Corporate Strategy - HBOS - Essay Example

HBOS, a leading banking and insurance group in the United Kingdom is a holding company for Halifax plc. It is popularly known as Halifax Bank of Scotland. Formed by the merger of Bank of Scotland and Halifax, HBOS has emerged as fourth biggest financial service provider in UK. The merger of two banking mammoths happened during the wave of consolidation in the late 1990's. Before taking over Halifax, Bank of Scotland had a hostile take over of NatWest, another financial company. In 2001, HBOS has hit the headline again by taking over Lloyds TSB. It was the HBOS Group Reorganisation Act 2006, a private Act of Parliament, which gives more operational freedom to the group. With this Bank of Scotland has become its principal banking subsidiary. It has three more subsidiaries such as Halifax plc, HBOS Australia and HBOS Insurance and Investment Group Limited. While Halifax operates as retail banking division in Scotland, England and Northern Ireland, Bank of Scotland is main retail banking division in Scotland. Formed in 2004, HBOS Australia is a consolidation of group's companies in Australia. HBOS Insurance and Investment group manages insurance and investment products in UK and Europe. HBOS is launched as a 'New Force' in banking and claimed as a major and distinctive new competitor in the UK financial service markets. It has about 22 million customers all over the world and unique expertise of the global banking scenario. It has three strong divisions of retail banking, corporate banking and investment. It is believed that successful acquisition and integration of many banking units has helped HBOS to emerge as a major financial conglomerate in Europe. Its average growth is around 10 percent. It operates under a number of well known brands. Businesses that actively pursue innovation generate more growth and profits than those that do not. This process will give the institution higher brand awareness and appeal. Last few years HBOS has been introducing innovative and customer oriented measures to achieve this goal. This has given it an upper hand in the industry. In its long years of existence it has been adding up more products and services to cater to the different needs of the people. The globalization, liberalization and privatization process has opened up new opportunities and challenges for the bank. The bank has entered into new markets with a global vision. In the recent period, it has grown to become a leading financial mall and global finance retail network. The market capitalization of the group is the fourth largest in UK. With assets of over 400 billion, HBOS is UK's largest mortgage and savings provider. It has several high profile brands including Bank of Scotland, Halifax, Birmingham Midshires, Intelligent Finance and Clerical Medical. But with globalization is turning to new trajectory challenges and opportunities before banks such as HBOS are crucial and thought provoking. Financial sphere of the world has changed a lot with free flow of fund and resources from continent to continent or countries to countries. Financial institutions are now compelled to find new models of growth. There are lot of pressure from investors, shareholders, promoters and customers for fulfilling growing expectations. But squeezing margins, impact of technology and increasing competition are compelling banks to reduce cost as low as possible. Today's banking has more global behavior than local flavour. The management has to taken into consideration lot of global and demographic issues before giving shape to a product, service or strategy. The risk management has got more concentration among bankers. Also expectations of customers are growing more with peer bank competition. Most of the banks in Western countries have now entered into high potential new destinations such as India, China and North American countries. They are also adapting both organic and inorganic growth models to survive in the new context. Today's financial service industry is facing lot of problems. While they have to drive the business forward and satisfy the expectation and norms of regulator, rating agencies and investors. Now the trend is going for large mergers and this will have a impact on competitive space banks existing, especially crossing international borders. The regulators are introducing more risk analysis system such as Basel II. This will have an impact on the increasing unsecured retail loans and corporate lending. The rapid growth growth of international trade, the possibility of banks abroad pursuing activities prohibited in the home country and the distinct opportunity of tapping the euro dollar and other markets fuelled a global move towards consolidation and massive reorganisation and expansion of banks in the US (1980s), Europe (1990s) and Japan (late 1990s). The banks have adapted new strategies and added more products to sustain in this waves of fast changes. Competitiveness and profitability are today considered as most important factors. The consolidation process has led to a heightened consciousness of ownership and capital structure, enhanced competition, increased autonomy, technological upgradation and performance change reflected in broad indicators of net worth, net NPA/net advances ratio, Return on Assets (RoA) and Capital to Risk Weighted Asset Ratio. The size, structure and performance of banks have evoked considerable debate across the development spectrum. Economies of scale and scope, risk diversification, market and product expansion and integrating technology to suit customer expectation and cost are some of issues need more attention to sustain in the new global banking environment. Banks from emerging new economies such as India and China are putting forward more competition to Western banks. They have better knowledge about the socio, political and economic conditions of their high potential market. While Western banks have strength of low cost fund, high technology and better products, the banks from emerging economy have clear understanding of their local population's financial needs and behaviour. The governments in these economies are giving them more support to compete with their peer banks in West. In this scenario banks such as HBOS have to devise a concentrated effort to expand their business to new markets and adopt risk management models to suit global banking environment. Innovation of product and services could give these banks an upper hand in the highly competitive business scenario. Innovation is about introducing something new or doing something in a new way. The goal of innovation is to take an idea from concept to realization and improve business performance. An innovation can be a new product, a new process, or a new way of doing business. Innovation can come from anywhere or anyone inside or outside an organization. HBOS has skilled human resource, an efficient management team, a professional board of directors, a good customer base and large pan Europe network. Innovation will make its products more customer friendly and growth prospective. For such terrific and aggressive growth plan it has to understand the trends and drivers of the global banking industry. A proper knowledge management system should be introduced. The regulatory, technical and business environments have been permanently altered by global competition. Today HBOS is that it is working under large number of brand names. It makes people in other markets to easily identify the brand. While the HBOS is a popular brand in Europe, Great Britain and Australia, it is yet to aggressively make use of the high potential markets such as India and China. This would give it an impression of global banking. According to Reserve Bank of India, 50 percent of population in India has no access to banking. But its GDP growth is more than nine percent. China is also growing in double digit figures. Unfortunately HBOS hasn't made use this opportunity yet fully. At the same time other brands such City, HSBC and Stanchart have more acceptance and popularity. These banks are successful in making huge profits from operations in these economies. They are using profit to compete with banks like HBOS, who don't have global presence. Retaining the brand Halifax Brand management is considered as an art. The logic of continuing with a brand after amalgamation or merger depends on the popularity of the brand among the population it caters. If the acquiring organization hasn't an appeal in the local market, it is advisable to continue with existing brand, which is more popular. When HBOS acquired Halifax, it was a popular brand in UK. Bank of Scotland used Halifax brand to market its retail banking products in UK, Scotland, Wales and Northern Ireland. But now it is time to grow to new markets and consolidation of brands. In this global business scenario companies need to bring a local sense with global perspective. A proper brand management would give them an upper hand in the competitive environment. It is about competing for preferential choice among a number of stake holders and is affected by a number of factors. Companies need good tools to manage and control operational process. They have to taken into consideration the cost side of brand management. A proper brand management will add value to the organization and give a competitive advantage. Here it can be seen that continuing with a large number of brands with same kind of products will reduce competitive advantage. The FMCG major, Unilever has recently decided to change its brand name of Indian products. They had been using Hindustan Level as the brand name for a long time. But in the changed global scenario, they find it easier to stick on Unilever for products in Indian market too. So there is no need for HBOS to continue with Halifax brand as it may reduce its competitive advantage. Reference: 1. http://www.hbosplc.com/abouthbos/home.asp 2. http://www.iconocast.com/ZZZZZResearch_Files/systemdynamics.pdf 3. http://www.mi2g.com/cgi/mi2g/frameset.phppageid=http%3A//www.mi2g.com/cgi/mi2g/press/060906.php 4. http://www.guestinvest.com/downloads/news-guestinvest-bank-of-scotland.pdf Read More