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, Latin America, Australia, Asia and Africa. It is a holding company that is listed in London, New York and Tokyo. It operates through its subsidiary Barclays Bank PLC. Barclays plc is the 18th largest company in the world according to Forbes Global 2000 rankings (2007 list) and the fourth largest financial services provider in the world by Tier 1 capital ($32.5 billion). It is the third largest bank in the United Kingdom based on market capitalization. The bank's headquarters are at One Churchill Place in Canary Wharf, in London's Docklands, having moved there in May 2005 from Lombard Street in the City of London Constituents of the group:
• • • • • • • • • •
• • • • • • • • • •
Barclays Bank PLC Mercers Debt Collection Agency Barclays Bank Delaware (formerly Barclaycard US, originally Juniper Bank, acquired 2003) Barclays Retail Bank — UK clearing bank Barclays Commercial Bank — Dealing with medium and larger corporate UK business.UK banks Barclays Wealth — Stockbrokers, Offshore and Private bank Barclays Private Clients International Ltd. — subsidiary based in the Isle of Man with branches in the Channel Islands Barclays Private Equity Barclaycard — Global credit card business Barclaycard US — separate from the Barclaycard global operation, this is the corporation's US credit card operation (formerly known as "Juniper Bank"). Issues branded credit cards such as US Airways, Midwest Airlines, Frontier Airlines MasterCard, Airtran Airways Visa card, and Apple Store Visa and MasterCard accounts. Barclays Capital — Investment bank Barclays Global Investors — Investment management company Woolwich plc — UK mortgage brand Barclays Africa — To be transferred to ABSA (South Africa) Barclays Spain Barclays Portugal Barclays France Absa Group Limited (South Africa) Firstplus Financial Group PLC Barclays Partner Finance (formerly Clydesdale Financial Services)
Porters Five Forces
Supplier Power (Medium)
Barriers to Entry (High)
Threat of Substitutes (High)
Buyer Power (Medium)
Entry Barriers (High) The emerging markets such as India and Africa are highly regulated by the government and also by the central banks. A lot of decisions such as regularization of interests on loans and deposits as well as money supply are controlled by the central banks of these countries. There are entry barriers which check the entry of any foreign bank in India. A lot of control is kept on the deposit taking, loan lending and also the number of branches to be operated in the market. The brand identity is not wide spread for Barclays since people will like to invest in government or public sector banks and not private bank for the safety of their deposits. Also due to restriction on the number of branches people in the rural areas would remain untapped. When it comes to product differentiation Barclays strategy works for urban and niche or corporate customers. The quick and efficient service provided by Barclays along with the ambience attracts a lot of customers. Rivalry among the Existing Competitors (High)_ When it comes to competitors in emerging markets we could include a whole lot of public as well as private banks along with NBFCs and microfinance institutions in rural areas are wide spread in rural areas. Existing from such markets even more difficult as compared to entry due to high regulations and the time it takes to wind up the business. However the strategy used by Barclays in Africa is a good strategy. Acquiring major stakes in Absa gives them easy entry in an untapped market as well as also brand visibility.
Bargaining power of Suppliers (Medium) The suppliers of a bank are the people from whom the banks raise funds. In most of the markets Barclays is a non listed company. So the major source of funds comes from it customers (depositors), who become Barclays suppliers in this case. The customers or the depositors have a high bargaining power in the market. Any bank giving a higher rate of interest would attract a larger number of funds towards it. This explains why private bank offer higher rate of interest as compared to other banks especially the term deposits. Also the Barclay Card offers a lot of attraction to the customer and attracts funds important for bank sustainability. However presence of other banks in the market both international and local players in the market provide a higher threat of substitutes in the market. Any bank which hikes the rate in the industry gets higher volume of funds. Bargaining power of the Customers (Medium) The customers for Barclays will be the people utilizing the products offered by it, the depositors, the card users and other service users. The customer has a high bargaining power since there are number of banks operating in the market which offer similar services. However Barclays rank high on the quality of services provided by them. This is of high importance for satisfied customers. Speedy service and facilities like free credit cards along with e-banking score high on customer satisfaction list. When it comes to buyer information only the urban customer is aware of the services offered by Barclays bank. In markets except India Barclays provides insurance services too. Threat of New Entry (High) Economies of scale in banking sector would be tapping markets which are still unsaturated and expanding their reach to a large number of customers which would mean higher net profit margins through volumes. Barclay as been trying to do this by continuously finding new markets and entering them. Their surge into emerging market in Western Europe, Africa (through Absa) and India shows their continuous effort to plunge into new markets. However they face high competition from financial companies as well as microfinance institutions how are providing easy financial solutions to the poor and weak and also the small entrepreneurs. As new player are entering into the market everyday, Barclays face a high completion from them. These institutions work at the ground level and hence have a better reach to rural customers. Hence they have a better access to the distribution channel. The markets like that Africa face a lot of political upheaval and hence can pose a major danger to the bank and the banking sector as whole. Resistance has been seen in markets like India by public sector banks as well as political parties when private banks entered the scene. Threat from Substitutes(High) There are plenty of substitutes in the retail finance industry such as moneylenders, NBFCs, microfinance and also the insurance companies. Banks offer a suite of services over and
above taking deposits and lending money, but whether it is insurance, mutual funds or fixed income securities, chances are there is a non-banking financial services company that can offer similar services. On the lending side of the business, banks are seeing competition rise from unconventional companies. Sony, General Motors and Microsoft all offer preferred financing to customers who buy big ticket items. If car companies are offering 0% financing, why would anyone want to get a car loan from the bank and pay 5-10% interest? In highly fragmented markets like India customers have a high propensity towards switching to other substitutes, especially in case of private banks which are comparatively new in the market.
Value Chain Analysis
The whole value chain is divided into two types of activities:• • Primary Activities Secondary Activities
Primary Activities This includes: Inbound Logistics: This includes the suppliers who fund the activities of Barclays. These include the investors who invest in its shares, commercial papers and also the foreign investors. Barclays is working more closely with their medium and high risk suppliers to identify potential issues and take steps to address them. For this the bank has issued a Corporate Responsibility Supplier Questionnaire. All new medium and high-risk suppliers are required to complete the questionnaire and it is also a condition of renewing the contract for existing relevant suppliers.
The results of the questionnaire have a 10% weighting in assessing our supplier’s suitability. The information helps us to ensure that we engage with the right suppliers and that they have suitable corporate responsibility policies that are in line with our standards. Operations: The operations of Barclays PLC include the following: • UK retail banking Personal Customers Home Finance Local Business Consumer Lending Barclays Financial Planning • Barclays Commercial Bank Larger Business Medium Business Asset and Sales Finance • Barclaycard UK Cards and Loans Barclaycard Business Barclaycard International • International Retail and Commercial Banking Absa Western Europe Emerging Markets • Barclays Capital Rates Credit Private Equity Absa Capital
Barclays Global Investors Index asset management Active asset management iShares
Barclays Wealth Private Banking Offshore Banking Brokerage Wealth Structuring Closed Life Assurance
Outbound Logistics: These are the ways Barclays reaches out to the customers: • • • • • • Consumer Loans Cards Mortgages Personal Loans Branch Banking e-Banking The Group is trying to reach out to the customers in more than these conventional ways. For example Barclay India has started with Barclays Hello Money- The revolutionary Mobile banking service. First time introduced in India by any commercial bank as a banking solution for the general public.
Market and Sales: Barclays PLC is a major global financial service provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and
investment management. Operating in over 50 countries and employing 135,000 people, they have a customer base of over 30 million customers and clients worldwide. Margins: For a bank or in this case a financial company the margins come from the charges such as interest charged or the brokerage or fee charges for the financial services rendered minus the operating costs. In these times when most of the markets are in recession making profits are not easy but still the company is growing at a reasonable pace. The profit did not increase rather decreased from 5195 to 5095 million euros. However seeing the industry trends especially after the sub prime crisis and recession in US economy, the results show a stable growth. Support Activities The supporting activities include all those activities which support the core activities of the business. These include: Firm Infrastructure: Most of the companies under the Barcleys group are investing heavily in infrastructure for better client service and better reach. This explains why they are facing high operating costs. Human Resource Management: Remuneration Committee The Committee has been constituted to provide governance and strategic oversight of remuneration, Barclays Human Resource activities and senior management development. The Committee’s objective in relation to remuneration is to ensure that it incentives excellence in business and personal performance and enables the Group to attract and retain employees of ability and experience. The Committee aims to achieve this by:
– ensuring clear and quantified individual and Group performance goals are in place supported by rigorous performance appraisal systems; – creating externally benchmarked remuneration frameworks for each major business that provide an evidence based approach to decisions; – reviewing past remuneration decisions against objectives; and – approving the specific remuneration packages of executive Directors and other senior executives. In relation to HR and senior management development, the Committee’s objective is to ensure that the Group’s people resources are managed to maximize business performance support the long-term success and growth of the business and protect the welfare of all employees. The Committee aims to achieve this by: – ensuring there are appropriate succession and talent management plans in place; – providing oversight of Group level policy on HR matters including those related to the mobility of employees within the Group; and – monitoring health and safety and equality and diversity issues across the Group. Technological Development: With the number of branches increasing and the area of operations going international banking sector is relying more and more on technology so as to reach to its wide spread customer base. However technological improvements involve a lot of cost. Barclays uses technology to reach out to its operations which are wide spread over continents. In order to reach out to the customers Barleys uses e-banking, mobile banking etc. , which require a high quality of technological support. These are also used to keep historic bank record, customer records, records of present and past employees etc. The records are so well kept that Barclays can supply information on branches such as when opened, by which company and a history of the building. They usually have photographs, dates of opening, history of the original bank which opened the branch, lists of managers and information on the building.
• Brand strategy through different brands
like various football leagues • Distribution channels • Various sources of income • Diversification
Lack of well trained staff and high attrition problems
• Emerging markets in Asia • •
High exposure to risks in the financial market Increasing competition and threats to the banking industry from other companies • Difference in the government regulations in all the countries.
• New Central and Eastern European EU members • Focus on improvements in European and US operations
Strategic Position & Action Evaluation (SPACE) Matrix is another management tool used to help analyze a company. It can also used to determine what sort of strategy the company should undertake. The SPACE Matrix is broken down into four quadrants as being aggressive, conservative, defensive, and competitive. Additionally, the SPACE Matrix analysis functions upon two internal strategic dimensions which are financial strength (FS) and competitive advantage (CA). Besides, the SPACE Matrix methodology also studies two business’ external strategic dimensions such as environmental stability (ES) and industry strength (IS). The CA (values from -1 to -6) and IS (values from +1 to +6) are representing by the X-axis of the Cartesian graph whereas the FS (values from +1 to +6) and ES (values from -1 to -6) are representing by Y-axis. After drawing these SPACE matrix graph, the overall strategic positioning of a company can be determined. SPACE matrix Internal strategic position Y-axis Financial Strength (FS) (score: +6 best, +1 worst)] +6: Operative earnings per share increased +4: Liquidity slightly decreased Total y-axis score: +5.00 -2.00 = +3.00 +5: Revenues increased +5: Return on Equity increased +5: Efficiency ratio stable Average: +5.00 X-axis Total x-axis score -1.25 + 4.80 = +3.55 Competitive Advantage (CA) (score: -1 best, -6 worst) -1: Market share -2: Service Quality -1: Customer Loyalty & reputation -1: Management Experience Average: -1.25 Average: +4.80 External strategic position Environmental Stability (score: -1 best, -6 worst) -2: Price or interest range of competing products -1: Inflation rates -2: Technology Changes -3: Competitive Pressure -2: Demand Variability Average: -2.00 Industry Strength (IS) (score: +6 best, +1 worst) +6: Growth Potential +5: Profit Potential +5: Financial Stability +4: Resource Utilization +4: Technologies Know-how
SPACE Matrix Graph
According to the graph above, we noticed that Barclays falls into the aggressive quadrant of the SPACE Matrix. It is located at the coordinates of 3.55 for x-component and a y – component of 3.00. It shows that Barclays has a strong competitive position in the market with rapid growth. It is also indicates that Barclays should adopt an aggressive strategy. It needs to use its internal strengths to develop a market penetration and market development strategy. Other possible strategies include product development, integration with other banks and also concentric diversification.
Barclays Microfinance Group- A New Profit Center
Expanding Access to Financial Services Why Microfinance? Microfinance is providing financial services to people who cannot access formal banking services. These services often include very small loans, typically less than $100, savings and insurance products. The Size of the Market Although it's difficult to get accurate statistics, some estimates suggest that there are more than a million small businesses in emerging markets. The number of microenterprises is thought to be even larger. This is a huge potential market for Barclays, which is why they should develop a wide range of microfinance services for these entrepreneurs. A useful benchmark was established by an analysis of ‘alternative financial institutions’ in the developing world in 2004. It counted approximately 665 million client accounts at over 3,000 institutions that are serving people who are poorer than those served by the commercial banks. Of these accounts, 120 million were with institutions normally understood to practice microfinance. Reflecting the diverse historical roots of the movement, however, they also included postal savings bank (318 million accounts), state agricultural and development banks (172 million accounts), financial cooperatives and credit unions (35 million accounts) and specialized rural banks (19 million accounts). Regionally the highest concentration of these accounts was in India (188 million accounts representing 18% of the total national population). The lowest concentrations were in Latin American and the Caribbean (14 million accounts representing 3% of the total population) and Africa (27 million accounts representing 4% of the total population). Considering that most bank clients in the developed world need several active accounts to keep their affairs in order, these figures indicate that the task the microfinance movement has set for itself is still very far from finished.
Barclays with the help of its subsidiaries worldwide and Absa in South Africa can come up with a new profit center which can be launched under the name Barclays Microfinance Group. Trends in Microfinance The Emergence of MFIs Microfinance is not a new concept; the difference today is that it is becoming increasingly commercialized. Although the United Nations and the World Bank continue to provide useful services in this area, as they have for decades, microfinance is moving further into the commercial world, through an emerging layer of microfinance institutions (MFIs) acting as agents for banks and insurers. This layer sells financial products to urban, semiurban, and rural markets, while the financial institutions remain as aggregators though securitization. Non-profit MFIs such as Planet Finance have paved the way for widespread microfinance, crossing the chasm into the commercial world. Grameen Bank Bangladesh and Bank Rakyat Indonesia has provided outstanding business models for how to make microfinance both a commercial and social success. The Life Insurance Corporation of India and the India MFIs such as Spandana and Shepherd, aided by sound regulations, has also played a major role in the commercial development of the microfinance sector. The layer is responsible for technological innovation to increase security, regulatory transparency, and scalability. It must reduce repetitive tasks, remove costly processes, and move the function to point of sale, which is the first lesson in lowering costs. Following outreach success, it must provide data warehousing to achieve sustainability and subsequent profitability. So we are looking at capacity building, credit rating, and access to wholesale finance arising from this layer. This white paper will examine how the layer can be technologically advanced and how, in the long term, this layer will get absorbed into the very institutions that now securitize microfinance
The services can be provided by developing commercial relationships with microfinance institutions, investors and networks as clients and partners. The Barclays Microfinance Group will work across Barclays businesses, product groups and geographies to provide leading microfinance institutions and their clients with financing, capital markets, transaction services, hedging, saving, remittances and insurance products. This would help Barclays to build domestic markets in developing countries.
The key to make this strategy a success is to make the products affordable for the customers and also to keep the operating costs low so that the group is able to survive.
The products which can be introduced are:-
Distribution of the products
The above Diagram represents the distribution Barcleys Microfinance could follow for remittance as well as collection of funds.
The diagram above shows how the services would be provided by Barclay Microfinance at various levels of distribution of different types of loans.
Future of Barclays Microfinance
In future we as Barclay see ourselves providing financial help to various microfinance institutions, rural banks, small and medium enterprises at a cost which is affordable to all. The help will be extended through direct investments in MFIs or by buying bonds issued by such institutions as well as directly to those entrepreneurs who come up with brilliant and feasible ideas.
Model used for partnering with MFIs would be:
Purchasing of Loans MFIs, Rural Banks Purchasing of Bonds Barclays Microfinance
Future Profits and Projections Book1.xls
4.1 Strategic Groups Figure 3 – Strategic Group Analysis (Source: Johnson et al., 2008, p73-77.)
Specialist e.g. PalmAir
Mass Service Providers e.g. BA, who operate similar NonFigure 3 illustrates that BA’sLocal e.g. direct competitors are those Virgin, scheduled the same strategic group. The competition is likely to be most Lufthansa, services and lie within BMI e.g.group as they are seeking similar strategies. AirFrance KLM intense within this
Lufthansa and KLM-Air France are the 2 leading European Airlines Member carriers in No-frills terms of passenger numbers, with 15.1% and 14.1% respectively of the total e.g. Ryan number of passengers carried. Jet comes in third with 9.3% of the total (Keynote, Air, Easy BA 2008c). BA face competition from a small number of serious contenders in the UK, with the main contenders being Virgin Atlantic, and United Airlines in the Star Alliance soon LOW BREADTH OF SERVICE HIGH controlling BMI (Euromonitor, 2008). Although they do not lie within the same strategic group as BA the advent of low-cost air travel has changed the face of the PRICE FOCUSED MIDDLE MARKET FOCUS ON established themselves airline industry. Airlines such as Ryanair and EasyJet haveSERVICE OFFERINGS among the leading carriers in Europe, whilst the more established long-haul carriers such as BA have struggled to keep up with their counterparts’ growth rates. Moreover the economic downturn and sharp fall in oil prices has caused a price war between Emirates, BA and Virgin Atlantic on the London-Dubai route. Fares have dropped by 30% across the airlines. Thus competition still remains fierce. Based on the strategic group analysis it could be argued that there is a gap in the market for a low cost airline operating a high breadth of service however it is likely
the reason no airlines have adopted this strategy is due to the fact that it would be destined to fail. This assumption could be supported by BA’s failed attempt to enter this market in recent years (Telegraph, 2002). The Balance Score Card (Appendix 7) is used as a tool to analyse the progress of the strategy in the review occurring every six months (Johnson et al., 2008). Whilst it highlights the strategy achievements, it additionally focuses attention to areas which may be failing, and hence need further resource allocation or a red flag to adapt the strategy. A traffic light system is utilised to categorise areas of success, monitoring, and decision making. Appendix 7 – Balance Score Card (Source: Garrison et al., 2003.)
Financial CSF Improved financial performance
Perspective Measures - Sales growth - End of year financial accounts - Profitability and liquidity ratios - Share price - Dividends per share
Customer Perspective CSF Measures - Quality control - Customer Quality of airline service feedback Customer service - Customer questionnaires and feedback - Customer feedback - Increased passenger volumes
Increased brand awareness
Internal Perspective CSF Measures Security and - Positive feedback speed of check-in services - Time efficiency of check-in service Customer orientated Expansion into new markets - Increased sales volumes - Profitability of airline competitors
Innovation and learning perspective CSF Measures Integration of UK and - Staff motivation emerging market cultures - Increase spending in R&D Investment into technological innovation Highly skilled staff - Spending on staff training
in the new markets
Based on the analysis of strategic options it is proposed that two strategies are implemented simultaneously. These strategies are a people processes focused strategy and technological advancement. Figure 12 details the objectives and performance measures of these two strategies. Figure 12 – Strategy Overview Strategy People processes Aim: Improved stakeholder brand image & profitability Objectives • • • Utilise databases. Improve service delivery efficiency. Improve internal communication. Implement effective review monitoring. Following succession with test internet implementation, roll out internet on-board internet access. An appropriate pricing strategy involving complimentary service for first class whilst targeting business class as the most profitable market. Continued market research to ensure that this is a valued service and seek opportunities for further development. Performance Measures • Profit margin increase of 2 – 3%. • Increase repeat purchasing by 25%. • Increase customer recommendation from 59% (2007/08) to 70%. • Improve employee survey rate from 35% (2007/08) to 80% (Value Chain). • Install equipment on remaining 244 aircraft.
• Technological advancement Aim: Customer Loyalty & Market Share • •
• Increase business class market share by 10%. • 80% of business class customers purchasing internet usage.
• Following R&D implement 1 new technological service.
In order for the chosen strategies to be successful effective implementation is essential to organize and enable success and to manage the changes that will impact BA.
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