SWOT Analysis of Barclays Bank, UK - Assignment Example

? SWOT Analysis of Barclays Bank, UK of the of the SWOT Analysis of Barclays Bank, UK Introduction No modern business today can exist in a vacuum. It has to face the internal and external forces that abound in the business environment. Some of these are helpful for every firm in the industry and are called opportunities, while others bring bad news for everyone and are regarded as threats. Besides these forces in the external environment, a particular firm may have internal strengths such as the skill and experience of its staff, or weaknesses such as frequent labor disputes because of lack of clearly defined polices for staff and workers. In sum the fortunes of the firm are dependent on how well its management deals with business opportunities and threats, while using the strengths of the firm to take advantage of the opportunities and minimize the effect of the threats through clever planning and strategic implementation of its vision for the company. This is what is called strategic management- or the planning and implementation to achieve its desired plans in the marketplace in the face of these internal and external forces. The legal, political, sociological, economic and other environments may pose a number of challenges that must be overcome by the business if it is to survive and prosper in the marketplace. Barclays Bank PLC is one of the key players in the worldwide banking industry as well as in the UK and this paper will discuss how successfully it has managed to meet the challenges faced by the banking sector in the UK. The Banking Sector in the UK The banking sector in the UK is one that is full of intense competition. Lately the banking sector which had been hit by the 2007-2008 economic recession has been in recovery mode and efforts are still being made to put the sector back on track and increase regulation which would prevent greed and excessive remunerations from wreaking havoc on our lives once again. Efforts are being made so that banking executives’ salaries, perks and other remunerations like bonuses and stock options will be reviewed by the Governor of the Bank of England and the Finance Secretary prior to payout. The Bank of England had committed a sum of around ?7 billion to bail out the banking sector in the UK but thankfully Barclays Bank PLC did not ask for assistance, rather it managed to raise the required capital through a number of share offerings in the equity market. Banking today can be characterized by the different products that are being dealt with, such as investment banking, asset management or debt management, or by the type of customer dealing, such as Wealth Management for high net worth clients and Retail Banking for all types of customers (Harrison, 1994). There are also a number of channels for service delivery, like online banking and ATM transactions, cash deposits and withdrawals, wire transfers etc. But never mind what classification you choose, it all deals with saving, lending, spending, deposits and investments and withdrawals. These are the primary functions of banking which we cannot deny (Lee, 2002). A Brief History of Barclays Bank The origins of Barclays Bank date back to the days of the goldsmiths who were acting as the earliest English bankers on London’s Lombard Street. A partnership was established between John Freame and Thomas Gould in 1690. In 1736, James Barclay, the son in law of John Freame became a partner in the business. In 1738, the business moved to 54 Lombard Street and at this time also began using the black spread eagle as an identifiable logo that is still associated with the bank today. In 1896 two more banking businesses united with this operation under the name of Barclays & Co, by then converted into a joint stock banking company. During 1905-1916, Barclays further extended its network by acquiring other small banking operations in the UK. Amalgamations with other banks in 1916 and 1919 saw the Barclays name expand ever further. After World War II, Barclays UK established a US affiliate by the name of Barclays Bank of California in San Francisco. In 1974, the UK bank took over the Mercantile Credit Company. In 1980, Barclays Bank International expanded its business lines to include commercial credit and took over the American Credit Corporation, which was renamed as Barclays American. In 1985, Barclays Bank UK and Barclays Bank International merged and as a result of this corporate reorganization, the former entity became a holding company and the latter was renamed as Barclays Bank PLC. In 2000, Barclays took over the ownership of the Woolwich Building Society and renamed it Woolwich plc. There have also been a number of acquisitions and divestments of businesses since the mid 1980s according to the Bank’s interests. In 2005, the Bank’s headquarters was moved to Canary Wharf. At present Barclays Bank plc ranks as the tenth largest banking and financial services group in the world and the 21st largest corporation. It operates in over 50 countries, has a customer base of 48 million and an asset base of €1.94 trillion, the third largest in the global banking industry. Barclays has chosen to structure itself along two main business divisions: Wealth Management and Corporate & Investment Banking, and Global Retail Banking. The first business division comprises Barclays Investment, Barclays Corporate and Barclays Wealth. The second business division comprises Barclaycard, Barclays Africa, Retail Banking UK and Retail Banking Western Europe. The bank is listed on the London Stock Exchange. Marketing Tools Used By Barclays Bank Barclays has always been innovative and supportive of new technologies to be used in its businesses. For instance, Barclays was the first bank in the UK to introduce credit cards way back in 1966 and just one year later in 1967, the first ATMs in the world. Barclays also announced the UK’s first debit card, Connect, in 1985, which was operational till July 2010. Barclays Bank is part of the Global ATM Alliance and even non bank customers can make use of Barclays ATM machines that operate 24/7 for a fee. Barclays has been a keen and avid sponsor of professional football, golf and tennis tournaments across the world. In the UK, Barclays has supported the Premier League since 2004 and the ATP World Tour Finals since 2009. It has also supported the Scottish Open Golf Tournament since 2002 and the Singapore Open since 2006. Cultivating Customer Loyalty and Support Barclays has always been great in cultivating customer loyalty and support. Barclays was the first UK bank to re-open its branches on Saturdays in 1982, and this additional effort resulted in record profits after a two year period. No doubt this is also more convenient for customers who cannot do their banking work during the week (Avlonitis et al., 2000). Moreover with the Global ATM Alliance, withdrawals are possible 24/7 no matter where the customers are. Since 1991 the bank has also chosen to close 171 non-remunerative branches in rural areas across the UK, which has earned it a loss of reputation and ridicule of its advertising campaign showing Barclays as the Big Bank (Hollensen, 2007). Current Issues Faced by Barclays Bank Despite its successes, Barclays has had its share of problems and difficulties. The bank has been criticized for its support of South Africa during the apartheid era in the 1970s and 1980s, and is similarly being criticized today for its support of Robert Mugabe’s Government in Zimbabwe. According to sources, Barclays has also chosen to look the other way regarding abuse of money laundering laws by the son of Equatorial Guinea’s President, who has siphoned funds to an account in Paris. A 2009 report also found that Barclays had been guilty of violating anti-money laundering laws as it had helped the Bank Melli and the Iranian Government in transferring funds through wire transfer and then concealing the names of the remitter on the source documents and applications. Barclays was fined and paid US$ 298 million for this abuse. Nevertheless, a fact finding report by War on Want, a British charity and anti-poverty movement has established as recently as December 2008 that Barclays and other UK banks have been guilty of servicing the financial operations of many arms and ammunitions dealers, including having an investment of up to ?7.3 billion in these firms. The bank has also been in the news regarding leaked reports that it sought to evade taxes through an elaborate scheme. Control Systems Used by Barclays Bank Amazingly the Bank has no COO or CIO in its management setup. These functions have been devolved to the businesses at the core business levels- it also helps save considerable cost for the bank. The Bank’s present CEO is Robert Diamond while Marcus Agius is Chairman of the Board. The bank should also have a good internal reporting system and a means whereby all management problems are discussed and solved. In fact usually sales teams also do follow this method in outlining customer needs and wants. The problems should be highlighted and addressed by the supervising sales team leader and if a solution cannot be found at short notice, it can be left for other people such as the higher management to decide what to do (Papasolmou & Vrontis, 2006). Another thing is that Barclays has divided itself among different functions as to whether it is used by the upper class, middle class or low class customers. It has been successful in bringing all types of people under one platform, say for ATM use and also been able to target their different needs like wealth management, investment banking and retail banking transactions. This is the mark of a successful bank and Barclay should never lose sight of its goals and objectives, as well as its varied customer base. Alienating rural customers through closing down rural branches was a bad move and in all likelihood, the bank has lost the goodwill and support of the affected customers (Watters, 1995). Performing a SWOT Analysis for Barclays Bank An analysis and synthesis of the above show that Barclays Bank in the UK has considerable advantages over the other banks. One plus point is its staff strength and training. Indeed, its customer service and the product knowledge of its support staff is said to be among the best in the UK. This helps Barclays establish a very favorable initial impression with the customer. When this is backed by efficient and superior service, it makes a world of difference and the customer soon becomes a loyal one (Devlin, 2000). Another advantage is a vast and well spread banking network. Barclays has 1800 UK high street branches, and has even converted some Woolwich entities to Barclays’ branches. Another step taken to assist the people has been the collaboration with the UK Post Office to set up accounts and make withdrawals and even get some personalized services such as bank loans. Barclays Investment arm had a very strong client base and had been put up for sale only after considerable debate among the management. It is expected that Barclays Corporate will soon make up for this divestment, as it too serves customers and businesses having an annual turnover of ?5 million, and has a full range of services covering everything from deposits and liquidity to online banking to cash management and trading to foreign exchange assistance to risk management. This segment alone serves over 8000 businesses in 23 countries across the globe. On a worldwide basis, Barclays has 4500 branches in 50 countries. No wonder it has such a strong asset base (Estelami, 2005). On the negative side, Barclays has had to make efforts to reconnect with customers especially in rural areas. Instead of drastically reducing the number of rural branches, it could have cut down the number of branches by much less and made efforts to provide services through the local Post Office as it is doing in some urban areas. Sometimes providing banking facilities in far flung rural areas helps in promoting an image of good corporate social responsibility (Grayson et al, 2008). It is quite likely that considerable funds are transferred in the cultivating and harvesting seasons to and from farmers’ accounts and Barclays can capitalize on this opportunity (Kelly, 1989). Quite possibly if their kids are city dwellers, Barclays would be the bank they would be most likely to deal with, given the above relationship (Tyler & Stanley, 2007). The absence of a COO and CIO could spell trouble for the bank at some future date. Both banking operations and banking IT planning and infrastructure especially are in a state of constant flux and it is only a matter of time, usually up to five years, before a current system becomes redundant and has to be changed or updated. The bank would do well to appoint people of required caliber to these positions so that they could help plan and deal with any future challenges and eventualities (Easingwood & Storey, 2003). It is sad that Barclays which was the seat of so many banking innovations in the past has chosen to take this route to save costs. It could save costs elsewhere. It has lately been seen that Barclays has preferred to lend to businesses with a strong asset base, high turnover and good profitability. Yet this has left other small, deserving businesses out in the cold. Barclays has been criticized for this lack of attention to corporate social responsibility (Machauer & Morgner, 2001). The banking industry operates in a highly volatile environment and a few good or bad decisions can spell success or failure for any one entity. As banks grow and become unwieldy, it is necessary to have the proper measure of control and supervision over its activities and a proper system of checks and balances would become necessary. The Government Finance body will likely regulate and look at reported profits and losses as well as their distribution and payouts. Barclays should also follow the rules of good corporate governance. It should establish an Ethics Committee if it does not have one to deal with controversial issues. Its bonus and remuneration policies to directors and key executives should be made public so that accountability is assured. The Ethics Committee should review transactions like the Lehman Brothers deal, suspicious wire transfers, efforts at tax evasion and the bonuses and other perks paid to top management. This would definitely help it regain its image as a bank for the people. Conclusion We have looked at Barclays Bank, UK and conducted an analysis of its strengths and weaknesses, as well as the opportunities and threats that have to be faced by the worldwide banking industry in general. We conclude that Barclays UK has been able to ride out the storm and face the difficulties and challenges posed by both the internal and external environment. Through strategic planning and direction, it has managed to retain its position as one of the biggest banks both worldwide and in the UK in terms of revenues and profitability. References Avlonitis, G J. & Papastathopoulou, P. ( 2000). “Marketing communications and product performance: innovative vs. non-innovative new retail financial products,” International Journal of Bank Marketing, Vol. 18, Issue 1, pp27-41. Devlin, J F. 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