Evaluation of RBS Groups Strategy - Essay Example

?Business Strategy Report Executive Summary The development of business strategies along with their effective implementation can be considered as a crucial decision for the 21st century marketers in order to build long-term sustainability in the rapidly growing business market. The organisations, in the present business world, especially in the banking and financial services industry, have long been recognised to face major challenges due to their ineffective strategic approaches along with their improper implementation processes. This research report tends to demonstrate an in-depth analysis regarding the strategic approaches of RBS Group through critically assessing its range of banking and financial tactics. Moreover, the discussion of this report also incorporates strategy development process by recommending most effective business plans for RBS Group. In order to successfully apply the proposed business strategies, the study have also recommended effective implementation plan that would empower the competitive position of RBS Group and maintain its long-term sustainability in the fiercely growing global banking and financial services industry. Table of Contents 1. Introduction and Paper Objectives 4 2. Strategic Analysis 4 2.1 Industry Analysis 4 2.2 Profile of the Company 5 2.3 Stated Organisational Purpose 6 2.4 External and Internal Analysis 6 3. Strategy Development 7 3.1 Evaluation of RBS Group’s Strategy using Strategy Toolbox 7 3.1.1 External or Environment-Based Strategy 8 3.1.2 Resource based Strategy 9 Strategic Business Units (SBUs) of RBS Group 10 3.2 Propose Strategies for the Next 5 Years at Corporate, Business Stream & Operational Levels: 10 3.2.1 Use of Strategic ‘Toolbox’ Widely 11 3.2.2 Identification of Strategic Options at the Business Stream/SBU Level 12 3.2.3 Using of Portfolio Methodologies for Evaluate and Rank SBU Level Strategies 15 3.2.4 Important Operational Level Strategies Critical to Successful Implementation 16 4. Strategy Implementation 17 4.1 Outline of the Plans for Implementing Strategies 18 4.2 Structuring Major Activities that are Needed in Strategy Impelmentation 19 5. Conclusion 21 References 23 1. Introduction and Paper Objectives Strategic decisions have long been identified to provide an extensive support to contemporary organisations in attaining goals and predetermined business objectives (Teece, 2010). Emphasising this concept, a strategic analysis of RBS with respect to its continuous accomplishment of goals and objectives encompassing different business units and branches across the globe, will be undertaken in this report. Moreover, the discussion would assist in developing adequate insights regarding the strategy development process of RBS and the competencies of the applied process to ensure that the organisation is able to cope with the growing competition in the banking and financial industry. The report would finally summarise with the discussion through appropriate theoretical evaluations and explanations in line with the strategic direction and strategic development process implemented by RBS. 2. Strategic Analysis 2.1 Industry Analysis In the past few years the banking and financial business industry had to experience radical oscillations due to the increasing challenges and hurdles. The industry had faced traumatic challenges due to the demise of few major investments and financial services providers from different regions across the globe (Deloitte Center for Financial Services, 2013). Moreover, the changing trends in the financial markets and continuous investments associated with the strategic decisions have also been witnessed to significantly influence the organisational operations in the respective business industry (Pennington & Thornton, 2010). However, the long-term structural process of the emerging markets can be considered to provide adequate support to the banking and financial business industry to effectively deal with the devastating investment and financial markets (Deloitte Development LLC, 2006). Moreover, the banking organisations have been highly focused on reconnecting with the retail global clients by means of integrating advanced technological features and personal services. In this context, it has also been observed that technology intervention in terms of building strategic alliance with clients, partners and other groups of stakeholders play a crucial role for the institutions to successfully achieve their business goals (Greenwood & Scharfstein, 2012). 2.2 Profile of the Company In this research report, the study would focus on critically identifying and analysing the business strategies applied by the Royal Bank of Scotland (RBS), a renowned global banking and financial services provider, which was established in the year 1727 (Hoover 2013). In relation to the continuous success in the respective business industry, the subsidiaries including National Westminster Bank, Ulster and Charter One, play a major role in supporting RBS group to provide its extensive number of banking and financial services with efficiency. According to the present day context, RBS group tends to provide a wide range of financial products and/or services to its more than 30 million of valuable customers across Europe, the US, the UK, the Middle-East and Asian countries (The Royal Bank of Scotland Group Plc., 2012). The diversified banking and financial services provided by RBS group has enabled the company to offer a wide range of services in accordance with the changing market trends along with needs and desires of the global clients (The Royal Bank of Scotland Group Plc., 2012). 2.3 Stated Organisational Purpose With reference to the business overview of RBS Group, the primary aims of the organisation is to recognise itself as one of the prominent banking and financial institutions as compared to the other competitors across the world. Moreover, the organisation also primarily focuses on rebuilding value of each group of stakeholders with adequate compliance to the policies and regulations (Royal Bank of Scotland, 2013). The business objectives of RBS Group thereby incorporate the aims of providing durable banking and financial services to the global client base and maintain its competitive position in the long-run. Moreover, keeping adequate focus on targeting a feasible growth in return on equity and continuous implementation of effective business models in order to promote efficiency on business have also been observed as the major purposes of RBS group (Springham & Thomson, n.d.). 2.4 External and Internal Analysis The deployment of online banking and promotional activities in RBS Group has further facilitated the organisation to meet the needs and desires of its customers more efficiently. Additionally, the organisation also tends to incorporate adequate measures to facilitate continuous development of customer services including retention, promotion and among other activities (The Royal Bank of Scotland Group Plc., 2012). The business process of the organisation encompasses a wide range of policies and regulations in line with the political and governmental regulations of the countries. The cutting-edge technology intervention in banking services, including online facilities to the customers in financial transaction is also an essential strategic operation to enhance the quality of services and increasing value for the customers as well (The Royal Bank of Scotland Group Plc., 2012). In RBS, HRM departments tend to promote a collaborative organisational culture through developing policies associated with recruitment, training and development, performance appraisal along with employee wages and incentive activities. Additionally, the risk management initiative of the Group can also be considered as a competitive attribute, which incorporates risk appetite functions in order to help the organisation from different potential risks. The risk appetite approach of the organisation significantly provides effective support in reducing numerous errors along with the use of balance sheet and ensures that each operational division of the organisation are involved in the model (The Royal Bank of Scotland Group Plc., 2012). 3. Strategy Development With regard to the strategy developmental initiatives, the organisations in the resent business world can be observed to develop a range of strategic options in order to meet their goals and objectives efficiently. In this process, companies need to emphasis on the developed strategic options and select the appropriate one among the alternatives (Philippon & Reshef, 2013). 3.1 Evaluation of RBS Group’s Strategy using Strategy Toolbox With reference to the strategies observed in RBS Group, it has been identified that the strategic plans of the organisation involves highly competitive and customer-centred attributes that can lead to long-term sustainability in the fiercely growing banking and financial services industry. In relation to the existing business strategy of the company, it is often observed that RBS Group tends to incorporate four major types of strategic plans which have evaluated through external or environment based model and resource based model (Royal Bank of Scotland, 2013). 3.1.1 External or Environment-Based Strategy Generic Strategies (Porter’s Three Forces Model) Porter’s three forces model can be stated as an effective tool to develop external or environmental based strategies for any organisation to remain competitive enough. The generic strategies consist of three major attributes including cost leadership, differentiation and focus or niche market strategies. In relation to the business strategy of RBS Group, the risk appetite approach of reducing the use of balance sheet can be considered as an effective cost leadership approach. The strategy helps RBS Group to reduce the costs associated with its range of financial products/services offered by the company’s retail and commercial banking services in the global markets. In the context of differentiation, the strategies of stable and robust capital investments along with cost allocation technique can be considered as an exceptional set of strategies practiced by the RBS Group as compared to the other global competitors. With respect to the focus or niche market strategy, the enduring customer franchises and cost control process of RBS Group are the fundamental factors that significantly enables the company to strengthen its competitive position in the respect business market (The Royal Bank of Scotland Group Plc., 2012). Market Options (Ansoff Matrix Framework) The market option of RBS Group can be identified through the evaluation of Ansoff Matrix approach. With regard to the market penetration attribute of the framework, the implementation of core financial products/services in the European and US markets can be considered as a commonly applied market penetration strategy of RBS Group. The market penetration attributes of the organisation involves customer retention activities and offering low-priced banking and financial services of the organisation (The Royal Bank of Scotland Group plc, 2011). In the context of market development, the continuous focus on targeting customers from different geographical locations and building new customer segments for the wide range of banking and financial services of RBS Group can be taken into consideration. In the similar context, the development of new financial products and services for the customers from different demographic backgrounds can also be regarded as an effective product development related strategic attribute of the organisation (The Royal Bank of Scotland Group Plc., 2012). 3.1.2 Resource based Strategy Value Chain Analysis With respect to the attributes associated with value chain analysis framework, the aspect primary activities of RBS Group can be considered to analyse its range of banking and financial products and/or services. Moreover, continuous expansion of business units along with developing different products/services for diversified groups of clients can also be regarded as a set of primary activities performed by the organisation. On the other hand, the human resource department, risk management groups and governing bodies of RBS Group can be considered as the major supportive attributes to the organisation’s primary functions. Furthermore, the strategic alliance with local and international financial organisations along with adequate compliance with the global business policies can also be regarded as few of the major supportive activities that altogether ensure RBS Group to efficiently perform its business operations. Strategic Business Units (SBUs) of RBS Group The Strategic Business Units (SBUs) define those business-level strategic plans of a particular organisation, which ensure to maintain distinct business approach than the other competitors operating within the market (Xerox Corporation, 2012). In relation to the RBS Group, the organisation possesses an effective set of SBUs that enables it to achieve a competitive position in the global banking and financial service markets. In accordance with the strategic functions of RBS Group, it has been identified that the company incorporates a wide range of functional attributes that can enable the company to achieve its financial objectives efficiently. Few of the major SBUs of the organisation include quality assurance, staffing and forecasting, training and development, reporting and publications along with networking support across the different business units located in various global destinations. The attributes significantly help the organisation to obtain greater access to the customers’ needs, increase its direct accountability, immediate response and enhance performance of the organisation in accordance with the market competition and changing customers’ trends (Groysberg & Sherman, 2008) 3.2 Propose Strategies for the Next 5 Years at Corporate, Business Stream & Operational Levels: In relation to the aforesaid strategic tools practiced by RBS Group, it has been identified that the company uses a wide range of effective strategies that can be evaluated in developing various theoretical assumptions. Few of the major strategic tools that are discussed in accordance with the strategic plan of RBS have been widely addressed below projecting the company’s performances over the next five years. 3.2.1 Use of Strategic ‘Toolbox’ Widely Porter’s Three Forces Model Cost Leadership Strategy The strategy considerably entails the benefit of maximising profit through the gradual minimisation of the organisational costs that are executed in different processes including procurement, manufacturing, sales and marketing among other activities. In relation to RBS Group, it has been identified that cost control and management strategy enables the company to achieve the desired goals of augmenting its return on equity (Minarik, 2007). In this context, the company delivers the investment portfolios to its cost programmes, which facilitates the effective designing of income ratio and enables to maintain operational and financial efficiencies thereon (The Royal Bank of Scotland Group plc, 2011). Therefore, the continuous practice of cost management control process is quite likely to provide with a major support to the organisation for the next five years to minimise costs associated with the banking and financial products and achieve competitive advantages. Differentiation Strategy Differentiation strategy involves the process of making competitive products/services, which are seemingly different and more effective than the products available in the existing market. This can be stated as a broad target of the marketers and requires innovation along with significant level of differences in terms of brand image, quality of product/service, technological advancements or types of product offerings (McGraw-Hill Education, n.d.). With respect to the business strategy of RBS Group, the differentiation in customer services along with developing effective banking and financial products in line with the demographic conditions can be regarded as a major initiative taken by the company. Moreover, strong brand image along with prominent positioning in the global financial and banking industry have also enabled the Group to provide exceptional and most profitable financial products/services to its customer segment, which has led the company to achieve a significant advantage in the respective industry. Therefore, the company can be considered to possess adequate opportunity in deal with the rising competition within next five years. Focus Strategy The focus strategy plays an important role while the companies tend to concentrate mainly on the niche market. Moreover, the strategy also supports the organisations to understand the major dynamics of the market along with needs and expectations of the potential customers. In relation to the RBS Group, appropriate concentration on focus strategy would enable the organisation to target the niche banking and financial markets and develop effective range of products/services in accordance with the changing trends of the clients. 3.2.2 Identification of Strategic Options at the Business Stream/SBU Level Ansoff Matrix The Ansoff matrix significantly offers the basis for setting objectives of an organization and accordingly, sets the base of the directional policies for the future actions of the organization. The model involves major aspects of product penetration, product development as well as product diversification in the perspective of the present and new market scenarios (The National Agency for Innovation and Research in Luxembourg, 2008). The model comprises four major strategies including market penetration, product development, market development and diversification. Market Penetration Strategy The strategy can be considered as an effective measure that enables the product/service to be recognised and marketed by the customers within a specific business market. In order to successfully implement the strategy, it is highly essential for an organisation to be renowned in its brand name in any particular business market. In relation to RBS Group, the organisation can successfully implement a market penetration strategy aided with its strong brand image along with long-term dominant positioning in the global banking and financial industry. Moreover, the strong governance system along with well-build financial records of the company can also enable RBS to successfully practice efficient penetration strategies in different American, European and Asian markets for the next five years. Market Development The strategic attribute of market development tends to define the market extension process through which, the organisation can deliver its existing products and/or services. In this process, the products and/or services of the organisation are not modified and only focus on targeting new markets for the existing products/services. When concerning the case of RBS Group, the market development strategy might not be effective for the organisation to increase its efficiency in providing banking and financial services. It is fundamentally because it can also reduce the value and brand position of RBS while marketing similar products into various global markets. Therefore, the market development strategy of RBS Group should be focused on developing new markets with appropriate and more authentic financial services for the next five years. Product Development Introducing or making significant development of the products/services can always be considered as an effective strategy for the marketers to increase sales along with revenue. With regard to the business strategy of RBS, it is often identified that the organisation gained its significant value through continuous development of its range of banking and financial products/services. In this concern, the company should maintain the similar pace of product development for the next five years in order to maintain its competitive positioning and sustainability. Diversification Strategy According to the previous performances, the diversification strategy of RBS Group has always been observed to be focusing on appropriate horizontal diversification strategy, which has been enabling the organisation to develop new product/service along with satisfying the needs and expectations of the existing clients. The strategy provides adequate support to the organisation to obtain more than 30 millions of global clients across the different geographical locations. In this regard, the organisation should also need to maintain similar diversification approach to retain the existing customers and build long-term sustainability in the global banking and financial markets. Moreover, the application of concentric diversification would also enable the organisation to motivate existing clients and keep them linked with the existing product/service for the next five years. Conceptually, the concentric strategy generally incorporates the process of offering new product with a combination of complementary attributes including technology and other features, which can also facilitate RBS to successfully achieve competitive advantages. 3.2.3 Using of Portfolio Methodologies for Evaluate and Rank SBU Level Strategies BCG Matrix Boston Consulting Group (BCG) Matrix is often regarded as an effective corporate portfolio analysis methodology, which enables its applicant organisations to critically analyse its efficiency at the business unit levels (Gupta & et. al, 2011). The following BCG Matrix framework is evaluated in accordance with the aforementioned SBUs of RBS Group. According to the critical analysis of the SBUs, it has been identified that the business strategy of RBS Group involves a range of key measures that enables the company to successfully achieve its desired business goals. The aforesaid pictorial representation depicts few of the major SBUs of RBS Group. In this context, the strategies in terms of business diversification, product development and cost control strategies of the organization are the key SBUs that incorporate high market share in accordance with the substantial growth of the market. In the similar context, it has also been identified that the market penetration, differentiation and cost leadership strategy of RBS Group possess high market share with a low market growth as per the BCG matrix. However, the market development and risk management strategy of the company signifies low market share with high market value, which can bring challenges in the global banking and financial operations of the company. In the similar context, the frequent change management strategy and disclosure related strategies can be stated as few of the major challenging factors to sustain the long-term sustainability needs of RBS. This can be stated due to the increasing risk from the instable global economy, which can cause severe impacts on the organization. Moreover, the fiercely rising competition in the banking and financial markets can also be considered as major constraint for RBS Group to maintain its continuous growth. Therefore, the strategy of making frequent changes in the management and financial and environmental disclosure can be considered as few of the major constraints for RBS Group to successfully attain its long-term goals. Therefore, the company should emphasise the implementation of certain operational level strategies in order to successfully address the potential challenges. 3.2.4 Important Operational Level Strategies Critical to Successful Implementation Innovative and more Competitive Product/Service The continuous formulation of new banking and financial products/services in line with the changing economic trend can enable RBS Group to proactively address the potential difficulties raised by the market development strategies of the organization. As the market development strategy highly focuses towards targeting new markets for offering the existing products/service of the organization, it can also have a negative impact on the organisational values and competitive positioning. Responsible Governance Structure In relation to the constraints associated with adequate disclosure of financial performance, the strategy of building responsible governance structure can also improve the annual disclosure of the organisation. In this regard, the building of strong and more responsible governance structure would enable RBS to restore confidence and reliance with major group of stakeholders and enhance the value of the organisation to a substantial extent. 4. Strategy Implementation In order to build an effective structure of the proposed strategies, the implementation strategy would be focused on an apparent and more specific selective approach. Therefore, the programming phase of the implementation process would incorporate the weaknesses of RBS Group that has led the company to face difficulties and suggest effective planning to deal with those challenges. The required timeline for the proposed implementation plan would focus on critically implementing strategic activities for the first three years. The following timeline of the proposed implementation plan will depict the activities to be practiced in order to improve the existing strategic direction of RBS. 4.1 Outline of the Plans for Implementing Strategies 4.2 Structuring Major Activities that are Needed in Strategy Impelmentation 5. Conclusion The global banking and financial industry has been identified to encounter numerous challenges and complications due to the growing instabilities in the economy along with rising threats from the external influencing factors. Despite numerous challenges and threats, the banking and financial industry have also gained numbers of opportunities by way of developing competitive strategies in order to come over the issues in the changing global economy. In this regard, the business strategies of RBS Group can be regarded as one of the major examples, which evidently portray the effective ways to deal with the market challenges even in the growing vulnerabilities within the global banking and financial business industry. However, RBS Group has also been identified to face challenges regarding development of effective business strategies to strengthen its existence in the respective industry. In this context, the study has critically demonstrated the strategic analysis with respect to empower the competitive positioning of RBS Group. References Deloitte Development LLC, 2006. Global Banking Industry Outlook. Financial Services, [Online] Available at: http://www.deloitte.com/assets/Dcom-Albania/Local%20Assets/Documents/al_fsi_banking_260606.pdf [Accessed November 25, 2013]. Deloitte Center for Financial Services, 2013. 2013 Financial Services Industry Outlook. Bankling and Security Outlooks. 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