Strategies of Banks and Other Financial Institutions Theories and Cases - Case Study Example

Abstract The contemporary society is characterised by business operations undertaken on a global perspective. That is, businesses can operate from one country to another with a high level of efficiency. This aspect of business operation has been facilitated by the existence of technological advancement and improved managerial techniques that enable businesses to undertake international activities. The financial sector is one of the business dimensions that have experienced significant positive impacts from global business operations, with many banks, insurance companies as well as credit controllers seeking markets overseas. This discussion will focus on Barclay Card, specifically explicating theoretical approaches and business frameworks of global business that it has applied to enhance its competitive advantage in the global business financial arena. Key Words: Global Business; Barclay Card, Theoretical Approaches of International Business, International Business Frameworks. Introduction Over the last two decades, the credit card industry has been experiencing tremendous growth in terms of client base as well as technological advancement (Baack, 2011). Majority of financial service providers and consumer retail shops in developed nations have employed the use of credit and debit cards as a means of ensuring transaction efficiency. In the United Kingdom alone, a recent research indicated that it is one of the nations with the biggest card payment in the entire region of Europe, with a total of 30% card users out of the 73% card users in the region. The research also indicated that as at December 2013, approximately 90 million debit cards were circulated in the United Kingdom market (Dayson, 2014). By February this year, approximately 58 million credit as well as charge cards were being circulated in the United Kingdom market (Dayson, 2014). These statistics basically indicate how the application of credit, debit, and charge cards among others; have increased over the last few years. On the other hand, some financial institutions have taken initiatives geared towards not only providing credit card, debit or charge card services locally, but also in international markets. An example of such services is provided by the Barclay Card: The Barclay Card is a financial credit card offered by the Barclays Bank of the United Kingdom as retail and business banking. As a multinational bank, it has been in operation for a period of approximately 30 decades since 1690. Apart from the provision of credit cards, the Barclays Banks is a universal bank focusing on provision of; mortgage lending, management of wealth, investment management, and wholesale as well as retail financial services. Barclays Bank launched its first credit card in 1965 and since then, it has been experiencing growth and development in terms of the number of credit card holders: Currently, the bank has 10.4 million credit card holders in the United Kingdom and 10.8 million credit card holders from international markets in over 60 countries. Within its first year of providing credit cards, the Barclay Card, the Bank attracted approximately one million credit card holders in the United Kingdom and has continuously attracted international credit card holders on a global dimension. Critical Success Factors of Barclay Card The success of the Barclay Card over the last four decades has been attributed to various factors as discussed herein: Franchise The first franchised operation that was undertaken by Barclay card occurred in 1965 with the introduction of the first Barclay Credit Card. The franchise, which was negotiated with the Bank of America, was arrived at after Barclays Bank evaluated the success of the Bank Americard, which was the first credit card offered by Bank of America (Batiz-Lazo & Hacialioglu, 2004). This franchise led to the launching of the Barclay Card, through a team of thirty thousand retailers, who signed up to market the Barclay card in the United Kingdom. By the end of 1996, the bank had registered approximately one million Barclay credit card holders (Batiz-Lazo & Hacialioglu, 2004). Currently, the Bank enjoys a franchise network with the Visa Network, a company that offers plastic credit cards to financials service providers. The success of the Visa International in the early 2000’s, is another factor that has been attributed to the success and increased popularity of Barclays in the early 2000. The company still provides Barclay visa cards, which has not only gained grounds in the local UK market but also in international markets. Greenfield Investment Barclays bank has not only explored new markets in the United Kingdom, but has also explored other international markets where credit card service is not provided or if provided, they do not meet the demands of the consumers (Klein, 2009). The first aspect of applying the concept of Greenfield investment by introduction of Barclay card occurred in the late 1966 with introduction of the Barclay card in the United Kingdom market, as a Greenfield (Batiz-Lazo & Hacialioglu, 2004). This made Barclays Bank the first bank to provide credit cards in a market where no other bank had undertaken such an initiative. With the advertisement of a Barclay card through 30, 000 retailers, the bank developed a foundation and gained national recognition, thus attracting over one million users within its first year of implementation. In addition, as one of the oldest banks in the global financial market, the company has expanded its services to over 60 countries, attracting over ten million Barclay credit card holders. Barclays bank is considered one of the multi-national banks to have explored new markets from developed to developing nations i.e. Barclay card is the first credit card service offered to developing nations in the East African region in countries such as: Kenya, Uganda, Ethiopia as we as Tanzania. This has seen it attracting a large number of credit card holders from a global perspective (Marshall, 2012). Competitive Strategy in its Value Chain One of the competitive strategies that have seen the success of Barclay card since 1995 is the development of a new brand and product. An appropriate example of how the Barclay articulated its branding policy occurred with the introduction of the Gold Card. In as much as other companies had introduced their Gold Cards from as early as 1980’s in the UK and in the US before Barclay Card, the company did not launch its first Gold Card until 1995, an action that increased its market share to approximately 30% of the sum of the new credit cards that were provided (Lübbe, 2010). This was a foundation for the success of the Barclay card, having attracted 90,000 new Gold card holders. The other competitive strategy that has been applied by Barclay card is the segmentation of clients as well as customisation of Gold Card features to fit into specific needs of its diverse clients (Lübbe, 2010) ; this has led to its continuous growth of Gold card holders over the last 2 decades. Additionally, Barclays has focused not only in provision of fair pricing, but also in provision of non-pricing features such as; rearrangement of insurance and accident cover in accordance to the segmentation of its clients, purchase protection as well as extended warranties of purchases, thus increasing its competitive advantage (Lübbe, 2010). On the other hand, the success of Barclay card over the last three decades has been attributed to its competitive strategy that counters the effects of new entrants in the credit card industry. The entrance of new companies providing credit card services in the UK market such as Westminster Bank, Bank of Scotland as well as Lloyds TSB, led to a change in Barclay Card pricing policy (Dancun & Dann, 2011). This led to the elimination of the annual charge fee that Barclay credit card holders were charged. Product diversification is another competitive strategy that has been applied to improve the competitive advantage of the Barclay credit card. In the early 1990’s Barclay card managerial team realized that similar technology that was used in its credit card could also be used to facilitate business to business transitions (Kumar, 2014). This led to the introduction of the Company purchase cards and Company charge cards, through the ‘Visa-marqued Company Barclay Card’, thus facilitating its efforts towards gaining leadership in the corporate organisation charge cards. Product diversification in relation to the Barclay card has been evident with the introduction of the Gold Credit Cards, that provide more features to its services i.e. allows customisation of clients’ features into the cards. The introduction of Barclay card Government Procurement Card is another aspect of production diversification that the company has applied to attract parastatals among its client base (Lübbe, 2010). Company Mergers and Acquisition As at December 2002, Barclay card had attracted a large base of clients through organic growth. However, by the beginning of the economic year 2003, the company began engaging in mergers/alliances with other companies for instance: It engaged in an alliance with the BT and Cellnet telecommunication companies as well as other retailers in the food industry like the Sainsbury’s and Mark & Spencer (Gabbie, 2011). These mergers were geared towards increasing the company’s client base through loyalty schemes. However, later in 2005, Barclay card abandoned the loyalty schemes developed through mergers and focused on developing its own client loyalty scheme known as nectar through a merger by Sainsbury’s. This was a strategy to ensure that Barclays card differentiates itself from its major rivals: In a period of one year, nectar was considered the biggest loyalty scheme in the entire United Kingdom with approximately 12 million subscribers (Gabbie, 2011). Barclay card has also achieved tremendous success through acquisitions; its first acquisition occurred in 2002, with the acquisition of the Provodian, a US-based company that offered credit card services to low income earners in the UK. This acquisition enhanced its efforts towards entering a new market segment, specifically, the market segment that was comprised of low income earners; thus, increasing its client base with over 500,000 new subscribers. This acquisition also provided Barclay card with the knowledge on how to manage low income earners, thus leading to its agreement with Littlewoods Limited Company, a retail company that served low income earners, to supply its clients with credit cards as well as other financial services (Ralina, 2010). In 2003, the Barclay card also acquired a point of sale of business from the Clydesdale Financial Service Company, thus increasing its market network. Conclusion From the discussion discussed above a variety of theoretical and international business frameworks appears to have facilitated the success of the Barclay card since its inception in 1965. These frameworks involves; mergers and acquisitions, franchise, product diversification as an aspect of competitive strategy and Greenfield investment. However, it is crucial to acknowledge the fact that the Barclay card has also faced various challenges that occur from time to time one these challenges, being a politically instigated challenges, occurred in 2003, when the United Kingdom’s government introduced the White Paper’; this white paper required banks and other financial service providers not to charge their clients while using credit cards, in lieu of this, Barclay card had made an advertisement indicating that its clients would not be charged anything when operating with their credit cards (Batiz-Lazo & Hacialioglu, 2004) . However, later economic critics claimed that Barclay card and other credit card service providers had certain hidden charges that consumer had to pay unknowingly, this led to a negative image among its clients that affecting its general operation during that financial year. Bibliography Baack, M. (2011). The credit card industry: A history. Choice Reviews Online, 28-2827. Top of Form Bottom of Form Batiz-Lazo, B., & Hacialioglu, N. (2004). Barclay Card: Still the King of Plastic? Manchester: London South Bank University. Top of Form Bottom of Form Brown, T. (2009). Modernisation or Failure? IT Development Projects in the UK Public Sector. Financial Accountability and Management, 363-381. Top of Form Bottom of Form Dancun, I., & Dann, Z. (2011). Product Development: Barcaly Bank Competitive Strategy. Burlington: Elsevier Science & Technology. Top of Form Bottom of Form Dayson, C. (2013). 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