
ps-of the-world/
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Company History (n.d.) Retrieved May 21, 2017, from
https://www.jpmorgan.com/global/compa ny-history
JP Morgan Chase & Co. (2017). JP Morgan Chase & Co. Annual Report.. Retrieved
April 30, 2017, from
https://www.jpmorganchase.com/corporate/investor-relations/document/
2016-annualreport.pdf