Vanguard Swot Analysis

This case looked at the operations of the Vanguard Group, the mutual fund industries growth leader. Unlike some of its competitors, Vanguard has been able to attract and retain clients without an extensive marketing campaign. Recently there has been discussion about implementing a more direct sales marketing campaign. However, given their extremely low expense ratios and their ability to consistently outperform the industry, there are some concerns over the financial issues that would accompany a large marketing effort. Instead, International expansion combined with focused U.S. market advertising, may be a more profitable path to take.

Strengths

• Mutual fund industry growth leader

• Growing at 30% per year

• Lowest average expense ratio

• 74% of funds earned above average returns (2001)

• Added 800k shareholders accounts (2001)

• Spent $.20 of every $10,000 invested to drum up new business

• Very low employee turnover

• Effectively utilize dashboards to interrogate and integrate real time metrics into staff meetings

• Ability to retain customers and obtain additional investments

Weaknesses

• $50 billion in assets leave Vanguard every year

• Net cash flow decreased from 46 to 40 billion from 2001 to 2002

• Redemption rates rose 2% (2000)

• Marketing research measures were qualitative and not quantitative

• Most brokerage firms do not recommend Vanguard funds to their clients to do lack of sales commissions

Opportunities

• Appeal to clients by emphasizing “speed, low expense ratio”

• Pick up 1/3 of any increase