The Financial Crisis in the United Kingdom - Essay Example

?EXECUTIVE SUMMARY The financial crisis in the United Kingdom has left deep roots to influence the financial service sector. Due to the negative influence of the crisis, it was recorded that the financial service sector had to face challenges to great extent in order to regain its position in the market. Even though the economic situation is under control in UK, the people blame financial institutions for the destruction of society. Regardless of the current situation, the financial service sector in UK has a promising future due to which most of the organizations are trying to establish their base at UK with an aim to accomplish their goals and objectives. For a Chinese financial service organization to establish its roots in UK’s financial service sector could be quite troublesome. However with appropriate strategies particularly marketing strategies along with accurate market entrance strategy, the organization could reach the height of success it has desired. Even though, the organization would have to face high competition in the financial service sector of UK, but still the prospects for growth are relatively high for financial organization if the organization focuses on cost reduction rather than differentiation. With the right proportion of marketing mix strategies (i.e. product, price, place and distribution) the organization can have the opportunity to win the heart of potential customers and customers in the market. INTRODUCTION Purpose Financial services are the roots to economic growth and development as such institutions help private citizens to protect their money from uncertainty and economic depressions, while enabling several businesses to start up, grow, expand and compete in local and international markets after increasing their overall efficiency. Financial services provided through banks and other financial institutions help in reducing the vulnerability and allow the people to manage their assets in positive ways i.e. generation of income. The purpose of this feasibility analysis is to take into consideration all the necessary dimensions of the business to evaluate new markets outside China. In order to setup business in a new market, it is essential to evaluate the environment in the host country along with the regulatory framework. This would significantly help in the identification of the critical factors that could help the business to setup accordingly in the new market. In addition, this feasibility study also provides the institution with several strategies to enter the new market along with the implications of marketing mix strategies. Similarly, the STP (i.e. Segmentation, Targeting and Positioning) would also be indentified and evaluated to provide the financial institution with opportunities to be successful in the new market. Finally, the strategies for sustaining the corporate reputation and the brand in new territory would also be defined and explained in the feasibility study. To further enhance the growth of the business in the new market and its territories, several recommendations have been provided to the financial institution. Scope The financial service sector is the largest sector in the world in terms of earnings and this sector plays an essential role in the economic development and growth for any country. The scope of this feasibility study would be to identify the marketing strategies in order to introduce the Financial Service organization in new market outside China. In addition, the feasibility study would also provide analysis of the external environment in the host country along with the regulatory framework. Similarly, the consumer economics and segmentation would also be indentified in the context. FEASIBILITY ANALYSIS For a financial organization to incorporate its operations in new market outside China it would be essential for the organization to understand the market and the regulatory framework associated with it. In order to successfully infiltrate the banking sector in UK, the business should take following elements under consideration.  ENVIRONMENT IN THE HOST COUNTRY AND THE REGULATORY FRAMEWORK PESTLE Analysis and Regulatory Framework In order to evaluate the macro-environment, it is essential to understand and identify the factors that could influence vital variables to great extent. Some of the vital variables that could be influenced include organization’s demand and supply level along with it costs (Kotter and Schlesinger; Johnson and Scholes, 1993). As identified by Tsiakkiros, the changes in the society due to the uncertain environment can influence the performance and functions of the whole organization. PESTLE analysis has been claimed by Kotler (1998) to be the most useful strategic tool as such tool help in understanding the macro environment of the country. The dimensions or factors that are evaluated in PESTLE analysis include political, economics, socio-cultural, technological, and legal and environment. With the use of such strategic tool, it has been assessed that the performance of an organization could be significantly influenced due to the powerful forces of change (Porter, 1985). In addition, such strategic tool can help an organization to decide regarding the entrance of new markets and new country as it helps to understand and adapt to the realities of the new environment. The PESTLE analysis of the banking sector in UK is as follows; Political factors The political factors of financial institution particularly bank includes the stability of the government and the political risks. Entrance of the bank in the new financial market of United Kingdom would be a great opportunity as the future outlook of UK is quite bright and therefore the scenario would provide the financial institution with several opportunities. Current political environment in UK has made it as the choice of investors around the world. The political disorder in the country is extremely rare due to which the businesses in UK are provided with sufficient opportunities to enhance their growth in the market. Moreover, due to friendly laws and regulations in UK, the country has witnessed overall increase in business. Therefore this would positively influence the firm entering the market. The core reason for the success of businesses in this region is its political stability and relatively low taxes. The overall tax burden is below the average in European Union and therefore making UK a good option. In addition, it has also been estimated that the corporate taxes would be reduced to 21 percent by 2014 and to 20 percent by 2015 (UK Trade and Investment, 2012a). In order to reduce avoidance of double taxation, UK has established treaties particularly to avoid such taxation. Even the labor environment in UK is quite high which makes it possible for the companies in all sectors to source high quality and educated staff. Economical factors As identified by Thompson (2002), economic conditions of the country can influence the success of the organization as it can affect both capital availability and cost, and demand. It has been projected that the real GDP of the country would be around 1 percent and would gradually increase to about 2 percent in 2014 (PWC, 2013). However analysts predict the economy to recover from the impact of recession after the year 2014. The UK’s financial services sector was around ?40 billion in 2010 and was equivalent to 3 percent of UK’s GDP (UK Trade and Investment, 2012b). In addition, it was also noticeable that the consumer price index (CPI) was around 4.5 percent in 2011. UK is one of the largest trading nations of the world. According to UK Trade and Investment (2012a) UK is the second largest exporter of commercial service and fourth largest importer of it. In addition, it was also indicated that UK is the tenth largest exporter and sixth largest importer of merchandise. Thus the overall economic situation of the country is feasible and it would become more feasible after 2014 as the growth rate of GDP would further improve. Socio-cultural factors Due to the economic crisis in 2007, many people in UK lost their trust in banks. People in UK have developed a mindset in which banks are considered the core reason for the mess of society. On the other hand, in the current economic situation, people are now moving towards bank in order to acquire loans for setting up their personal business. Technological factors Technology has played an important role in the development of banking sector in UK. With the passage of time, financial institutions are now moving towards e-banking due to its convenience. In addition, due to simplicity of ebanking, ease of access and availability of online transaction gives the people command over their finances. The statistics from ONS shows that people have now shifted towards the use of e-banking from 29 percent in 2003 to 49 percent in 2008. Additionally, it has also been discovered that e-banking was once considered a tool for competitive advantage but as the time passed, financial organizations have focused on using such technology to ease the transaction process for both the customers and staff. Some of the examples of such technology include ATM (Automated Teller Machine), internet banking, telephone banking, online banking, online fund transfer etc. Therefore advancement in technology has positively influenced the industry and it is expected to further positively impact. Legal factors UK is one the those countries that have established anti-discrimination laws along with Equal Employment opportunity laws so that the people could work in any organization without fear of discrimination at the work place. In order to protect the rights of the people, financial service organizations are enforced to follow strict laws and regulations as in earlier years few stakeholders lost huge sum of money due to fraud. Environmental factors Banks do not have any negative impact on the environment. But financial service organizations are playing quite important role in the protection of the environment and the society by making huge amount of charity and donations to improve the quality of life of the people. CHOICE OF ENTRY MARKET STRATEGY  Entrance Strategy in UK’s Financial Service Sector A financial service organization working in China is provided with several opportunities to enter the financial service sector in UK. Some of the entrance strategy that the business should take into consideration to establish in UK’s financial service sector is as follows; Joint venture This particular strategy to enter the UK’s financial service sector focuses on joining financial organization in the market. By doing so, both the parties and organization would provide equity and resources to the joint venture and would have share in the management, profit and losses. The foremost advantage of implementing this particular strategy would be the acquiring of competencies and skills that is rare in the market. Similarly, this entrance strategy would allow the FS organization to enter the market quickly and would be able to avoid tariff barriers. As the other party would be highly aware of the market situation and consumer trend, the joint venture would be able to satisfy the requirement of the local people. THE IMPLICATIONS OF THE FINANCIAL SERVICES MARKETING MIX STRATEGY AND PRODUCT PROVISION, PRICING AND DISTRIBUTION STRATEGY Marketing Mix Strategies Marketing mix has been described as a conceptual framework that helps marketing managers to make the right decisions at the right time to meet the needs of the customers. According to Palmer (2004), marketing mix is a tool that could be used by managers to develop long-term strategies along with short-term programmes that could help the organization to reach its desired goals and objectives. The concepts associated with the marketing mix (i.e. product, price, place and promotion) can help a firm to change and enhance its competitive position in the market by implementing the right marketing mix strategies at the right time (Gronroos, 1994). For the FS organization to be successful in the United Kingdom, it would take the following marketing mix strategies under consideration. Some of the marketing mix strategies are as follows; Product The FS organization should provide the potential customers in UK with plenty of reasons to select this particular bank over others in the market. In order to successfully gain the customers attention, the organization would provide the customers with house loans on their accounts. This provision of loans would not be limited to just houses but the customers would be provided with loans in order to setup their small businesses in the region. Similarly, the customers would be provided with a chance to become a member of the organization by opening special account. The account holder would be provided with additional facilities than others in the organization. In addition, the customers would be provided with an opportunity to open accounts for their children. The customers would be provided with relatively high interest rates as compared to others in the market. Similarly, the FS organization would provide the customers with insurance opportunity. The organization would work with the clients on critical issues in property, casualty and life insurance; this would include claims and underwriting on overall strategy. By providing the customers and clients with such opportunity, the organization would be provided with an opportunity to enhance its awareness level in the UK. This FS organization would not act as an organization to its customers and clients but would act as a guardian of interest. In addition, this financial service organization would provide its customers with information regarding the latest technology and would help the customers to implement the technology in order to reduce cost and increase efficiency. By focusing on such practice, the organization would be able to help the customers in overcoming the complex challenges that they face in the marketplace. Price In such a complex economic situation around the globe and changing consumer trends, the organization would focus on cost reduction pricing strategies. It has been observed that the due to the difficult economic situations around the globe, financial service organization are unable to enhance their profit. In order to remain ahead of competitors i.e. banks in the United Kingdom, the organization would highly focus on the cost reduction strategy. Such pricing strategy would help the organization to enhance its performance and productivity in the market and would allow the organization to create more value than expected. By such reduction in the operation cost, the organization would be able to achieve its long-term growth and would develop value proposition with customers in United Kingdom. Since price could act as a profit lever, the organization would utilize such opportunity to be use innovative approach to respond to current and future pricing issues. In addition, the organization would also measure its price performance and would continuously provide feedback so that the price approach used by the bank could be further refined and enhanced to enhance the performance and productivity of the organization. Regarding the pricing strategy, the special account holders would be provided with several opportunities within the organization. For example, the account holder would be provided with loans on lower interest rate than prevailing in the market. Moreover, the special account holder charges would be waived off. This would provide the organization with an opportunity to enhance its relationship with the customers. The bank would have to face certain loss due to such waiver but regardless of the loss, the organization would be able to create a long-term relationship with its customers which in turns would provide the bank with higher income and cash from such account holders. Place/Distribution Channel To infiltrate the financial service sector in the United Kingdom, the organization would use both the direct and indirect channels of distribution. The direct channels of distribution that would be used by the bank include direct mail, direct response advertisement, branch networks and direct sales force. In addition, the organization would also use indirect distribution channels for insurance and investment sector. This indicates that the bank would focus highly on the use of both distribution channels. In UK, it has been observed that the customers are more satisfied with direct mail and direct response advertisement even though technology has increased distribution channels for financial service organizations. Once the organization attracts the customers, the customers would be contacted by the salesperson or the call centre contact staff to remain in touch with the organization. The organization would also have an alternative available i.e. customers would be asked to return by post or fax. Direct mail i.e. form of direct distribution channel would be highly focused by the organization as this form of distribution could be accurately targeted towards particular segments. Promotion In order to be successful and competitive in the UK environment, it would be essential for the organization to enhance its promotional activities to encourage the customers to focus on the use of financial services being provided by the organization. To fine-tune the promotional strategies would be the primary goal of the organization as the marketing strategies implemented in China would be inconsistent to great extent. In order to draw great number of clients, the organization should focus on direct marketing as it would help the organization to enhance its awareness in the market and would simultaneously help in promoting the value of the organization. As the customer base of the organization would be the people looking for financial solutions, the organization would place ads in variety of trade publications and regional newspapers. Such means of advertisement would help the organization to establish its integrity in the market and in order to cultivate trust, the organization would demonstrate its credibility and capability so that more customers could entrust the organization with their money. In order to establish its network in the market, the organization would provide its potential customers and customers with an opportunity to meet the members of the firm one-on-one. Such networking strategy at work would provide the financial service organization with greater accessibility. Similarly, the organization would advice its members to attend local functions and events as it would significantly help the organization to grow its network and build trust with customers and potential customers. Digital marketing would also be used by the organization in order to enhance its awareness level. The company would highly focus on search engine marketing as it is one of the quickest ways to grasp the attention of the potential customers in United Kingdom. The well organization digital marketing strategy would help the organization to attract the potential customers so that they could use the financial services offered. CUSTOMER’S ECONOMICS AND SEGMENTATION CONSIDERATION With the passage of time, consumer behavior, consumer attitude and purchasing decision have gradually changed due to the competitiveness in the market. It has also been continuously reported that the sentiments of the consumers towards financial service organization and in particular banks have gradually changed. Due to such changes in the preferences of consumers, it was discovered that the banks are finding it quite difficult to operate in such environment as the performance and ability to compete effectively has gradually decreased. Some of the changes observed in customer’s economics are as follows (PWC, 2012); The new trend of online banks has changed the perception of the customers. The customers are now expecting higher value of financial products and services due to which the ability of the banks to be profitable is somewhat decreasing (PWC, 2012). The customer’s willingness to pay is constantly changing due to the changes in the market i.e. product, service and channels. Customers have lost their sense of loyalty to any particular financial organization as they search for best financial product. Moreover, it has also been discovered that the customers are constantly turning to payday lenders in order to satisfy their financial needs (PWC, 2012). As the customers have become accustomed of free banking services their expectations have grown as well. The customers are in search of financial organizations that could provide them with more of free banking services and are expecting to include more costly services to their free banking services list (PWC, 2012). The markets that the organization would segment in UK are the people that are looking for house loans along with loans to setup their business from scratch. In addition, the organization would also aim to facilitate other customers with variety of offering in terms of bank accounts. STRATEGY FOR BUILDING AND SUSTAINING CORPORATE REPUTATION AND BRAND IN THE NEW TERRITORY Building and Sustaining Corporate Reputation and Brand In order to survive today’s dynamic business environment, it has become essential for an organization to keep its reputation high in the market. The reputation of the organization helps to remain competitive even in challenging time. For building and sustaining the corporate reputation, the organization would rely on its core competencies. In addition, the organization would provide immense resources to protect its reputation in the United Kingdom and to do so; the organization would focus on excellent quality offerings. This would help the organization to meet the expectation of the stakeholders which will eventually help in the growth of brand equity in the market. For further protection of the corporate reputation, the organization would publish policies, guidelines and procedures for the employees so that it could be followed as expected. To sustain the corporate reputation, the employees would be provided with friendly and safe working environment and the policies would assure that the employees would not have to suffer from discrimination, harassment and safety issues. In order to create the value of the brand in the market, the employees would be encourages to take part in community events and programmes. Similarly, the organization would take corrective measures to protect the environment to great extent. One example of such would be the protection of rainforest from deforestation. CONCLUSION UK would be one of the most feasibly markets to enter for the financial service organization. As the consumers are constantly in search of greater financial services, the financial organization would be provided with several opportunities to meet the customer’s need accordingly. In order to infiltrate the UK’s financial service sector, the organization would be focusing on joint venture as it would help the organization to establish its root in the country. By implementing the right mix of marketing strategies, the financial organization would be able to enhance its productivity and performance in the market. Advertisement and promotional strategies would play an essential role in the success of the organization in the new market. To be successful, it has been indicated that the organization should focus on direct mails as this particular method could bring in potential customers at the bank doorstep. RECOMMENDATIONS Following are certain recommendations for the financial service organization to become a part of the UK’s financial service sector. Some of the major recommendations are as follows; a) The organization before infiltrating the UK’s financial service sector should find the right organization to support its entrance strategy. The firm should select such organization that could support each and every step of operation that the organization intends to take in the market. b) The financial organization should hire the best talent available in the market. In order to do so, the organization should eliminate all the barriers to effective recruitment and selection i.e. discriminating factors. To be provided with innovative and creative employees, the organization should encourage diversity and equal employment opportunity as it would help to create excellent corporate reputation of the bank. c) The organization should provide its customers with variety of opportunities so that the firm could encourage the customers to remain loyal to the organization rather than turning to payday lender to meet their financial needs. The bank should provide its customers with support i.e. free bank services. In addition, the bank should charge less from its premium account holders and should waive off certain charges to enhance the long-term relationship with its customers. d) The financial organization should enhance its services from time to time with the help of advancing technology. This would help the organization to remain a step ahead of the competition in the market. With such advancement in technology, the organization would be able to reduce its operation expenses which would help to the organization to focus much on its pricing strategy i.e. cost reduction. References Kotler, P. (1998). Marketing Management – Analysis, Planning, Implementation, and Control, 9th Edition, Englewood Cliffs: Prentice-Hall. Tsiakkiros, A. (2002). Strategic planning and education: The case of Cyprus. The International Journal of Educational Management Bradford. Kotter, J. and Schlesinger, L. (1991). Choosing strategies for change. Harvard Business Review, pp. 24-29. Porter, M. (1985). Competitive Advantage, New York: Free Press. Thompson, J. (2002). Strategic Management, 4th Edition, London: Thomson. Palmer, A. (2004). Introduction to Marketing - Theory and Practice, UK: Oxford University Press. Gronroos, C. (1994). From Marketing Mix to Relationship Marketing: Towards A Paradigm Shift in Marketing. Management Decision, vol. 32, no. 2, pp. 4-20. PWC. (2012). The price of success. Available from http://www.pwc.com/us/en/financial-services/publications/viewpoints/assets/pwc-fs-viewpoint-aligning-pricing-with-customer-value-proposition.pdf [Accessed 31 March 2013] PWC. (2013). UK Economic Outlook March 2013: Summary report. Available from http://www.pwc.co.uk/the-economy/publications/uk-economic-outlook/ukeo-summary-march13.jhtml [Accessed 31 March 2013] UK Trade and Investment. (2012a). The UK Business Environment. Available from http://www.ukti.gov.uk/investintheuk/whytheuk/ukbusinessenvironment.html [Accessed 31 March 2013] UK Trade and Investment. (2012b). Financial Services. Available from http://www.ukti.gov.uk/investintheuk/sectoropportunities/financialprofessionalservices.html [Accessed 31 March 2013] Read More