Issues in Global Business: Barclays Bank - Case Study Example

ISSUES IN GLOBAL BUSINESS (BARCLAYS BANK) Definition of strategy Strategy can be defined as the scope and direction of a company over the long-term, which will enable the company gain an advantage by aligning its resources in a challenging environment to meet the needs of market and fulfill stakeholder expectation (John & Scholes 2002). Overview of Barclays bank Barclays PLC is a British financial service company firm operating around the globe. A company’s strategy consist of the competitive moves and business approaches that managers employ to attract and please customers, compete successfully, capitalize on opportunities to grow the business, respond to changing market conditions, conduct operations, and achieve the targeted financial and market performance. Barclays is global financial provider, which offers services personal banking, credit cards, investment and corporate banking. Its presence can be found in Asia, Africa, America and Europe, the fact that it is a global business it requires strategic plan that exemplifies global business. The heart and soul of any strategy is the actions and moves in the marketplace that managers are taking to gain competitive advantage over the rivals (Mintzberg, 1994). The current strategic plan at Barclays bank was set out in the year 2012, which is to make Barclays the ‘Go-To’ bank for all its stakeholders. Any company that aspires to be global must consider some specific strategic issues that are unique to compete across national borders: Business model A company’s business model sets forth how its strategy and functional approaches will form value for clients while at the same time producing sufficient revenues to cover costs and get a profit. Barclays bank’s business model is aimed to satisfy its customers and clients by offering a rounded value preposition (Barclays bank strategic report, 2014). There are two elements of a company’ business model (1) customer value proposition and (2) profit proposition. Barclays bank’s customer proposition is designed to satisfy the customer by offering them a range of products and services, which will in turn fulfill the bank’s profit proposition that will be realized as a result of income stream from the products. Strategies for competing globally There are numerous as to why a company can decide to compete globally, but there are four strategic issue that unique to competing across national and continental borders: a) Whether to customize the company’s offering in each different country market to match local buyer’s tastes and preferences or to offer a standardized product worldwide. On this issue Barclays bank opts the latter, it ensures that its banking services are different and they meet the tastes and preferences of respective clients in each country. b) Whether to employ the essentially the same basic competitive strategy in all countries or modify the strategy country by country. Barclays has opted to employ a unique competitive strategy in each country but in line with the group’s mission and vision. c) Whether to locate the company’s production facilities, distribution centres, and customers service operations to realize the greatest location-related advantages d) How to efficiently transfer the company’s resource strengths and capabilities from one country to another in an effort to secure competitive advantage. It is due to the process of exploring these issues that concepts such as multicountry competition, global competition, and profit sanctuaries are introduced. Multicountry competition occurs when competition in one state market is not closely associated to competition in another state market. There is no global or world market, just a collection of self-contained country markets. Global competition exists when competitive conditions across national markets are linked strongly enough to form a true international market and when leading competitor compete head in many different countries (Johnson & Scholes 2005). Strategy options for establishing a competitive presence in foreign markets. There are five ways in which a company can establish a competitive presence in a foreign market: 1. Retain a national (one-state) creation base and export goods to overseas market. 2. License foreign firms to use the company’s technology or to produce and distribute the company’s product. 3. Employ a franchising strategy in foreign markets. 4. Rely upon acquisitions or internal start-up ventures to gain entry into foreign markets. 5. Rely on strategic alliance or joint venture with foreign companies as the primary vehicle for entering foreign markets. The strategy employed at Barclays to enter any foreign country is via an internal start-up since it was easy to build a new business subsidiary from scratch as it has a number of companies in almost all the continents of the globe. It has also the necessary resources and competencies to rapidly equip a new subsidiary it the personnel and capabilities it needs to compete successfully and profitably. Localisation Barclays bank has adopted a localised strategy to thrive in the international market. There are many differences in buyer tastes, cultural traditions, and market conditions in different countries, which prompt a company like Barclays to adopt “think local, act local” approach to make sure that the company’s products are customized to meet consumers taste and preference of that country. A localisation strategy ensures that the local managers have been delegated considerable strategy making latitude, since they have the first information regarding local market and competitive conditions. In regard to adopting a localized strategy, Barclays bank gives the local managers the mandate to match marketing, advertisement, sales promotion campaign, and distribution channel to fit local customs and cultures. This is because the local managers can determine how best to respond to the fresh strategic initiatives and market manoeuvres of local rivals, and decide which newly-emerging local market opportunities to pursue. Expanding in to international market helps leveraging products and competencies, therefore it is very crucial for a firm to increase its market by considering an international market. The core competencies of Barclays bank is the banking industry is its capability of lending, which has ensured that it has a competitive advantage over other financial institution in the international market. Cross-country Differences in operating costs and profitability Difference in wage rate, worker productivity, energy costs, environmental regulation, tax rates, inflation rates, tariffs and other related factors from country to country are frequently so vast that a company’s profitability and operating costs are significantly impacted by where its distribution, production, and customer service events are situated. Due to the fact that Barclays bank has subsidiaries in countries that operating costs is relatively low such as Asia and Africa, has enhanced the company to have a production-cost advantage over the rival banks that have not invested in this regions. Low cost countries become principal service site, which means that most of the output is attained in other regions of the globe. Culture and ethics in global business strategy Barclay’s bank company in their quest to craft and execute their strategy of becoming the ‘To-Go’ bank, which is aimed at offering value for both the customers and shareholders, they have a duty to do so in an ethical manner; to be a committed corporate citizen, and allocate some of its financial and human resource to improve the well-being of employees, the communities in which it operates, and society as a whole, and; avoid strategies and operating practices that adversely affect the environment. The notion of ethical an unethical are present in all cultures and societies. Due to this fact there are three distinct schools of thought that explains the extent to which ethical standards travel across cultures, hence multi companies like Barclays bank should apply the same set of ethical standards in any and all locations where they operate. 1. The school of ethical universalism According to this school, the most important concepts of what is right and what is wrong are universal and transcend most cultures and societies, and religions. The major strength of this school of thought is the fact that it draws upon the collective views of multiple societies and culture to put some clear boundaries on what constitutes ethical business behaviour and what constitutes unethical business behaviour no matter what country or culture a company or its personnel are operating in. 2. The school of ethical relativism According to the school of ethical relativism, the universal moral prescriptions, like being trustworthy and truthful, that apply in most every society and business and business circumstance. Ethical relativism follows rule of “When in Rome, do as the Romans do” appear sensible, it leads to the assumption that what overcomes as local morality is an satisfactory and definitive guide to ethical behaviour. 3. Integrated social contracts theory According to integrated social contracts theory, universal ethical norms or principles based on the mutual views of multiple cultures and societies combine to form a “social contract” that all individuals, groups, organizations, and business in all situations have a duty to observe. Within the boundaries of this social contact, local culture or groups can specify what other actions may or may not be ethically permissible. However, universal ethical norms constantly take superiority over ethical norms. Competitive advantage There are five most an commonly and dependable strategic approaches that a company can set to delineate itself from its rivals, achieve competitive advantage, and convert customers to loyalty customers. They include: 1. Determined to be the industry’s low-cost provider, thus aiming for a cost-based competitive advantage over competitors. This can be demonstrated at Barclays bank that has the capability of offering low interest rates to loans it offer. 2. Offering more value for the money 3. Outcompeting competitors grounded on such differentiating features as higher quality, wider product selection, added performance, and added value performance. 4. Directing on a slight market niche and winning a competitive edge by doing a better job than competitors of serving the special wants and tastes of buyers that constitute that niche. 5. Developing expertise and resource strengths that give the company competitive capabilities that rivals of serving the special needs and taste of buyer that compose that niche. Barclays’ competitive advantage is formed by the measure and diversity of its businesses and the quality, quality, character and the relationship of its people. There are two main types of competitive advantage, differential advantage and comparative advantage (Chandler, 1962). Banking industry is highly competitive around the globe, which has prompted Barclays bank to adopt a comparative advantage type. Comparative advantage is achieved when a company is able to offer a service or good at a lower price than its competitors. In regard to offering a service at a lower cost than competitors, Barclays has been named the lender of the year by Health Investor three times. Porters Theory of Competitive Advantage Porter (1998) suggested there are four types of ‘generic’ strategies by which organizations can attain competitive advantage. They include differentiation, differentiation focus, cost leadership, and cost focus. These four strategies relate to the extent that a business activities’ scope re narrow verses broad and the manner in which the business seeks to differentiate its product. The following figure can summarize the four strategies. Porter focused on the role that firms played within countries in shaping the pattern of international specialization. Source: Porter, M. E. (1998), Competitive Advantage: Creating and Sustaining Superior Performance. The Free Press. Cost leadership and differentiation are positioned to gain a competitive advantage in a broad range of markets or industry segment. Cost focus and differentiation focus are supposed to gain a competitive advantage where the markets and industries are narrow. Since Barclays bank is a global business, the type of strategy that it has adopted according to porters theory of competitive advantage is cost leadership and differentiation. References Andrews, K. (1980). The Concept of Corporate Strategy (2nd Ed). Dow-Jones Irwin, USA. Cooper, R. (2008). Perspective: The Stage-Gate Idea To Launch Process – Update, What’s New, And Nexgen Systems, The Journal of Product Innovation Management, Vol. 25 No. 3, pp. 213-32. Hofer, C.W and Schendel, D. (1978). Strategy Formulation: Analytical Concepts. West Publishing Company Johnson, G., and Scholes, K. (2002). Exploring Corporate Strategy, (6th Ed). New Delhi: Dorling Kindersley Johnson G., and Scholes K (2005). Exploring Corporate Strategy, 7th Edition. FT Prentice Hall Mintzberg, H. (1994) The Rise and Fall of Strategic Planning, Basic Books Pearce, J. A. and Robinson, R. B. (1997). Strategic Management: Formulation, Implementation and Control. Irwin McGraw-Hill, 6th Edition. Porter, M. E. (1998). 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