Marketing Financial Services in London

Tony Carter
Michael Chattalas

ABSTRACT. Given the extremely competitive nature of the financial industry in London, England it is important to understand how to conduct a successful marketing effort. A look at various financial services firms in London,
such as General Electric Corporation Global, Morgan Stanley Dean Witter,
Fidelity Investment and government organizations including the Financial
Service Authority and the Bank of England help to profile several methods
available to help a global marketing effort. Innovative marketing performance
tools such as Customer Advisory Boards, Sales Technology Tools, and other
effective performance issues are examined. [Article copies available for a fee
from The Haworth Document Delivery Service: 1-800-342-9678. E-mail address:
<getinfo@haworthpressinc.com> Website: <http:// www.HaworthPress.com> 2001 by
The Haworth Press, Inc. All rights reserved.]

KEYWORDS. Competition, marketing, London, financial, services,

performance

INTRODUCTION
This paper explores the increasing globalization of the financial services industry focusing on an in-depth case study of the operations of
Tony Carter is Associate Professor and Chair, Business Administration and Professional Programs, Wagner College, Staten Island, NY 10301.
Michael Chattalas is Instructor, Wagner College, Staten Island, NY 10301.
The authors offer many thanks to a series of personal interviews in London, England taking place on May 24, 1999 and October 19-20, 1999 with Dan Porter and Bill
Wright of GE Global, Richard Horlick of Fidelity Investments, Sasha Young of Morgan Stanley Dean Witter, Chris Bailey with The Bank of England and Bob Ferguson of
Financial Services Authority.
Services Marketing Quarterly, Vol. 22(4) 2001

2001 by The Haworth Press, Inc. All rights reserved.

63

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three such firmsGE Capital, Morgan Stanley Dean Witter and Fidelity
Investments in London, a leading global financial center. The regulatory role of the Financial Services Authority and the Bank of England is
also explored.
THE GLOBALIZATION OF FINANCIAL SERVICES
The corporate and institutional market-side of the financial service
industry is already among the most globalized in the world. At the same
time, technology and economic convergence, particularly in the European Union, is currently driving personal financial servicesthe other
side of the industryinto increasing globalization (The Economist,
1997). Technological forces are greatly reducing the industrys costs,
while enabling global customer interaction. Financial markets are becoming increasingly integrated, driven by the dominance of the U.S.
dollar and the Euro. Government regulation of financial services is becoming increasingly liberalized allowing the global mobility of capital.
As customer choices increase and financial service firms gain greater
global market access, those companies that establish a strong worldwide presence, will surely gain from first-mover advantage when the industry moves toward consolidation. American financial service firms in
particular seem well positioned to aggressively expand their unique set
of branding and competencies on a global scale.
As global financial service firms capture a growing market share,
they are likely to grow out of the top-tier New York and London firms.
These are firms that already advise the worlds leading companies in
two of the worlds three biggest capital markets (Tokyo being the
other). Importantly, they both work in English, the language of international businessthus reducing customer anxiety that may result from the
perceived cultural distance in service encounters. Additionally, London
is bound to grow in relative significance even further, as the European
Union moves toward financial convergence based on the common currency of the Eurodespite the perennial ambivalence of the British toward European integration. The current Cool Britannia national
image campaign is attempting to rebrand England as a country at the
forefront of service innovation (The Economist 1999). In this sense,
London attempts to position itself as the true global financial capital of
the world, literally at the geographic and cultural crossroads of European, American and Asian interests.

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65

Globalization as driven by technology, deregulation, privatization,

and the increasing influence of American values, is propelling U.S. financial services firms to worldwide dominance. Meanwhile, the physical and symbolic barriers posed by geography and cultural differences
are falling. Given the heightened influence of culture in service encounters, American financial firms are particularly well positioned in the
global marketplace.
In an emerging world without economically significant geographic
or even, cultural borders, those firms with the best skills, economies of
scale and worldwide strategies will reap huge potential. Capital is becoming increasingly mobile as foreign exchange, bond and equity markets are being integrated. In addition, the growing flow of direct foreign
investment around the world cannot be underestimated. As technology
reduces service encounter and buyer-seller interaction costs, the electronic delivery of services will further the mobility of capital and subsequently of, financial services products (Bryan and Frazer, 1999). In all,
financial services firms are becoming globalized as their core products
benefit from improved mobility.
MARKETING ISSUES
There are several methods available to help global marketing efforts.
One such financial services firm, Fidelity Investments, a U.S. firm
based in London, England, acknowledges the importance of a mission
statement, and of a corporate philosophy that makes a commitment to
quality levels and performance. This firm also adds that a lot of team
building is necessary due to the complexity of the marketing of financial services.
In many cases this marketing activity is driven by ego and personal
relationships and not by merits and costs. According to Bartlett and
Ghoshal (1995), global organizations depend on personnel who are
willing to take personal initiative and to cooperate with one another,
who have self confidence and a commitment to the company, and who
are able to execute relatively routine tasks with the same proficiency as
they are willing to learn new skills and ways to take the company to the
next stages of ambition.
Other financial services firms have added that for global sales it is especially important to use visual aids to help the customers understanding of product or service features while overcoming language barriers.
The use of customer advisory groups and committees along with sales

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technological tools such as video conferencing, database management,

and current industry software can also help raise levels of sales efficiency. Strategic meetings within the organization between line managers, senior level managers, their economist and customer advisory
groups are useful in order to decide the best strategic process to use for
managing customers. The Financial Services Authority in London proposes the obvious ability to develop personal relationships which can
also lead to the long-term benefit of referral business. The urgent rapid
pace of cultivating clients and generating deals that is expected in the
United States will not work in a global sales effort as effectively as using a more slowed down pace. This aims at building confidence and
trust as a way of overcoming the problems that may arise from the cultural distance between the financial services firm and its worldwide
customers (Stauss and Mang 1999).
Worldwide customers with diverse cultural backgrounds may have
varying expectations toward financial service encounters and may in
fact perceive these situations differently. As a result, globalization strategies embrace social processes that aim to override the constraints of
geography and ethnicity. The members of a global organization thus engage in cross-cultural interactions to evolve common norms, values and
meanings (Wright et al. 2000). These elements are especially vital to the
proliferation of service exchanges. Furthermore, employee effectiveness and global competitiveness is built on an applied combination of
social and technological inputs (Wright et al. 2000).
Another customer-related strategy that can assist a marketing effort
is profiling customers. Since a global marketing effort is an overseas investment with a smaller margin for error, this information is crucial. Before calling on a customer and doing business, it is important to first
find out if they want to work with foreign companies and whether they
have a prior positive international experience. Such customer references are crucial initiation rites that can bridge the perceived cultural
distance between customers and global financial services firms. Also, it
should be determined if they are financially solvent through the review
of some materials that show solid financial strength. Once a transaction
has been underway it becomes important to get the customer to show
some commitment to the given project. Assurances are fine, but in particular, a nonrefundable deposit to ascertain commitment and enthusiasm should be used, along with performing a customer product or
service audit to assess customer needs and aspirations. This audit
should examine the customers structural strengths and weaknesses regarding finances and/or the product or service. In addition, the audit

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67

should determine the opportunities and threats facing the client, along
with specific suggestions on how the global financial firm can help prepare a strategic response. This is done by keeping a tight connection
with consumers, developing a worldwide information and intelligence
system, and positioning the organization to satisfy consumer demands
(Moran et al. 1993).
CONDUCTING A SUCCESSFUL FINANCIAL SERVICES
MARKETING EFFORT
The Financial Services organizations involved in London recommend these conditions to conducting a successful marketing effort:

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Communication between all world areas is critical;

Global Account Manager at the senior level;
Regular communications using e-mail and conference calls;
A lot of networking by interfacing with key decision maker;
Knowledge of culture, customer differences, local laws and customs;
Local person to handle marketing of foreign market;
Good communications between home, office, and sales outpost;
Uniform pricing policy;
Global sales strategy;
Incorporating international customer wants and needs into their
product and service development process, by including key global
markets in customer research;
Technology tools;
Hiring from within the target country;
Team selling, since a team that has the ability to understand all clients needs worldwide can work together to formulate the most effective strategy.

A CASE STUDY OF THREE INVESTMENT FIRMS

IN LONDON GENERAL ELECTRIC CAPITAL (LONDON)
GE Capital is a subsidiary of the General Electric Corporation, the
number one firm on Forbes Super 50 list based on its combined rankings in revenue, profit and market value measures. GE Capital is a
multi-business corporation with one-half of its revenue stemming from

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GE Capital Services. Currently, GE has ten core business units, 290,000

employees, global revenues that equal 42% of total revenues, and double-digit growth statistics for revenue and net income.
General Electric is a diversified technology, manufacturing and services company with a commitment to achieving world leadership in
each of its key businesses. These businesses include GE Aircraft, Appliances, Capital Services, Industrial Systems, Lighting, Medical Systems, NBC, Plastics, Power Systems and Transportation Systems. In
terms of revenue and profit GE was Forbes #1 on the super fifty list. GE
is #12 in revenue, #2 in profits and #1 in market share. The Financial
Times reported that GE is the most respected company in the world. GE
continues to have steady growth; 50% of GE revenue is from the United
States. GE has an international growth rate of 15%. Within Europe there
is continual growth; European employment started at 7,700 in the beginning and is now at 82,000 and growing.
GE remains very market driven; the goal at GE is to make the customer more productive, lower costs, make better use of assets and be
more competitive within the market place. Integrity is the cornerstone
of business conduct at GE Capital; there is no room for misinterpretation or mistakes.
The past 15 years have witnessed tremendous growth for GE due to
three key initiatives of growth strategy implemented by Jack Welch,
GEs Chief Executive Officer. These initiatives include globalization,
services, and Six Sigma quality. Globalizations role in GEs growth
is evident by the following statistics: by the year 2000 revenues from
outside the United States will be over 50% of total revenue; the international growth rate from 1987 to 1998 was 11%, while the U.S. only
saw a 7% rise in growth; there has been approximately a 50% increase
in employment outside the U.S. Due to the fall of Communism, GE
will take advantage of Eastern Europes target for higher employment
and use Poland as a hot spot for business acquisitions.
GE Capital in London emphasizes a market driven orientation with
their operations in London. These marketing methods include helping
their customers and becoming more competitive, providing low prices,
giving high quality products and high service levels. GE Capital in London also believes that since it costs more to get new customers than to
keep existing ones, it is important to protect their current customer base.
GE Capital in London also believes in solid management and employee
practices such as:

_ Empowerment;
_ Embracing change as opportunity;

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Leadership by example;
Thorough communication;
Creating clear and simple reality based vision;
Live quality;
Building diverse teams;
Development of a winning culture.

With the transformation to a service company, improved service is

another key initiative of GEs growth strategy. GE has developed a market driven approach to improve customer service by three methods.
First, GE wants to make its customers more productive by continuing to
manufacture high tech, quality products. Second, GE aims to lower customers costs by servicing GE products and products of its competitors.
Lastly, GE attempts to drive better use of their costs by focusing on service technology and research and development.
Six Sigma is a growth initiative signifying quality while focusing on
GE customers. It is both a measurement and a methodology. The Six
Sigma quality measurement goal is achieved when the average process
generates fewer than 3.4 defects per million chances. The Six Sigma
methodology is the disciplined problem-solving approach that is used
to achieve the Six Sigma goal. This is based on the firms vision to generate virtually defect-free processes, products and services by 2000.
Continued growth is not the only goal GE strives to accomplish. The
corporation knows that in order to be the best, you must employ the
best. Therefore, GE looks to hire the A employee. One who leads
rather than follows, one who involves everyone and shares the best
ideas with everyone immediately, spreading the wealth. One able to
embrace change and willing to take risks and move fast. This type of
employee exemplifies GEs management motto to Lead Not Manage,
a management trend guaranteed to succeed.
GE Capital is a wholly owned subsidiary of GE, the worlds largest
company by market value, employing over 275,000 colleagues. GE
Capital is one of the GE groups fastest growing and most successful divisions. Over the past twenty years, GE Capital has grown earnings by a
compound annual growth rate of over 20% contributing about 40% of
GEs total profits. GE Capital earned $3.25 billion in net income in
1997, on assets of $255 billion. GE Capital entered the European market 13 years ago and is now undergoing a period of rapid growth
through strategic acquisitions. Already highly successful European net
income was over $700 million. The wide-ranging operations cover four
major sectors: consumer services, equipment financing, specialized fi-

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nancing and specialty insurance. The key driver to success is the close
adherence to GEs core values. The priorities within GE are integrity
and quality, openness to change, and the ability to find the best way for
customers to achieve their ambitious business goals. GE is committed
to fulfilling its role in Europe as a responsible business leader in the
communities throughout the continent.
GE Capital Services European operations collectively form one of
Europes most successful financial services businesses, a success built
on the value that is created for the customer. From 1994 to 1997, GE
Capital has increased net income from $150 million to over $700 million. That growth is very positive for GE Capital because it brings forward new customers. The success that GE Capital experiences is a
result of customer dealings. The goal within GE is to help the customer
become more competitive, GE has highly qualified professionals use
their expertise in order to best serve the individual needs of every customer.
GE Capital has managers that are well trained and who act as leaders
rather than as managers. There are many opportunities and challenges
for GE Capital:
Opportunities
Strategic reorientation will mean:
More potential acquisition opportunities.
New technologies and markets.
High appetite for GE products.

Challenges
High prices within competitive
markets.
EMU compliance.
European economy not meeting
growth expectations.

GE Capital is one of the largest and most diversified financial services companies in the world. It consists of 28 highly focused businesses, 21 of which are currently established in Europe. GE Capital
gives businesses a competitive advantage; more productivity; more efficiency, more ways to excel and, to individuals, GE Capital means
more spending power and greater variety in private label credit cards,
auto financing, savings and insurance products. GE Capital is shaping
the global financial services industry as it increasingly exploits its size
and scope to rapidly institutionalize its expertise on a worldwide scale.
Morgan Stanley Dean Witter (MSDW)
Globally, MSDW can be found in 23 countries with approximately
500 offices worldwide. The recently built London office is the main office in Europe, with others located in Zurich, Frankfurt and Milan. Se-

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curities lending is the transfer of securities, also known as stock or

share, from lender to borrower to satisfy deliveries in the market. The
benefits of securities lending are a more liquid market, reduction of
market failures, and fee-revenue generated by lenders such as MSDW.
The mechanics behind securities lending are basic with the lender loaning to the borrower for the exchange of collateral, usually at a fee. The
borrower now sells stock he doesnt own and eventually returns it to the
lender at a future date. Morgan Stanley Dean Witters role in securities-lending is to act as an intermediary between lender and borrower. In
this situation a fee is paid from the borrower to MSDW, while MSDW
in turn pays a fee to the lender. Over the past ten years, MSDW has implemented changes in the firm due to the introduction of global communications and advanced technology, especially the Internet. The
company is now able to participate in the global market to the fullest extent.
According to MSDWs 1998 annual report, the worldwide market
for mergers and acquisitions was strong contributing to record levels of
revenues by the firms investment banking business. Also, the stability
of the global economy in the first half of fiscal 1998 positively impacted
the securities market. Finally, as the EMU replaces the national currencies of 11 participating European Union countries with the Euro, the
EMU will primarily impact MSDWs Securities and Asset Management business.
The EMU replaces the national currencies of 11 participating European Union countries with a single European currencythe Euro. The
Euro was launched on January 1, 1999, when the European Central
Bank assumed control of monetary policy for the participating nations.
During the transaction period until the national currencies are withdrawn from circulation, such currencies will continue to exist but only
as fixed denominations of the Euro. EMU will primarily impact the
Companys Securities and Asset Management business. The introduction of the Euro presents major business opportunities for financial market participants such as MSDW. The company expects that the
introduction of the Euro will lead to greater cross-border price transparency and will have significant impact on the markets in which the company operates. It will also propel further convergence across the
European financial services market.
The introduction of the Euro presents major business opportunities
for global financial services firms such as MSDW. The firm expects
that the introduction of the Euro will cause less cross-border price confusion and will have a significant impact on the markets in which

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MSDW operates. MSDW prepared actively for the introduction of the

Euro and implemented several modifications to its information technology systems and programs in order to prepare for the transition to the
Euro. The company engaged in extensive testing of the systems and
processes affected by EMU and also communicated extensively with its
clients and cohorts regarding the implications of EMU.
Morgan Stanley Dean Witter is a brokerage house that provides
through its subsidiaries, a wide range of financial and securities services
on a global basis and provides credit transaction services nationally. Its
Securities and Asset Management businesses include securities underwriting, distribution and trading, merger, acquisition, restricting, real
estate, project finance and other corporate finance advisory activities.
The companys credit and transaction services businesses include the
insurance of Discover/NOVUS Network, a proprietary network of merchant and cash access locations, and direct-marketed activities such as
the online securities services offered by Discover Brokerage Direct,
Inc. The Companys services are provided to a large and diversified
group of clients and customers, including corporations, governments,
financial institutions and individuals.
The Companys expectations about future costs, the timely completion and the potential risks of its Year 2000 modifications are subject to
uncertainties that could cause actual results to differ materially from
what was discussed above. Factors that could influence the amount of
future costs and the effective timing of remediation efforts include the
success of the Company in identifying computer programs and non information technology systems that contain two digit year codes; the nature and amount programming and testing required by the Companys
regulators around the world, including securities exchanges, central
banks and various governmental regulatory bodies; the rate and magnitude of related labor and consulting costs; and the success of the companys external counterparties and suppliers, as well as worldwide
exchanges, clearing organizations and depositories, in addressing the
year 2000.
Fidelity Investments Corporation
The Fidelity Investments Corporation is an investment management
organization with clients ranging from schoolteachers to Fortune 500
companies. Boston is home to Fidelity Headquarters, but the company
has global investment centers in London, Hong Kong and Japan. Fidel-

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ity concentrates on private investments such as mutual funds and investment management.
Fidelity is a mutual fund company with a retail market of 200 billion.
The retail market is very strong and continues to grow at 100% each
year. With so many individuals interested in the stock market, mutual
funds are becoming more and more a way for individuals to make profits on existing funds.
According to Richard Horlick at Fidelity International in London,
globalization plays great importance in Fidelitys success. Currently Fidelity holds a good position in the retail market in the United Kingdom
but is limited by the size of the market. Conversely, Japan is a primary
target market for Fidelity due to the countrys large population and the
recent ability to launch domestic funds in Japan. The wealthy and
well-educated population of Taiwan makes it Fidelitys most profitable
market. Hong Kong is another target market for Fidelity, which focuses
on the sale of mutual funds to this market.
Despite the success Fidelity has achieved in the global market, a few
roadblocks stand in their way. The South Asian and Middle Eastern
markets are difficult to do business with because of the time zone and
work schedule difference. A communist society combined with a low
average level of income makes China a difficult market to break into.
The overlay associated with doing business in Eastern Europe is too
high related to the expected return rate available; in addition the poor
economic state of this population leaves Fidelity offering a simple, basic insurance program to this market.
Fidelity has made its mark globally, but relies on the use of technology to maintain competitive advantage and a research-driven approach
to investment management as its business foundations. A focus on technology has enhanced Fidelitys ability to offer superior customer service to all its clients. Investments in hardware, software and systems
help Fidelity employees analyze and research the worlds markets, in
addition to providing its customers with up to the minute information
helping them to make sound financial decisions. A commitment to fundamental, thorough research on the companies in which Fidelity invests
acts as a competitive advantage. Its organizational belief is that people
who know the most about a company and its industry, both domestically
and abroad, are best prepared to build financial portfolios. This sophisticated research process correlates to another corporate belief that being
the first to enter a market, especially an unfamiliar market, is not always
going to be successful.

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Fidelity holds the individual responsible and accountable for investment decisions, which it believes is much more effective than decisions
made by committee. Before individuals make decisions, however, a
committee made up of portfolio managers, analysts, and researchers
carefully scrutinizes certain segments of the market supplying the individual with mass amounts of information necessary to make the proper
decision.
There are four investment offices, USA-Boston, London-European
Securities, Hong Kong14 different countries within, and Japan has
been a member since 1969. The regional sales office is located in Buenos Aires, Australia, Paris, Luxembourg, and Madrid. With so many locations finding an investment office any time of the day and year, to
cater to individuals and their financial needs is never a problem for Fidelity. The key competitive advantage for Fidelity is research, constructing a regional portfolio that shows the performance of different
funds in different areas. One weakness for Fidelity is that it has become
multi-local, creating a need to keep a higher level of global consistency
throughout the company. The target market for the future is the Middle
East and Europe. The base of business done at Fidelity is retail with a
shift in International Business, Institutional Accounts and Retail. The
key for a company such as Fidelity is to market where there are large
pools of money, to find the margin and work from there. Currently
France, Germany and Scandinavian Countries are the target markets for
large pools of money. The advantage to London is that it is cheaper.
Competition in the United Kingdom is mostly retail. Two of the big
competitors are Merrill Lynch and J. P. Morgan. With competition from
such large companies, further global expansion is a concern in order to
remain ahead. New markets, such as Japan which remains closed, is one
concern for Fidelity. Going into Japan can increase financial growth
and increase the competitive edge. Japan has a high-income bracket so
going into Japan for new business would mean significant growth.
China, however, has a low average income, making it very difficult to
do business in China.
Fidelity carefully picks which markets it wants to enter. Instead of
creating a new market, Fidelity chooses the best existing ones and focuses on them, rather than pursuing them all. The majority of markets
are still domestic bonds. Focusing in on a few specific stocks allows Fidelity to research and understand the stock before making any financial
decisions. Local stocks are followed by locals; this allows Fidelity to
get a matrix to gain regional impact.

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GOVERNMENT REGULATORY ORGANIZATIONS IN THE UK

Financial Services Authority
The FSA is the new single financial regulator of the United Kingdom. Prior to the establishment of the FSA there were many regulatory
organizations with overlapping responsibilities producing chaotic regulation. This led to the conception of the FSA as a single regulator replacing the former regulatory bodies.
As one of the largest financial centers in the world, London is home
to the following key financial markets: banking, fund management, foreign exchange, insurance derivatives, and securities dealing. Why attempt to regulate these financial markets? The FSA has identified two
reasons for regulating these markets. First, regulation attempts to create
a stable financial environment imperative to maintaining the stability of
the global financial market. Secondly, requiring that financial institutions provide proper information to consumers removes the possible
damaging economic consequences of a non-regulated system.
By taking on the responsibilities of a comprehensive financial regulator, the FSA handles multiple assignments. It is a low making/standard
setting organization, responsible for educating the public, licensing
firms and individuals, supervising firms and markets, enforcing rules
and regulations, and settling disputes and issuing compensation.
The benefits of this integrated regulation range from a one-stop regulation point for firms to creating a level playing field for all financial
service institutions. It also develops a coherent consumer education
strategy and establishes clear accountability and respectability to the
FSA, Parliament, and the British public.
Although the United States does not participate in unified regulation
efforts, there is a worldwide trend toward integrated regulation with
Sweden and Denmark leading the way. As a matter of fact, many international financial institutions have commented on this type of regulation acting as a competitive advantage for businesses located in
London. The FSA believes it holds a standard as a world leader in financial regulation.
Cumulating nine regulatory organizations into one is not a simple
task. However, it has given the FSA an opportunity to introduce modern
management methods. It has been able to flatten its hierarchy and improve the flow of information around the regulatory system. It has
adopted the symbolism of an open-plan environment shaping a culture

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of open communication within the FSA. Another management practice

aimed for success.
Globalization is inevitable to the continued growth of financial organizations. We have witnessed the major role it plays, although varied, in
each and every company we analyzed. Advancements in technology
will only lead to greater global opportunities.
The Financial Services Authority has objectives that are set forth by
the Parliament. The key objectives of the FSA are:

_ To sustain confidence in the United Kingdom financial sector and

markets;

_ To protect consumers by ensuring that firms are competent and financially sound while giving their customers confidence in their
integrity, while recognizing consumers own responsibility for
their financial decisions;
_ To promote improvement in public understanding of the benefits
and risk associated with financial products;
_ To help monitor, detect and prevent financial crime.

The FSA seeks to be an innovator in techniques of regulation, and the

assessment of financial market developments. The FSA seeks to anticipate change, and show the ability to adapt its working practices quickly
to changes in products, markets and institutional structures. That implies that FSA has a staff that will grow and change with the times.
The FSAs size brings with it the danger of a closed and slow moving
bureaucracy. It should therefore make particular efforts to be open to
suggestions and criticisms, scrupulous in explaining its decisions to
customers and institutions and responding promptly and fully to complaints and requests. Internally, it must work hard to ensure that staff are
well informed about all aspects of the organization. The FSA requires
high commitment from its staff. That commitment must be properly acknowledged, in line with rewards available in the market.
London is one of the three main centers in the world and has the largest share of trading in many international financial markets. Regulation
is required for systemic risk and financial literacy; domestic and retail
through different businesses within. Financial literacy is understanding
what is being bought and why. The FSA must also mandate disclosure,
see what is being bought and sold.

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The FSA was formed to prevent all the overlapping within the common areas. The idea was to bring all areas together, too many areas create political risks, and regulatory failures. The FSA has multiple roles:

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Standard setting/law making;

Public education;
Licensing of firms and individuals;
Supervision of firms and markets;
Enforcement/Investigation;
Dispute settlement and compensation.

There are many benefits of integrated regulation in the United Kingdom:

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One-stop regulation for firms;

In the round perspective;
Competitive parity;
Coherent consumer education strategy;
Economies of scale;
Greater accountability.

The FSA works to regulate the economy and to keep the United
Kingdom from experiencing economic disaster. The Federal Reserve
Bank in the United States does the same for our economy. The FSA sets
the standards and controls the prices of financial services and goods
throughout the United Kingdom.
Bank of England
The Bank of England is the equivalent to the Fed in the United States,
printing British notes as currency. There are 12 agencies within the
Bank of England with two deputy governors.
The Bank of England is the central bank of the United Kingdom. The
Bank of England is responsible for the overall stability of the countrys
financial system. Set up in 1694 as the result of a proposal by Scottish
merchant William Paterson, the Bank of England is one of the oldest
central banks in the world. The Bank of England started as a commercial bank with private shareholders and developed a large private banking business. It was not until 1946 that it was brought into state
ownership but for many years before that, the Bank has seen itself, and
behaved, as a public institution carrying out public functions.

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Once a month there is a meeting to discuss the interest rate that is set
by the Bank of England. The inflation rate has remained at 2.5% for a
long period of time. The goal of every central bank is to aim for a positive inflation rate. The interest rate is determined by how fast the economy is growing. In comparison to the United States, the growth rate of
the British economy is lower.
The Bank serves as the bank to Englands government and to its
banking system, while also setting monetary policy. Customers of the
Bank include Englands commercial banks, other central banks such as
the Federal Reserve, and the British Government. By holding accounts
at the Bank of England, other countries central banks are able to conduct foreign exchange in London.
The three main objectives the Bank aims to achieve are maintaining
the integrity and value of the nations currency, ensuring the stability of
the financial system, and promoting the efficiency and competitiveness
of the financial system. The first objective is achieved by monetary policy primarily through influencing the interest rate and by providing a
framework for non-inflationary economic growth. A nine-member
group called the Monetary Policy Committee meets one day per month
to establish the interest rate, while it is the responsibility of the Bank to
decide on the level of short-term interest rates necessary to meet the
Governments inflation target, currently 2.5%. When setting the interest rate many questions need to be asked. How fast is the economy
and/or demand growing? What are some domestic and international
economic and monetary factors that may have an effect on inflation
over the next few years? This is important because once interest rates
are determined, it takes approximately one to two years for the interest
rates to work through the economy possibly affecting domestic borrowing, consumer demand, investment, and eventually, prices.
From a global perspective, interest rates have an effect on the value
of the sterling in terms of foreign currencies. For instance, higher interest rates will tend to attract foreign funds into sterling, thus increasing
the sterling exchange rate against other currencies. In the foreign exchange market, the Bank buys and sells the Governments foreign exchange reserves, attempting to manipulate a rise or fall in sterling.
Ensuring a stable financial system is another important function of
the Bank of England. In the past, the Bank of England had the power to
authorize and supervise all deposit-taking institutions, thus creating a
regulatory standard necessary to establish a stable financial system.
However, the 1998 Bank of England Act transferred this responsibility
from the Bank to the Financial Services Authority which now acts as a

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79

regulatory agency for the financial market of the United Kingdom, an

organization previously discussed.
This transfer of power did not eliminate the Banks responsibility of
overall stability of the financial system. Rather, the Bank houses the Financial Stability Area which identifies and analyzes developments in
the structure, function and regulation of the financial system that are relevant either to the stability of the system as a whole, or to its efficiency
and effectiveness in meeting the needs of the customers. If there is a
threat to the stability of the economy, the Bank may intervene by financially supporting an institution destined for failure, whose repercussions of collapse may spread throughout the financial system. This
infrequent intervention protects the stability of the entire financial system. In order to play its stability function globally, the Bank analyzes
developments in foreign financial markets and their impact on the banking sector. Also, the Bank is well represented on numerous international
supervisory committees and holds close ties with supervisory institutions around the world.
Finally, promoting the efficiency and competitiveness of the financial system is the final objective of the Bank of England. London is the
worlds leading international finance center and would like to remain
that way. To prevail as leader, financial institutions must recognize and
adjust to weaknesses and competitive threats. The Bank of Englands
role is to monitor Londons financial development. The Banks efficiency and competitiveness concerns focus on Year 2000 compliance
of banking institutions, and a belief that London should provide an efficient service to domestic industry, in which savings are directed to industry through markets and the banking system.
The creation of an Economic and Monetary Union (EMU) in Europe
was adopted in the Maastricht Treaty on European Union intended to
establish European integration. The monetary unification includes a
common currency called the Euro. Although the United Kingdom did
not join the EMU at its initiation (January 1999) the Bank of England
has played a large role in the preparations for the EMU. The Bank was
closely involved in the technical preparations at the European level to
ensure that the arrangements were applicable to all members. Staff
members of the Bank of England were lent to the European Union to offer expertise and to help facilitate discussion at meetings. In the United
Kingdom, the Bank coordinated preparations in London and surrounding areas to ensure that the Euro could be used in wholesale financial
markets beginning January 1, 1999. Now all banks in London are set up
for Euro trading.

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SERVICES MARKETING QUARTERLY

The rate of unemployment plays a huge role in the economy for England; unemployment is stable and consistent but still continues to be a
concern for Englands economic success. The business cycles are always changing, bringing fluctuation to the economy. It is important for
the business cycle to remain in harmony. The business cycle has remained in harmony for 2-3 years; by the year 2002-2004 the political
and economic problems within England are expected to work out.
The European Monetary Union is of great concern to the Bank of
England. The main argument in support of European Monetary Union is
that the permanent elimination of exchange rate fluctuations between
participating countries would reduce risks and costs for inter-European
Union trade and thus help promote greater economic prosperity. The
creation of the Economic and Monetary Union in Europe is envisaged
in the Maastricht Treaty on European Union and its timetable began on
1 January 1999. As a result, exchange rates between participating countries will be fixed and a single interest rate will be set for all participants
by a European Central Bank. The Euro will become a currency in its
own right and will be used in the banking system but there will be no
physical Euro bank notes or coin until the beginning of 2002.
Currently, the Bank of England has been performing a delicate balancing act; preparing the United Kingdom economy for the realities of a
potential transition to the EMU, while asserting British national sovereignty over monetary policy in the short term.
The Bank has been concerned with the impact of European legislation on the City. The Bank is ensuring that proper representations are
made and that those negotiating on behalf of the United Kingdom are
properly briefed is an important task for the Bank. The Bank of England
sets economic policy and standards for all of England, very similarly to
the way the Fed operates within the United States.
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Bartlett, C. and Goshal, S. (1995), Rebuilding Behavioral Context: Turn Process
Reengineering into People Rejuvenation, Sloan Management Review (37, 1),
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Bryan, L. and Frazer, J. (1999), Getting to Global, The McKinsey Quarterly (4),
28-37.
Carter, T. (1998). Contemporary Sales Force Management. New York: The Haworth
Press, Inc.
Moran, R., Harris, P. and Stripp, W. (1993), Developing the Global Organization:
Strategies for Human Resource Professionals. Houston: Gulf Publishing Co.

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Stauss, B. and Mang, P. (1999), Culture Shocks in Intercultural Service Encounters?

Journal of Services Marketing (13, 4/5), 329-346.
The Economist (1997), Global Investment Banks: Fools Gold (December 13).
The Economist (1999), Rebranding Britain Compellingly Dull (November 27).
Wright, P., Geroy, G. and MacPhee, M. (2000), Human Resources Model for Excellence in Global Organization Performance, Management Decision (38,1), 36-42.