Vanguard Case Analysis

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STATEMENT OF PROBLEM

Current financial deregulations have posed an unprecedented threat to the core business model of Vanguard. The commercial banks and insurance companies are now able to provide services that were solely the realm of investment banking. Companies such as Citigroup are striving for horizontal integration to provide full spectrum of services to the customers. The saturation of the mutual fund industry has inhibited Vanguard’s capacity to grow its retail business. Vanguard’s current approach with limited product offerings and a low-cost structure has prevented it from undertaking expensive marketing campaigns. Unless Vanguard augments its portfolio of products and engages proactively to attract new business, it is set to loose in the highly competitive market conditions.

RECOMMENDATIONS

To compete effectively and to grow in the changed market conditions we recommend the following

* Target exclusively under $1 million market with the aim to obtain 25% share of this segment in five years.

* Attract higher portion of funds from existing customers.

* Adopt proactive marketing strategies to make investors aware of our value proposition and develop broader brand recognition.

These strategies will ensure our focused attention to a less competitive highly lucrative market segment. This will enable us to leverage our strengths and deliver our value proposition to our customers.

Value Proposition: To provide investment and financial advising services with high return at low risk. Unlike other mutual fund companies, our mutual funds are highly safe and have lower cost because of our unique philosophy and customer focus.

CONTEXT ANALYSIS

In 2002 Vanguard’s 118 mutual funds accounted for 10% of U.S. mutual fund market and attracted $38 billion net inflows of funds. The redemptions from Vanguard funds were about 10% which was half of the industry average. But the landscape of financial industry is...