Barclay Bank Indian - Essay Example

?Barclay Bank Indian Executive Summary Large numbers of foreign banks are entering into India since the market seems to have huge potential. It is quite interesting to know that there were many foreign banks operating in India since centuries; however they became known only after the economic reforms in India. Foreign bank wanting to operate in India needs to follow several regulations and norms that might restrict the foreign banks to enter into India. However, it is because of the attractiveness of the market of India that forces the foreign banks to enter into India. There are approximately 33 foreign banks in India. Barclays has been one among them. The report presented below tries to analyse the environment in which Barclays Bank India has been operating. Further, it tries to analyse the reason for Barclays’s success. It has been analysed that the main reason for Barclays Bank’s success in India has been its innovative strategies. The report tries to analyse the organisation by conducting the value chain analysis. In addition to this, the report further tries to explore the competitive stances of the organisation and evaluates its sustainability Table of Contents Executive Summary 2 Overview 4 Section A 5 Analysis of Organisation Business Environment 5 Porter’s Five Forces Model 5 Industry Life Cycle 7 Key Reasons for Barclays’s Success 7 PEST Analysis 9 Section B 10 Value Chain Analysis 10 Competitive Stance 11 Scope and Scale 11 Evaluation of Sustainability 12 Critical Appraisal of Strategy 13 References 14 Bibliography 16 Overview Barclays PLC can be considered as one of the leading financial firms of Britain catering to the needs of the customers by providing financial services. In India, the Barclays Bank is considered to be one of the most esteemed foreign banks that provide services to more than 9 lakh customers. The bank started serving the needs of the commercial customers from the year 2006 November onwards and aims at offering the premier banking services. In addition to the commercial customers, Barclays Bank in India also serves the needs of public sector companies, small and medium enterprises and multinationals (Maps of India, 2011). The management report of Barclays Bank India has been aimed at understanding and analysing the strategic situation of the firm. The report will begin with the analysis of organisation’s business environment and of industry survival and the success factors. The second section of the report will contain in-depth strategic analyses of the Barclays Bank in India. Finally, the report will conclude with the decisive appraisal of the strategy. Section A Analysis of Organisation Business Environment Porter’s Five Forces Model According to Michael Porter, the five forces models tend to understand the level of competitiveness in the market and also affect the profitability of the firms that already exist in the industry. Threat of Substitute Products It has been analysed that although there are various foreign banks in India such as ABN AMRO Bank, American Express Bank, Citibank, Deutsche Bank, HSBC bank and Standard Chartered Bank, there are few features as well as products of which they can only be obtained from the Barclays Bank such as Hello Money, the country’s only 7-year personal loan scheme, premier banking services and NRI banking services. Thus, it can be revealed that this force is favourable to Barclays Bank in India. It, therefore, bears a positive sign. Bargaining Power of Suppliers It can be demonstrated that the core business of the banking industry can be considered as ‘service’ that mainly focuses upon the safety of the wealth. It has been evident from the case study that the bank has invested heavily to acquire the talented pool of workforce. In addition to this, the suppliers at the banking sectors are the providers of tangible goods such as cheque books, furniture and others. However, the impact of such tangible goods is not that significant. The provision of talent pool has an impact upon the operation. In context of Barclays, it can be revealed that since there are talented pools, this can be considered as favourable force in this industry and simultaneously bears a positive sign. Barriers to Entry It has been noted that the Reserve Bank of India (RBI) has provided strict norms for new entrants. In accordance with guidelines of the RBI in March 2005-2009, the foreign banks were permitted to establish by setting up wholly owned subsidiary (WOS) (RBI, 2010). Even though this may seem to be quite attractive for the foreign banks while entering into India, it has been found that the foreign bank that applies to Reserve Bank of India in order to set up the WOS or the branches in India, needs to satisfy RBI that they are subject to passable prudential supervision in their home country (The European Business Group India, 2011). This often poses a threat to enter into new markets. Therefore, it can be revealed that the barriers to entry have been high. Bargaining Power of Buyers The bargaining power of the buyer is quite high since there are total of 34 foreign banks in India that have at least 310 branches. Since the presence of foreign banks in India is intense, it can be said that the buyers can switch to any of the banks according to their requirement. Therefore, to Barclays Bank India this can be considered as an unfavourable situation (India Inc, 2011). Competition among Existing Banks It can be argued that the competition is fierce in the Indian banking industry. The competition has forced the banking sector to improve their product range, quality of services and customer satisfaction. The major rivals of Barclays have been Citibank, ABN AMRO, HSBC and Amex. It was noted that its domestic rivals in India also started providing the same kind of products and services. The main rivals were ICICI and HDFC. This reveals that the competition is high. Industry Life Cycle Barclays has been present in India for more than 30 years as an investment banker and started launching the commercial banking services since the year 2006. However, it has been noted that the bank entered into retail banking services in the year 2007. It has been evident that the bank has been developing several strategies in order to beat the competition faced by it. In its Indian growth plan, the bank decided to become one of the India’s fastest growing banks. It opened up several branches in India. Due to its innovative products as well as services, it became the fastest growing foreign bank. However, because of the global economic downturn that was caused by the US financial meltdown and the credit crunch there was a decline in the Barclays performance. Barclays retrenched its human resources and decided to remove 25 employees every week. Key Reasons for Barclays’s Success The key reason behind Barclays’ success as pointed out by the Chief Executive of Barclays Wealth India, Mr Satya Bansal has been its customer-centricity and the commitment made by the entire team. In addition, Mr. Bansal believes that it is because of clients’ faith upon the bank that has led to continuous success (Barclays, 2010). In addition to this it has been noted that Barclays adopted specific marketing and communication strategies in order to create brand awareness in India. It also adopted low-cost retail business model using business correspondents, internet and mobile banking in order to drive down the cost. It has always paid due attention towards studying the consumer trend in the Indian Retail Banking and adopted its strategies accordingly. Thus, it can be revealed that it is because of innovative products as well as services offered by Barclays that has led to its success. PEST Analysis The bank faces several threats from the RBI as well as from SEBI. In the year 2008, it was evident that RBI decided to tighten the monetary norms. This had an adverse impact upon the successful operation of Barclays (The Times of India, 2008). In addition to the RBI, there are other regulators as well who may have an impact upon the successful operation of Barclays. They are Deposit Insurance and Credit Guarantee Corporation, Ministry of Finance/Income Tax Department, Foreign Exchange Dealers Association of India (FRSGlobal, 2009). The economic downturn in the year 2009 had a major impact upon the operation of the firm. It forced the bank to adopt retrenchment strategy. However, according to the report of “World Retail Banking Report 2008” it has been anticipated that by 2017 Indian retail banking sector would reach ?63 billion. It has further been mentioned in the report that by 2020, India would have a surplus of about 47 million people of age group, 15 to 59. On the other hand, it was predicted that the other economies would face shortage of such core target for audience for banking services. Therefore, it can be predicted that this is going to have an impact upon the foreign banks in India. In addition to this, the projected per capita GDP is expected to increase from US$ 380.8 in 2000-01 to US$ 2097.5 in 2026 which reflects the disposable income of the consumers (IBEF, 2010). Technology also has an effect on the successful operation of the banks in India. It has been noted that intense competition has forced the Indian banking sector to improve their product range and pay more attention towards the technology being implied such as mobile banking, phone banking and net banking. Section B Value Chain Analysis The inbound logistics for Barclays has been the suppliers funding in its activities. It includes the investors’ investment in its shares, commercial papers and also includes foreign investors. Barclays reaches the customers via consumers’ loans, cards, mortgages, personal loans and branch banking. It tries to reach the customers in more than these conventional ways such as it started Hello Money in India. This bank in India has been focusing on serving the needs of large Indian corporate, the Indian companies that are looking for growing overseas and the corporate in the SME sector. It has a network of ‘50 distribution points’ via its network of branches and the finance outlet in India (Barclays, 2011). Barclays invests heavily in the infrastructure so that it can assist its clients and provides them better services. Since there has been rise in the number of branches and in this cut-throat competition, Barclays is paying due attention towards the technological factors so that it can reach its customers. E-banking, mobile banking and others are the technologies used by Barclays in order to reach its customers. Barclays has around 5000 employees in India (The HinduBusinessLine, 2010) Competitive Stance It has been evident that in India, Barclays Corporate is targeting commercial banking needs of larger local corporate as well as the operation of the MNCs who work closely with Barclays Capital as well as Barclays Wealth. The retail strategy that the bank adopted in India has been targeting the needs of the growing affluent consumer banking customer segments in India (Deccan Herald, 2011). From the case study, it has been evident that according to the views of Samir Bhatia of Barclays Bank, India can be considered as one of the most exciting markets for retail financial services in the world. India has been offering significant potential across customer segments and market segments that Barclays is well placed to maximise. By offering unique products and services in India, Barclays decided to become one of India’s fastest growing banks. It has been continuously focusing upon differentiation strategies in order to be the leader by adopting specific marketing and communication strategy so that it can create brand awareness in the country. It can be analysed that since the segment is affluent, there is huge potential for Barclays India to increase its sales if the bank focuses on meeting the needs of customers precisely. Scope and Scale India has huge opportunities since there are segments which are still untapped such as the rural areas. In addition to this, by offering the unique products to the consumer such as Hello Money which has vast potential appealing across all the segments, it can achieve economies of scale. Barclays India therefore needs to focus more on those untapped areas in order to increase the scope. Furthermore, it has been noticed that the bank has been focusing upon the synergies by creating alliances for banking intermediaries and microfinance institution as partners so that it can gain strong market penetration in India. Evaluation of Sustainability Barclays has been focusing more on sustainability by realising its responsibilities towards the community. It believes in helping the community and the people within them by achieving their goals. It has invested 54.9 million pounds globally in community projects. It also engages itself in the youth development programmes, income generation and fundraising programmes, preventive health as well as environmental sustainability programmes (Barclays, 2010). The strategies that the bank has adopted in the Indian market seem to be sustainable. However, in next five years there might be changes in the customers taste and preferences which would make the sustainability of the bank questionable. Therefore, it is important for the bank to keep innovating itself and try to adopt the strategies that is appealing to the mass group of consumers in the long run. Critical Appraisal of Strategy The strategy adopted by Barclays Bank in India has been quite successful and innovative. It thoroughly studies the behaviour of the customers before introducing any product in India. The products such as Kudumb savings account, Hello Money and many more have been designed taking into consideration the Indian economy and the consumers. Furthermore, it takes into account the needs of both high end consumers as well as middle to low end consumers. It can be depicted that since there is intense rivalry, the bank needs to focus more upon intensive strategies so that it can maintain its position in the market and uphold the competitive advantage as well. References Barclays, 2010. Barclays Wealth Reaches Milestone In India. News. [Online] Available at: http://group.barclays.com/Media-Centre/Barclays-news/NewsArticle/1231784930795.html [Accessed April 25, 2011]. Barclays, 2010. Susutainability Reports. Barclays. [Online] Available at: http://www.barclays.in/about/corp_sustain.htm [Accessed April 25, 2011]. Barclays, 2011. Barclays. Barclays in India. [Online] Available at: http://www.barclays.in/about/about_us.htm [Accessed April 25, 2011]. Deccan Herald, 2011. Karan Bhagat Barclays Corporate New India MD. News. [Online] Available at: http://www.deccanherald.com/content/65072/karan-bhagat-barclays-corporates-india.html [Accessed April 25, 2011]. FRSGlobal, 2009. FRSGlobal in India. Regulators in India. [Online] Available at: http://www.frsglobal.com/regions/india.html [Accessed April 25, 2011]. IBEF, 2010. Market Overview. Banking. [Online] Available at: http://www.ibef.org/download/Banking_060710.pdf [Accessed April 25, 2011]. India Inc, 2011. Foreign Banks Can Go Local To Expand India Base. News. [Online] Available at: http://www.indiaincorporated.com/news-archive/item/65-foreign-banks-can-go-local-to-expand-india-base.html [Accessed April 25, 2011]. Maps of India, 2011. Barclays India. Commercial Banking. [Online] Available at: http://www.mapsofindia.org/finance/banks-in-india/foreign-banks/barclays-india.html [Accessed April 25, 2011]. RBI, 2010. Database. Introduction. [Online] Available at: http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2313 [Accessed April 25, 2011]. The European Business Group India, 2011. Contents. Introduction. [Online] Available at: http://www.europeanbusinessgroupindia.com/contents/SFBD210111.pdf [Accessed April 25, 2011]. The HinduBusinessLine, 2010. Barclays Lays Off 250 Employees In India. Today’s Paper. [Online] Available at: http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article990409.ece?ref=archive [Accessed April 25, 2011]. The Times of India, 2008. Quarterly Review. RBI May Further Tighten Monetary Norms: Barclays. [Online] Available at: http://articles.timesofindia.indiatimes.com/keyword/quarterly-review/featured/2 [Accessed April 25, 2011]. Bibliography Sakariya, S. & Paliwal, P., 2010. Barclays Bank in India: Innovative Retail Banking Growth Strategy. Pandit Deendayal Petroleum University. Read More