Analysis of the Business Environment of Barclays Bank Plc - Essay Example

?Management Report Executive Summary Barclays Bank has been operating in India since the year of 1990. It provides a broad range of services to its clients such as loans, payments & cash management services, deposits, trade finance as well as treasury solutions. Barclays Bank was the first bank to install Automated Teller Machines (ATM), which proved to be a vital development in the technology thereby enabling the financial institutions to serve their customers 24x7. The main focus of the bank is satisfying the needs of their customers which they believe to be of utmost importance for their survival in the future. Table of Contents Executive Summary 2 Table of Contents 3 1.0Overview 4 2.0 Analysis of the Organisation’s Business Environment 5 2.1 Porters Five Forces 5 2.2 Industry Life Cycle 7 2.3 Scale and Scope of Barclays Bank in India 8 2.4 The Key Reasons for Barclays’ Success 9 2.5 Evaluation of Sustainability 9 3. Analysis of the Organisation’s Strategy 10 3.1 Value Chain Analysis 10 3.2 Resources of Barclays Bank 12 3.3 Strategies Adopted by Barclays Bank 12 3.4 Competitive Stance of Barclays 13 4. Critical Appraisal of the Strategy 14 14 5. References 15 1.0 Overview Barclays Bank Plc (Barclays), which is an English bank, is one of the chief financial service providers globally. Barclays entered Indian Retail Banking sector through Global Retail Commercial Banking (GRCB) in the month of May, 2007. The doors of Barclays were opened to commercial customers in India in November 2006 and at present it has around 2000 clients. It provides a wide range of services to its clients such as loans, payments and cash management services, deposits, trade finance as well as treasury solutions. In the present scenario, Barclays Corporate has a set-up of around 50 distribution points. In March 2008, Barclays Finance was launched (Sakariya & Paliwal, 2010). Therefore, in this context, the report endeavours to analyse the business environment of organisation in which key success and sustainability factors of the Bank is explored. The strategy of the Barclays Bank has been analysed with the help of value chain analysis along with analysis of the competitive stance of the bank. In the concluding section, critical appraisal of the strategies has been presented. 2.0 Analysis of the Organisation’s Business Environment 2.1 Porters Five Forces Entry Barriers (High): In the emerging markets such as India, multifarious decisions such as interests on loans, deposits as well as money supply are regulated by Reserve Bank of India. Reserve Bank in India had decided to provide licenses to a few numbers of foreign or new banks in India (RBI, 2010). These entry barriers prevent the entry of any foreign bank in India. A lot of control has to be kept on loan lending, the number of branches which are to be operated in the market and deposit taking. Since the people are likely to invest in the public or governmental sector banks instead of private banks for the purpose of the safety deposits the brand identity for Barclays in not well-known. Also because of the restrictions imposed on the number of branches, rural area people would stay untouched. As far as product differentiation is concerned the strategy of Barclays Bank works for the corporate or urban customers. Barclays Bank’s services which are efficient and quick enable them to attract a lot of customers. Rivalry among Existing Competitors (High): The competitors include private as well as public banks along with microfinance institutions located in rural areas. Acquiring most important stakes in Absa provides Barclays easy access in an untouched market which also helps them in brand visibility (Barclays Bank PLC, 2010). Bargaining Power of Suppliers (Medium): The customers, parent company and other funding sources are the suppliers of the bank from whom the bank can increase funds. In the market, the customers have a high bargaining power. Barclaycard provides an attracting scheme to their customers which in turn help them to get large funds that are important for the survival of the bank. Bargaining Power of the Customers (Medium): The bargaining power of the customers is high due to the fact that there are various other banks which are working in the market offering similar products and services at a variable cost. Barclays’ customers comprise of the people using the products provided by it, the card users, other service users or the depositors. When it comes to the quality of services, Barclays bank’s position is high. Speedy service as well facilities such as e-banking, free credit cards are important for customer satisfaction. Threat of New Entry (Low): Barclays has been trying to do this by purposefully recognising fresh potential markets and demonstrating their expansion strategies. It is due to the fact that the entry barriers tend to be high which obstructs the entry of new banking institutions to the market. Thus, the low threat of entry increases the opportunity for Barclays in India. Threat from Substitutes (High): In case of retail finance industry, microfinance, moneylenders as well as insurance companies serve as substitutes. Apart from lending money and taking deposits, banks offer services which are also being provided by non-financial banking institutions that possess a threat to the banks. In India, customers have a high tendency towards switching to new substitutes, particularly in case of private banks which are new in the market. Porters Five Forces Source: (Pontificia Universidad Catolica de Puerto Rico, n.d.). 2.2 Industry Life Cycle Source: (Value Based Management.net, 2011) With reference to the above findings, it can be stated that banking industry in India is at its verge to enter the maturity stage in the industry life cycle. For instance, the demand of banking products in the economy is apparently on rise. Moreover, high entry barriers influence the industry rivalry to be increased among the existing players and also depict the constraint of limited resources to support the industry growth. Subsequently, the growth of the industry is likely to get steadier in the near future which refers to its maturity period. 2.3 Scale and Scope of Barclays Bank in India Barclays Bank has been functioning in India since the year of 1990 and at present it has 5 branches operating in India. The statements of finance has been prepared in such a way that it confirms to the provisions of statutory which is according to the principles of accounting and the guidelines which has been subjected by the Reserve Bank of India (RBI) (Varadi, 2008). Barclays Bank has been evolving as a bank with sustainable growth, profit and asset in India. The present segregation in private, rural and public banks has increased the scope of Barclays Bank in India. It can be observed that the main motto of Barclays Bank is to meet the customers need and ensure them a secured future. The better the bank understands their customers the better the bank flourishes. The main aim of Barclays Bank is to direct and allocate their customers to an alternative and comfortable investment scope which further increases the scope of banks (Mapsofindia.com, 2010). 2.4 The Key Reasons for Barclays’ Success Barclays’ reputation is trustworthy as well as reliable in which the people can invest as it is recognised as one of the major competitive advantages in the economy The ability of Barclays bank is to recognise and target the emerging markets such as India, Parts of Africa and Asia are mostly based on expanding the availability of cash machines and retail network (Barclays Bank PLC, 2010). 2.5 Evaluation of Sustainability Retail banking that was launched by Barclays Bank in India included credit cards, current account, loans and savings products. In the year 2008, Mobile Phone banking was launched by Barclays Bank. Since it is the only bank for around 16,000 people and also the economy of the country is growing at the rate of 9% each year, there is a large demand which has yet to be fulfilled by the banking services. “Mobile phone banking” minimises the costs which enables the customers to access the services of the bank at an affordable rate (Barclays, 2011). To be specific, the technological advancement assists the bank to enhance its market adaptability as it effectively satisfies the modernisation demand of the economy. The bank focuses on supporting and contributing to the growth of the communities. This is the foundation of Barclays Bank which would enable it to succeed in the future. The key elements for the sustainability of the bank in the future are customer satisfaction, integrity and innovation (Barclays, 2011). 3. Analysis of the Organisation’s Strategy 3.1 Value Chain Analysis Inbound Logistics involve the suppliers, who are responsible for funding the activities of Barclays. Commercial papers, foreign investors as well as the investors who invest in its shares are a few of the suppliers of Barclays. The bank issues a Corporate Responsibility Supplier Questionnaire to the suppliers with high risk to recognise the potential issues and take necessary steps to deal with those issues (Personal Today, 2007). The operations of Barclays focus on medium business, large business, brokerage, offshore banking, wealth structuring, active asset management, index asset management, consumer lending, financial planning of Barclays, home finance, personal customers, local business and many more (Barclays Bank PLC, 2010). This depicts that Barclays have provided significant consideration to its strategies through diversification and expansion in Indian market. It can also be recognised in its outbound logistics. For instance, consumer loans, mortgages, personal loans, cards, branch banking, e-banking are the various means by which Barclays bank reaches to its customers (Sakariya & Paliwal, 2010). Furthermore, Barclays makes use of the technology such as mobile banking, e-banking to spread its operations and reach out to its customers. These are also used to keep the records of the present and past employees, customer records and others (Barclays Bank PLC, 2010). Barclays bank financial services to its ultimate customers which include such as, credit card, retail and commercial banking, investment, wealth management and others. Barclays is operating in almost 50 countries employing around 135,000 people thereby making a customer or client base of about 30 million. Barclays has also constituted a Remuneration Committee to check the personnel performance and excellence of the business which would in turn help Barclays to retain the employees having experience and ability (Barclays Bank PLC, 2010). Source: (University of Maine System, 2005). 3.2 Resources of Barclays Bank The Resources of Barclays include the following: Human Resources: The HR team of Barclays supports above 147,500 employees in almost or even more than 50 countries Name & Reputation: The reputation of Barclays is protected by the team of corporate affairs Technology: Barclays’ management group evidently focuses on the technological development of the services which can be identified in terms of the online service facilities rendered by the bank along with easy asset management services supported by sophisticated technologies (Barclays, 2011) 3.3 Strategies Adopted by Barclays Bank Barclays has focused on entrepreneurship, education, financial inclusion and serving people to get employment. The Barclays Bank has adopted cost leadership strategy in which the bank provides services which are of low cost and of quality to their customers. This is important at the time of maturity of industry and when the prices fall, the company can produce at a cheaper rate and can still earn profits in the long run. Secondly, Barclays has adopted differentiation strategy that offers products or services having unique attributes as compared to their competitors. Barclays Bank offers Barclaycard which renders generic services to their clients. The major aim of Barclaycard was to increase the market share by continuously providing the debit and credit card services. This has made Barclays pioneers in internet banking and ATMs. This strategy was important for the company to grow in the markets of the UK, India and then internationally (Sakariya & Paliwal, 2010). Mobile banking service known as ‘Hello Money’ for paying bills, transferring funds, making enquiry or requesting for financial statements was launched by Barclays (Vbulletin Solutions, Inc., 2011). Expansion of the company offices and existing staffs can enable the company to enter into the growth phase. The use of technology and brand power can enable the company to increase its profitability and market share in the long run (Sakariya & Paliwal, 2010). 3.4 Competitive Stance of Barclays The chief competitors of Barclays in India are HSBC, other public banks such as State Bank of India and private sector banks as well. In order to remain competitive, the bank has to discover changes in its internal environment, inculcate a corporate culture for enabling its staff to remain co-operative and competitive which would in turn provide the best banking facilities to its clients that are of utmost importance for the survival of the bank in the long run. The bank needs to be competitive not only internally but externally too which can again be done by providing the best and unique products with low interest rates. By using the latest technology in terms of mobile banking (e.g. Hello Money), online banking, premium banking services along with NRI banking services with an intention to improve the efficiency in the services rendered which in turn proved to be its competitive stance in the Indian market. The Bank’s capital strength also provides it a competitive advantage over other banks (Barclays Bank PLC, 2011). 4. Critical Appraisal of the Strategy The major aim of Barclays Bank was to focus on the customers’ needs and bring the under banked as well as unbanked segments into the fold of banking. The bank offered innovative and unique products and services to its customers such as smart budget card, Hello Money Service, Personal loans. There were five branches of Barclays in five cities of India thereby making it the fastest rising foreign bank. Barclays Bank had adopted the cost leadership, differentiation and positioning strategy owing to which the bank succeeded by providing the basic requirements for mobile phone communications. The customers were provided with improved network coverage facilities. The differentiation strategy adopted by Barclays Bank benefitted the bank in a number of ways such as brand loyalty, price premium and also the reduced costs. Competition from the public, government regulations, private and other foreign banks could be the foremost challenges that Barclays would face in its voyage in India. Although Barclays is known for providing the products and services that are innovative, success of the bank in the Retail banking of India would possess a challenging job for the bank (Sakariya & Paliwal, 2010). 5. References Barclays, 2011. Our Core Functions Provide Best-In-Class Support For The Business. Home. [Online] Available at: http://group.barclays.com/Careers/Barclays-around-the-world/Core-functions [Accessed April 20, 2011]. Barclays, 2011. Broadening our Reach. Sustainability. [Online] Available at: http://www.barclays.com/sustainabilityreport07/broadening_our_reach.html [Accessed April 26, 2011]. Barclays, 2011. The Way We Do Business. Barclays. [Online] Available at: http://group.barclays.com/Citizenship/ [Accessed April 26, 2011]. Barclays, No Date. Barclays in India. Home. [Online] Available at: http://www.barclays.in/about/about_us.htm [Accessed April 20, 2011]. Barclays Bank PLC, 2011. General Info. Barclays Capital. [Online] Available at: https://efg.barclayscapital.com [Accessed April 20, 2011]. Barclays Bank PLC, 2010. Delivering On Our Promises. Annual Report. [Online] Available at: http://www.barclaysannualreports.com/ar2010/files/Annual_Report_2010.pdf [Accessed April 20, 2011]. Mapsofindia.com, 2010. Bank Jobs in India. Home [Online] Available at: http://business.mapsofindia.com/banks-in-india/banking-jobs.html [Accessed April 26, 2011]. Personal Today, 2007. Barclays Screens Supplier Spend With Corporate Social Responsibility Questionnaire. News. [Online] Available at: http://www.personneltoday.com/articles/2007/06/26/41228/barclays-screens-supplier-spend-with-corporate-social-responsibility-questionnaire.html [Accessed April 26, 2011]. Pontificia Universidad Catolica de Puerto Rico, No Date. Five Forces model Porter. Competitive Forces model. [Online] Available at: http://www.pucpr.edu/facultad/fcortes/Michael%20Porter%20Value%20Chain%20model%20framework.htm [Accessed April 26, 2011]. RBI, 2010. Entry of New Banks in the Private Sector – Discussion Paper. Why New Banks In India. [Online] Available at: http://rbidocs.rbi.org.in/rdocs/content/PDFs/FIDIS110810.pdf [Accessed April 26, 2011]. Sakariya, S. & Paliwal, P., 2010. Barclays Bank in India: Innovative Retail Banking Growth Strategy. Pandit Deendayal Petroleum University. University of Maine System, 2005. Value Chain Analysis (VCA). M. Porter’s Value Chain. [Online] Available at: http://perleybrook.umfk.maine.edu/slides/spring%202008/BUS411/BUS_411_day_8.ppt [Accessed April 20, 2011]. Value Based Management.net, 2011. Product Life Cycle- Industry Maturity Stages. Home. [Online] Available at: http://www.valuebasedmanagement.net/methods_product_life_cycle.html [Accessed April 20, 2011]. Varadi, V. K., 2006. Measurement of Efficiency of Banks in India. University of Hyderabad. [Online] Available at: http://uohyd.academia.edu/vijaykumarvaradi/Papers/109392/Measurement_of_Efficiency_of_Banks_in_India [Accessed April 20, 2011]. Vbulletin Solutions, Inc., 2011. Barclays Bank Says Its Mobile Banking Service Will Bring More Facilities Within Reach. Home. [Online] Available at: http://ecurrencymoneyforum.com/threads/20843-Barclays-Bank-says-its-mobile-banking-service-will-bring-more-facilities-within-reach [Accessed April 20, 2011]. Read More