Analysis of the Service Marketing Issues Affecting the Organisations of Banking Industry - Assignment Example

Service Industry Table of Contents Q. A definition your chosen sector by size and competitivestructure. If applicable, identify the major strategic grouping(s) and the one you have selected for study. Assess the current marketing environment of this group 3 Q. Your assessment of the opportunities and threats facing the sector/grouping using original and coherent analysis based on properly referenced sources 5 Q. A summary of the commonalities and differences between the current service marketing strategies of your chosen sector’s ‘major players’ 7 Q. Identify that organisation’s key strategic service marketing issues for the next 5 years, drawing on your foregoing analysis 9 Q. Briefly demonstrate the relationship between any one of these issues and some relevant theoretical principles of services marketing, taken from any appropriate and referenced source. 11 References 15 Bibliography 18 Q. A definition your chosen sector by size and competitive structure. If applicable, identify the major strategic grouping(s) and the one you have selected for study. Assess the current marketing environment of this group Ans: Banking industry is one of the most crucial industries for any country’s economy. The economic condition of any country is reflected by the performance of its banking industry. Over the last one year the industry has been the hot topic of discussion due to the recent global financial turmoil which has shaken the banking industry in most of the developed countries in the world. UK is one of the largest economies in the world. As a result its banking industry greatly influences not its own economy but also the global economy. UK banking industry is the third largest banking sector in the world. It is one of the most efficient and dynamic industry in the entire Europe. It serves almost 95% of UK’s total population. Almost 3.5% of total workforce in UK is employed in UK banking industry. It has been found that productivity of UK financial sector is growing at a rate which three times higher than the pace of the UK economy. The sector is heavily influencing the GDP of the country. In 2007 financial sector and banks contributed approximately 70 billion euro to the national output of the country and this amount is almost 7% of UK’s GDP. Most importantly this amount has witnessed an increase by 100% from the year 2003. UK banking sector is considered as the world leading center for private banking, investment and cross border banking. It is holding the fifth position in terms of global international lending. It has been observed that almost one third of global foreign exchange business involve banks in London only. As of December 2008 there are 381 credit institutions in UK. Moreover there are total 163 foreign credit institutions. Furthermore there are 2,241 investment firms in UK (Financial Service Authority, n.d.). The banking industry has gone through a radical transformation because of market liberalization. Significant deregulations and competition that was created out of that were the two main reasons behind this. In UK banking industry deregulation started when Competition and Credit Control in 1971 (CCC) was introduced in 1971. The competitiveness of UK banking industry has undergone a permanent change when 1979 banking act was introduced (Pozdena and Hotti, 1985). The trend of deregulation was also extended to stock exchange as the financial markets were deregulated. Banks started to become more aggressive in terms of their positioning and marketing of various products and services which were not there in the balance sheet. Several banks made entry into the securities business by acquiring some stock broking firms. During the period of 1987 to 2003 a number of consolidations, diversification, mergers and acquisitions took place and the banking sector was greatly affected by these incidents (Matthews, K. Murinde, V. Zhao, T. January 2006). In the modern era of business, corporate restructuring in the form of mergers and acquisitions have been a common strategic weapon for many multinationals. Acquisitions and mergers are the two major aspects that have major influence on UK banking sector as well. These two transformational forces reshaped the country’s banking industry. Till 1960 UK retail banking industry was dominated by five major banks, Barclays, Midlands, the Westminster Bank and National Provincial. Midland bank was later acquired by HSBC. Royal Bank of Scotland acquired National Provincial. In the recent past the largest cross border banking deal in Europe has also taken place in UK where Abbey is acquired by Santander Central Hispano of Spain. Recently UK banks are getting diversified in terms of their product offerings. They are acquiring Life insurance companies. Another interesting fact is that there is huge reduction in number of UK owned banks, although the average financial strength of banks has increased significantly. UK banking industry has recorded significant growth over the last two decades. But the industry is getting highly competitive in nature. Mergers and acquisitions are making the competitiveness more intense. In such a competitive industry it is important to satisfy customer needs successfully, invest in technology and meet regularity necessities successfully in order to gain competitive advantage (Rao, S. n.d.). Q. Your assessment of the opportunities and threats facing the sector/grouping using original and coherent analysis based on properly referenced sources Ans: The global crisis fuelled by the sub-prime crisis is being heralded as the biggest curse on the financial industry all over the globe. The effects of the crisis are, perhaps, more pronounced for the developed countries of the world. At present global recession is perhaps the biggest threat to UK banking industry. In November, 2008 Bank of England declared that the country’s economy has already entered into the recession and it could shrink by 2% in 2009. Country’s central bank reduced rate from 4.5% to 3% (BBC News, n.d.). Then in February, 2009 central bank of the country claimed that UK is probably in deep recession and rate cut might not work anymore. It also said that country’s economy would shrink sharply in 2009. It forecasted that the shrinking would take place at the rate of 4% (Schifferes, February 11, 2009). Bank of England reduced its interest rate to a record low of 1%. But still October it has been found that the country’s economy has failed to exit recession. Even in the third quarter of this year UK’s GDP reduced by 0.4%. There are still huge crisis of liquidity and UK banks are struggling to recover from the storm of recession (AFP, October 23, 2009). Another critical threat to UK banking sector that has been observed over the past few years is ‘tiger kidnap’. Tiger kidnap is a label which could be applied to a set of offences for describing the alleged holding hostages in order to persuade an individual to participate in a crime. It is not like any other kidnapping crime as the objective of the criminals is not get the money from hostage’s family, rather in tiger kidnap hostages were forced to participate in crime. Mainly employees of any bank were targeted and they were forced to participate in theft from the organization. Banking sector has historically being the main target of tiger kidnap as the bank premises used to hold huge amount of cash. Lower standards of physical security of the banks have been making the process easier for the criminals. Losses for the banks that have been incurred due to this type of crime have been significant as there are various secondary losses associated apart from the primary financial losses. Combination all the losses result to increase in total cost of operation. Secondary costs could increase because of temporary branch closures, lose of short-term business, duty of care cost, stock value and insurance impact, associated legal cost, lose of time to witness obligations and lose of confidence of customers and shareholders. Furthermore the experience of tiger kidnap is traumatic in nature for those who have been involved. It has been observed that employees who were found to be involved in such an offence never return to their work. As a result banks loose several valuable employees in this way (Control Risks Group Limited, n.d.). Recently a report has been published by the Booz & Company on the potential threats and opportunities for UK banking sector. According to this consultancy there has been sharp drop in income for UK private banks. In period of 2007 to 2009 income for banks has been found to be dropped by in range of 30% to 40%. Moreover future tax uncertainty and changing tax regulations is unsettling HNI (High Net Worth) people. Some of these individuals are reconsidering London as global banking hub. The management consultancy has also found there have been a sharp increase in the demand of the private clients form their private banks. This demand is terms of alignment of interests and transparency. Another crucial threat for the banking industry is the fast changing external environment. Each and every day customer demands are changing. Moreover technological change is also posing a potential threat for the industry. Industry need to adapt with this technological change otherwise customer service would be affected. As per the findings of Booz & Company there are several opportunities also for UK banking sector. According to Alan Gemes, senior vice president of the company, “Fundamental changes in the environment, both negative and positive, present an important opportunity for UK private banks to enhance their position”. He also believes that it is crucial for the private banks to identify and understand the changing needs of clients specially the private clients. According to him there has to be proper alignment of value propositions of the banks with the changing needs or demands of the private clients in order to gain competitive advantage in the market. Banks also need to address the declared offshore/onshore issue and change the cost base for gaining most (Montia, December 2, 2009). Q. A summary of the commonalities and differences between the current service marketing strategies of your chosen sector’s ‘major players’ There are number of banking service providers in UK. Major banks in UK include Barclays, HSBC, Co-operative bank, Natwest, Lloyds TSB and Royal Bank of Scotland (Totaltravel.com, n.d.). The Barclays Bank is one of the most respected banks in the world. More than 10 million people around the world have their current account in Barclays bank. There are more than 2000 branches and 74,000 employees in the bank across the world. However, the number of employees is reducing with the more and more implementation of technology. Barclays Bank is famous for two innovations; one is Barclaycard and another is cash machines. Barclaycard is one of the most popular credit cards in UK. Being one of the largest banks in UK, Barclays offer a wide range of financial products which include credit cards, loans, mortgages, pensions and insurances. In Barclays Bank customers can avail cheque facilities of up to 1000 euro immediately. Barclays internet banking facility is available to almost all its customers who can check their account balance, transfer money and pay bills. Apart from Barclays, other major bank like Royal Bank of Scotland is also one of the most reputed bank in UK. Popularly called as RBS, this bank stands out when it comes to history of global banking. There are almost 110,000 employees in RBS. RBS also offer wide range of financial products such as insurances, credit cards, loans, pensions and travel services. The most special service offered by RBS is that customers can receive up to 300 euro per day from the machines without frilling a cash card. Like Barclays, RBS also provides internet banking facilities. The most important facility of this is that people can view and print balances and statements up to 6 months back. This facility is not available in case of Barclays. Another major bank in UK is HSBC Bank which is one of the largest banks not only in UK but in the world. It is much bigger than Barclays in terms of number of employees and branches. There are almost 215,000 employees and 9000 branches all over the world. Range of product offerings of HSBC Bank is also much bigger than other banks in the region. But there is no-frills service and no credit facility in case of its “Basic” bank account. Moreover statements are delivered quarterly only. HSBC’s internet banking system is very much user friendly. Lot of technical support is available for the online users (Bank.org.uk, n.d.). The commonality between the banks’ strategies is that they are developing their marketing strategies which are retail service oriented. Customers have become the point of attraction and banks have realized that customer service is perhaps the most crucial aspect of attaining growth. They are focusing on strengthening their branch networks. These retail oriented strategies are very effective for gaining competitive advantage. But apart from these strategies banks need to focus on their marketing mix. Without proper marketing mix strategies they would not be able to survive in the long run (Faqs, n.d.). Q. Identify that organisation’s key strategic service marketing issues for the next 5 years, drawing on your foregoing analysis Ans: Selected banking service organization is Barclays which is mainly involved in global retail banking, wealth management and investment and corporate banking (Barclays, n.d.). Barclays is a 300 years old organization which today operates in more than 50 countries around the world. Barclays lends, invests, protects and moves money for over 49 million clients and customers all over the world (Barclays, n.d.). Barclays strategies are designed with the objective of achieving significant growth over the passage of time. According to the organization major ways of achieving this objective is to diversify business base, increase presence in those markets and segments which have high potential of growth. The company’s main objective in the current year is to earn as much profit as possible. Barclays other main objectives include being the best bank in UK, increase the growth of its global business, developing commercial and retail banking in some chosen countries excluding UK and finally improving operational excellence (Barclays, n.d.). In the next five years Barclays should adopt some specific service marketing strategies in order to be a leading banking service provider in the world. These strategies should be focused on 7 Ps of service marketing, customer service, growing markets in developing economies and upcoming advanced technologies. Barclays should concentrate more on product, price, promotion, place, people, process and physical evidence. Apart from first four Ps which are important for each and every business organization but other 3 Ps are crucial for service marketing. People, process and physical evidence, all of these are equally important for a bank Barclays which is a real giant in the global banking industry. It should come up with new financial products and services for its existing customers. Barclays strategies should be developed focusing on various issues on customer satisfaction, enhancement of various financial processes and its physical presence all over the world. Barclays should also focus on the growing markets of developing nations in the world in order to have sustainable growth. Bank’s biggest opportunity is the growing markets like China and India. Bank should focus on increasing number of its retail branches in these markets. It should try to improve its network in these markets. There is huge number of potential high net worth clients in these growing markets. Barclays should target these clients and provide excellent banking and customer service. Another important aspect is technology. Global technological environment is constantly changing and it is greatly affecting the global banking industry. It is expected that in the next five years there will be lots of change in the global technological arena. Several new innovative technologies are likely to come and these innovations would definitely influence the process of banking. Q. Briefly demonstrate the relationship between any one of these issues and some relevant theoretical principles of services marketing, taken from any appropriate and referenced source. The Seven Ps of service marketing mix is the fundamental concept of service marketing theory. Over the years strategies adopted by various organizations are based on these seven Ps which include product, price, promotion, place, people, process and physical evidence. In case of Barclays service marketing strategies also this marketing mix is crucial. These seven Ps and their relevance in Barclays service marketing strategies are discussed below. Basically marketing mix refers to the four Ps of marketing which are Product, Price, Place, Promotion. Marketers from any industry must focus on these variables while making any decision on marketing strategy. But in case of service marketing this marketing mix is extended by three more Ps, people, process and physical evidence. Product Products are very important for any organization as the organization is represented in the outside world by the products and services that it offers. Product refers to tangible or intangible entity which is going to be marketed. Product need to be designed according to the customer need or market trend. Decisions regarding product strategy would involve product function, its appearance, product packaging etc. But in case of service, products are intangible in nature. Moreover services are intangible. One simply can not touch or hold a service. Services are inseparable form its provider. One can not separate service from the service provider. Furthermore Service is perishable in nature. It does not last beyond a specific time. All these characteristics are applied in case banking services also. As a result banks should focus on these issues while designing their service providing strategies. Barclays various products include credit cards, loans, mortgages, pensions and insurances. Important is how these wide range of financial products are being served to the customers. There must be some special value added services like its current service which allows customers to avail cheques up to 1000 euro immediately. Since financial products are intangible, it has to be properly served to the customers. Price Price of a product or service is nothing but the monitory value of that particular product or service. As a result organizations always focus on the price at which customer would get its product or service. Customers are also aware of the price of the product. They are likely to choose that service provider who would provide the service at the lower price. Pricing strategies are needed to be designed by focusing on the required profit margin, competitors pricing strategy, possible response of competitors and customers. There are various pricing strategies such as mark up pricing, target based pricing, value based pricing, ongoing pricing etc. Place Place refers to the location where the organization is having its operation. Place strategies are mainly associated with the distribution channels. While making any decisions on place strategies, required market coverage, logistics, channel member must be considered. Selecting proper place of operation is crucial for any bank. Being such a big bank, Barclays also need to focus on this aspect. It should target all the developing economies in the world for further expansion of its operation. Barclays should improve its network by increasing its retail branches in various developing nations like China and India. Promotion Promotion is very important for success of any product or service brand. In today’s competitive world financial service providers adopt various promotional strategies in order to promote their services. Promotional strategies would include strategies on advertising, sales promotion, public relations etc. Promotional strategies are adopted with the objective of communicating various product features and finally selling the product to the target customers. Promotional activities mainly drive the sell of the product. People People are the key element in case of service, because it is the people who are actually delivering the service and it is the people who are consuming it. It is very crucial for the companies to hire the right staff so that they deliver the service in the best possible way. In case of service, customers physically interact only with the service provider rather than the service itself. As a result it is important to have people who have appropriate interpersonal skills, right attitude and proper training to deliver the service. These people would be responsible of making the service either a success or a failure. In case of banking service industry people are key factors for business. Services are inseparable in nature which means they can not be separated from their provider. As a result people become the decisive factors for service industry. In case of Barclays also it is very important. Bank need to have efficient customer service process. Process Process in which the service is delivered is crucial. Quality of the service and the pace at which service is delivered is heavily dependent on the process of the service. As a result customer satisfaction is also influenced by the process in which service is delivered (Learnmarketing.net, n.d.). Process is also important for banking service industry. All the processes should be efficient in terms of cost and time. Barclays should also focus on improving its various processes like lending, protecting, and moving money. Processes which directly involve customers should more customers friendly. Processes should involve less time and cost. In order to made processes more efficient, various advanced technologies can be applied. Internet banking facility could be made more users friendly and Barclays can provide more value adding services through online banking. Physical Evidence Physical evidence of any service actually help customers to compare among various service providers. The place where the service is being delivered is one of the most important factors that need to be taken care of by the service providers. In case of a bank which is involved in retail banking that retail premise is the physical evidence for the bank to the customers who walk into that bank. The immediate impression that is developed in the mind of customer after he/she gets into a bank premise is crucial for the bank. As a result most of the banks are trying to make their retail premises more attractive towards the customers. In case of Barclays also this is very important. If the bank decides to make entry in a new market of a developing country like India, it has to focus on this aspect. Moreover Barclays is a very popular bank worldwide. As a result when a customer enters into a Barclays premise, his or her expectation might be little more than from any other bank. Barclays need to design its strategies based on these factors. References AFP, October 23, 2009. UK fails to exit recession, data shows, Brisbanetimes, [online] Available at: http://news.brisbanetimes.com.au/breaking-news-business/uk-fails-to-exit-recession-data-shows-20091023-hdan.html [Accessed on December 12, 2009] Bank.org.uk, No Date, Barclays Bank, [online] Available at: http://www.bank.org.uk/barclays-bank/ [Accessed on December 12, 2009] Bank.org.uk, No Date, HSBC Bank, [online] Available at: http://www.bank.org.uk/hsbc-bank/ [Accessed on December 12, 2009] Bank.org.uk, No Date, Royal Bank of Scotland Bank, [online] Available at: http://www.bank.org.uk/royal-bank-of-scotland-bank/ [Accessed on December 12, 2009] Barclays, No Date, About us, [online] Available at: http://group.barclays.com/About-us [Accessed on December 12, 2009] Barclays, No Date, Key Facts, [online] Available at: http://group.barclays.com/About-us/Barclays-at-a-glance/Key-facts [Accessed on December 12, 2009] Barclays, No Date, Our Strategy, Our strategy and guiding principles, [online] Available at: http://group.barclays.com/About-us/Who-we-are-and-what-we-do/Our-vision-and-strategy [Accessed on December 12, 2009] Control Risks Group Limited, No Date, Tiger kidnap - the threat to the UK banking sector, Control Risks, [online] Available at: http://www.controlrisks.com/pdf/tiger_kidnap_report_LR.pdf [Accessed on December 12, 2009] Financial Service Authority, No Date, National Data on Banking Sector – UK, [online] Available at: http://www.fsa.gov.uk/pubs/international/banking_sector.pdf [Accessed on December 12, 2009] Faqs, No Date, The adoption of a retail-oriented marketing mix for bank branch operations [online] Available at: http://www.faqs.org/abstracts/Business-international/The-adoption-of-a-retail-oriented-marketing-mix-for-bank-branch-operations.html#ixzz0ZToA67r6 [Accessed on December 12, 2009] Learnmarketing.net, No Date, Service Marketing Mix/Extended Marketing Mix, [online] Available at: http://www.learnmarketing.net/servicemarketingmix.htm [Accessed on December 12, 2009] Matthews, K. Murinde, V. Zhao, T. January 2006, Competitiveness and Market Contestability of Major UK Banks, CARDIFF BUSINESS SCHOOL WORKING PAPER SERIES, [online] Available at: http://www.cardiff.ac.uk/carbs/econ/workingpapers/papers/E2006_6.pdf [Accessed on December 12, 2009] Montia, December 2, 2009, Private banks: threats and opportunities abound, Banking times, [online] Available at: http://www.bankingtimes.co.uk/02122009-private-banks-threats-and-opportunities-abound/ [Accessed on December 12, 2009] Rao, S. No Date, View Point: UK Banking Industry, [online] Available at: www.infosys.com/finacle/finacle-connect/Issue_07/.../kali.doc [Accessed on December 12, 2009] BBC News, November 12 2008, Bank warns of recession into 2009, [online] Available at: http://news.bbc.co.uk/2/hi/business/7724215.stm [Accessed on December 12, 2009] Schifferes, February 11, 2009, Bank says UK in deep recession, BBC News [online] Available at: http://news.bbc.co.uk/2/hi/business/7883255.stm [Accessed on December 12, 2009] Totaltravel.com, No Date, Major banks, Banking in United Kingdom - UK Major Banks, [online] Available at: http://www.totaltravel.co.uk/uk/traveller/bank-uk [Accessed on December 12, 2009] Bibliography Buckle, M. Thompson, J. L. 2004, The UK financial system: theory and practice, Manchester University Press Coulbeck, N. 1984, The multinational banking industry, Routledge Upchurch, M. 1999, The state and globalization: comparative studies of labour and capital in ..., Routledge Read More