Faculty of Business and Law

MSc FINANCE AND MANAGEMENT

GLOBAL CORPORATE STRATEGY

PGBM16

Module leader: Dr. Augustus E.Osseo-Asare

Module tutor: Mohan Namasivayam

Student name: Nguyen Hong Van Tran

Student number: 149050294

Number of words: 3422

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ABTRACT
Global financial services industry in general and UK financial services segments in specific
are known as a greatly competitive and continuously fast-changing environment, so there
have been various opportunities and threats to Lloyds Banking Group and other businesses in
the industry. A good mix of outside in perspective and continuous revision and development
of core competences help them establish the business model with great dynamic capabilities.
The efficient decisions related to establishing SAs in contractual forms have contributed an
essential part into rebuilding the trust of Britain‟s households, business and communities and
then seeking the vision of becoming the best bank for customers. Moreover, the proper
business model, good corporate governance and efficient management of paradox between
profitability and responsibility take a vital role in implementing their strategy to reach vision
and mission.

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 TABLE OF CONTENT

Pages
Table of content 3
List of figures 4
List of abbreviations 5
I. Introduction 6
1. Global Financial Services Industry 6
2. Lloyds Banking Group 8
II. Firms’ competitiveness in the global financial services 10
industry
1. Force 1: The bargaining power of suppliers 10
2. Force 2: The bargaining power of buyers 10
3. Force 3: The threat of substitutes 11
4. Force 4: The threat of new entrants 11
5. Force 5: The threat of rivals 12
III. Strategic alliances, mergers and acquisitions and global 17
competitiveness
1. Strategic alliances 17
2. Mergers and acquisitions 18
3. Lloyds’ business model in a fast and dynamic 21st Century 20
global business environment.
IV. Corporate Governance, CRS, leadership and 21
competitiveness.
V. Personal reflections on learning 24
VI. Conclusion 26

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 LIST OF FIGURES
PAGE
Figure 1: Private Sector Credit, 2016 4
Figure 2: Banking assets, 2016 7
Figure 3: Top 15 leading financial centers globally as of March 2016 7
Figure 4: Underlying profit 2014 8
Figure 5: Vision, Mission and Strategic priorities of Lloyds Banking Group 9
Figure 6: Total income by segmental analysis of Lloyds Banking Group 2014 12
Figure 7: Top 25 leading banks globally, by total assets in 2016 13
Figure 8: Top Banks in the UK 13
Figure 9: Market share of current account of leading banks in UK, 2014 13
Figure 10: Volume share of business loans in England and Wales, Year to 14
Quarter 1-2013
Figure 11: Largest mortgage lenders by balances outstanding in 2014 14
Figure 12: Total revenue by region and total income by franchise 2014 of Royal 15
Bank of Scotland.
Figure 13: Mapping the Risk of Digital Disruption 16
Figure 14: Lloyds Banking Group PLC 19
Figure 15: Shareholder value approach versus stakeholder value approach 22
Figure 16: SWOT summary 25
Figure 17: Business activities undertaken using smartphones and tablets with 36
mobile internet access, 2013
Figure 18: The simplified framework of bank value chain 37
Figure 19: The Ashoka Hybrid Value Chain 37
Figure 20: Activities along the financial services value chain by sector 38
Figure 21: The value chain within an organization 39
Figure 22: The value chain of Lloyds Banking Group 39
Figure 23: Key success factors (KSF) 41
Figure 24: Main advantages and disadvantages 42

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 LIST OF ABBREVIATIONS
Global financial services industry GFSI
Royal Bank of Scotland RBS
Lloyds Banking Group LBG
Strategic alliances SA
Mergers and acquisitions M&A
Key success factors KSF
Small and medium-sized enterprises SMEs
Industrial and Commercial Bank of China ICBC
Supplier Relationship Management SRM
United Kingdom UK

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 I. Introduction
1. Global Financial Services Industry

The global financial services industry (GFSI) is known as an industry, in which monetary
financial institutions and financial corporations other than monetary financial institutions are
related to the transactions required to obtain the financial good in different areas(International
Monetary Fund, 2012; Deloitte, 2016). The areas includes banking, commercial real estate,
hedge funds, insurance, mutual funds, private equity and wealth management have
appearance in not only their home country but also many abroad countries (International
Monetary Fund, 2012; Deloitte, 2016). The distinction among these subsectors in the
financial services are ambiguous as financial institutions or companies could involve in
diversified services in different sectors and the activities in these subsectors are interrelated
(International Monetary Fund, 2012).

Figure 1: Private Sector Credit, 2016

Source: The Economist Intelligence Unit, 2016

As can be seen from Figure 1, the GFSI is divided into six markets- Western Europe, Asia
and Australasia, North America, Eastern Europe, Middle East and North Africa and Latin
America based on geographic market segmentation (The Economist Intelligence Unit, 2016).

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 Figure 2: Banking assets, 2016

Source: The Economist Intelligence Unit, 2016

Combined with data in Figure 2, it is reveals that the private sector credit of Western Europe
has the greatest percentage of GDP with 133.9% and it also the second highest level of
banking assets in 2016 (The Economist Intelligence Unit, 2016).

Top 15 leading financial centres globally as of March 2016

850
800
750
700
650
600

Global central financial index rating

Figure 3: Top 15 leading financial centers globally as of March 2016

Source: Long Finance, 2016.

Furthermore, according to the statistic of Long Finance (2016) on Figure 3, London is the
global financial centre having highest global central financial index rating. Moreover, Lloyds
Banking Group has focused on the national financial market with reshaping decisions since
2011(Lloyds Banking Group, 2014, p.11). Therefore, this work will mainly consider changes

7
in UK environment besides analyzing the effects of global environmental trends when
critically evaluate the essential issues in the Global Financial Services and strategic decisions
of Lloyds Banking Group to maintain and improve in the dynamic environment.

2. Lloyds Banking Group (LBG)

LBG is a leading UK based financial services group offering and providing a variety of
products and services related to banking and financial services and their main focus are
personal and commercial customers (Lloyds Banking Group, 2016a).

Underlying profit 2014

Retail
6%
-1%
11% Commercial Banking
41% Consumer Finance
13%
Insurance
Run-off and Central Items
28%
TSB

Figure 4: Underlying profit 2014

Source: Lloyds Banking Group, 2014, p.41

The Figure 4 manifests that their four major segments include retail, commercial banking,
consumer finance, and insurance with the contributions in underlying profit in 2014 of 41%,
28%, 13% and 11%, respectively (Lloyds Banking Group, 2016a). This group is multi-brand
with well-known brands including Lloyds Bank, Halifax, Bank of Scotland, and Scottish
Widows and it has a multi-channel model with a comprehensive network including digital,
telephony and mobile services besides the direct services at office branches (Lloyds Banking
Group, 2016a).

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The below Figure 5 shows the mission and strategic priorities of Lloyds Banking Group:

Becoming the best bank for customers and our

Vision
shareholders

We are meeting our customers‟ needs by creating

a simpler, more responsive organisation and are
investing in our digital capability while maintaining
Mission a comprehensive branch network. By becoming
the best bank for customers we believe we can
help Britain prosper and deliver strong and
sustainable returns for our shareholders.

Reshape its businesss porfolio to fit its

assets,capabilities and risk-seeking

Strategic priorities
Strengthen its balance sheet and liquidity position

Simplify to enhance its flexibility and efficiency

Invest to be the best bank for customers

Figure 5: Vision, Mission and Strategic priorities of Lloyds Banking Group

Source: Lloyds Banking Group, 2014, p.41

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 II. Firms’ competitiveness in the global financial services industry

To critically examine the competitive environment of the global financial services industry in
which LBG do business, it is important to apply Porters‟ Five Forces models (Grundy, 2006,
pp.214). According the detailed analysis of Appendix 1, there are some indications:

1. Force 1: The bargaining power of suppliers

In terms of providing the money and funds- which is main input of LBG, it is divided into
two main groups of suppliers: small suppliers and larger supplier (Lloyds Banking Group,
2015, p.16)a. The small suppliers usually have low bargaining power of suppliers. However,
if there is a mass of suppliers withdrawing money at the same point of time, as the situation
in the financial crisis in 2008, its operation could be adversely impacted. Compared to these
suppliers, larger suppliers- other SMEs and large enterprises have greater power because they
frequently have more substantial and sustainable lending amount.

The UK Government and Bank of England have a significant bargaining power of suppliers
to LBG as they not only provide massive funds but also have legal and regulatory power.
Furthermore, Bank of England is a key supplier providing short-term fund with usually one
day period in order to meet reserve requirements (Howells and Bain, 2008, p.308).

LBG‟s suppliers providing intangible assets, such as data security systems, digital system,
operating and managing software and others, also have a strong bargaining power because
they get access into the important managerial and operational information (Lloyds Banking
Group, 2016b, p.1). For example, SAP, who provides Supplier Relationship Management
(SRM) E-Procurement solution software to LBG, is a dominant supplier in the financial
services industry, so they has a high bargaining power of suppliers (King, 2011).

2. Force 2: The bargaining power of buyers

In this case, there are various levels of bargaining power of different types of buyers. In
specific, buyers who are personal and small businesses in retail subdivision usually has low
negotiating power because there is an insignificant effects on the profits and long-term wealth
of LBG if one of them stop their account and switch to other competitors. However, 41% of
LBG is from the retail turnover (Lloyds Banking Group, 2014, p.41). It implies that if there is
a revolution of a lot of these customers at the same time, the corporation could be negatively
affected.

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Compared to this group of buyers, large corporates and high net worth individuals could have
more bargaining power as their profitability and cash flows could be dramatically impacted
when there is any loss of these great accounts and sources of turnovers.

Besides that, its products is low differentiated, so it is non-difficultly switch from this
financial services company to other competitors without any serious issue (Lynch, 2015,
p.89). Moreover, some non-bank companies having high ability to integrate vertically to take
part in this industry are large corporate customers of LBG, so they has a high bargaining
power (Lloyds Banking Group, 2014, p.15).

3. Force 3: The threat of substitutes

According to Rodrigo (2012), there is extremely low threat from substitutes because financial
services comprising both traditional and modern financial services and alternative financial
services have played a core role in the economy and individual life.

On the other hand, Maverick (2016) and Ross (2016) argued that the threat of substitute
products has risen because companies outside the industry have some disruptive innovation
related to technologically advanced facilities for financial services. For instance, many types
of the substitutes for payment processing and transfer services are created and used widely,
including Apple Pay or online peer-to-peer lenders such as Prosper.com or LendingClub.com
(Ross, 2016). Bitcoin has been a digital alternative to traditional money based on
cryptography for its operation with a peer-to-peer network (Delloite, 2014). It has advantages
over current financial services of low transaction costs and ease in international
transferability (Delloite, 2014).

4. Force 4: The threat of new entrants

After the financial crisis, the governments and policy makers lower legal barriers with
simplifying the authorization process for new banks and reducing capital requirement for new
entrants in the prudential regulation in the UK financial services industry for promoting
competition (Bank of England, 2014, European Commission, 2015).

Moreover, economies of scale is not considered as a main barrier in this sector as there has
been a lot of cashless trends and disruptive innovations destroying the traditional products
and businesses such as digital facilities, online and Fintech (Slater and Olson, 2002, pp.17).

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Hence, there is a rise in access of new entrants to the market with diversified business models
(Lloyds Banking Group, 2014, p.15).

5. Force 5: The threat of rivals

According to Johnson et al. (2014, p.41), competitive rivals are defined as businesses having
indistinguishable products and services seeking to the same customer group. Five critical
factors should be considered in evaluating the extent of rivalry in an industry comprise
competitor balance, industry growth rate, high fixed costs, high exist barriers and low
differentiation (Johnson et al., 2014, p.41).

Total income by segmental analysis 2014

5%
3%

9% Retail
Commercial Banking
45%
14% Consumer Finance
Insurance
24% Run- off and Central items
TSB

Figure 6: Total income by segmental analysis of Lloyds Banking Group 2014

Source: Lloyds Banking Group, 2014, p.41

It is true that Lloyds Banking Group has been operating in four segments- retail, commercial
banking, consumer finance, and insurance, but it can be seen that 69% of its total income in
2014 came from retail and commercial banking activities (Lloyds Banking Group, 2014,
p.41). Thus, it is reasonable to focus on appraising the main segments.

There are many common points between Lloyds Bank Group and Royal Bank of Scotland.

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Figure 7: Top 25 leading banks globally, by Figure 8: Top Banks in the UK
total assets in 2016
Source: http://www.relbanks.com/europe/uk
Source: http://www.relbanks.com/worlds-top-
banks/assets

In specific, Royal Bank of Scotland (RBS) ranked 22nd in top 25 leading bank globally and
3rd in UK‟s top banks in 2014 and LBG stood at 23rd and 4th, respectively (Figure 7 and 8).

Market share of current account of leading banks in UK, 2014

4% 3%
2% Lloyds Banking group
6%
Barclays Bank Plc
27%
The Royal Bank of Scotland
10%
HSBC Bank Plc
12%
18% Santander UK Plc

18% Nationwide Building Society

TSB Bank Plc

Figure 9: Market share of current account of leading banks in UK, 2014.

Source: http://www.statista.com/statistics/387098/uk-banks-current-account-market-share/

Besides that, Figure 9 provides that the market shares in current account in 2014 of LBG and
RBS are 27% and 18%, respectively.

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Figure 10: Volume share of business loans in England and Wales, Year to Quarter 1-2013

Source: https://www.cml.org.uk/news/news-and-views/largest-lenders-in-2014-reflect-a-
competitive-mortgage-market/

Additionally, Figure 10 supports that the two corporations has the same volume shore of
business loans in England and Wales in first quarter 2013.

Largest mortgage lenders by balances outstanding in 2014

Lloyds Banking Group

20% 24% Santander

2%
2%
2% Nationwide Building
2% 12% Society
6%
Barclays
8%
12%
10%
The Royal Bank of Scotland

Figure 11: Largest mortgage lenders by balances outstanding in 2014

Source: https://www.cml.org.uk/news/news-and-views/largest-lenders-in-2014-reflect-a-
competitive-mortgage-market/

Moreover, both of them are in top 5 greatest mortgage lenders by balances outstanding in
2014 as Figure 11.

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 Figure 12: Total revenue by region and total income by franchise 2014 of Royal Bank of
Scotland.

Source: Royal Bank of Scotland (2014, p.23).

According to information from Figure 6 and 12, 66% of the total income of RBS is from
personal and business banking and commercial and private banking and these segmental
markets also takes a vital role in total income of LBG with 69% (Lloyds Banking Group,
2014, p.41; Royal Bank of Scotland, 2014, p.2). Besides that, UK market is their major
market (Lloyds Banking Group, 2014, p.11; Royal Bank of Scotland, 2014, p.2).

Moreover, these two banks nearly have the same missions- building the customers trust
(Lloyds Banking Group, 2014, p.6; Royal Bank of Scotland, 2014, p.4).Therefore, it could be
concluded that RBS is a main rival of LBG in both global market and UK market and they
have a high competitor balance, meaning that the competition in the market is expected to be
significant (Halminton and Webster, 2015, p.83).

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 Figure 13: Mapping the Risk of Digital Disruption

Source: Citigroup, 2016b, p.28

Furthermore, it is necessary to take into account some trends and changes of some largest
banks in the international market- Citigroup and Industrial and Commercial Bank of China
(ICBC)- as their strategic changes could cause the transformation of the nature of the global
financial services industry competition facing the LBG. Firstly, in a report in 2016, US bank
Citi has predicted that the continuous growth of Fintech could lead to digital disruption in
future while digital capacity is the recent strengths of LBG (Citigroup, 2016 b, p.28). Figure
14 shows that companies in UK have high risk of losing exsiting revenue pool due to digital
transformation.

On 1 February 2015, the acquiring a controlling stake in Standard Bank‟s London-based

global markets business of ICBC made it the first large state-owned Chinese lender and it has
become the first Chinese lender owning London vault since May 2016 (BBC News, 2016;
England, 2015). The more accessing into UK market of ICBC and the future prediction of
Citi group have created challenges for LBG and other businesses in the domestic market
(England, 2015).

Moreover, a survey of Wilkes (2014) resulted that the net balance of financial services
companies reporting raised business volume achieved 49 per cent, which is 51 per cent
greater than net balance recorded in 2007. It implies that there has been a significant market

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growth since the global financial crisis. In addition, there is low product differentiation in this
industry, so it is easy for customers to switch to its competitors (Lynch, 2015, p.89).

Therefore, the financial services industry is a highly competitive industry and the threat of
rivals to LBG is great.

III. Strategic alliances, mergers and acquisition and global competitiveness

1. Strategic alliances

Globalization, a dynamic market and high competition have substantially changed the global
economy and the way firms run business in the world (Vazirani, 2012, pp.38). Strategic
alliances (SA) and mergers and acquisitions (M&A) have become important tools to
implement growth strategies (Rani, Yadav and Jain, 2013, pp.179).

According to Johnson et al. (2014, p.341), SA refer to collaboration of two or more

independent firms in which they share resources and activities to seek a common strategy
with partial ownership changes or no ownership changes. Meanwhile, Lynch (2015, p.645)
defined SA as a form of contractual relationship used to secure an international venture
without affecting shareholdings. Marciukaityte et al. (2009, pp.1194) claimed that SA are
known as equity and non-equity cooperating arrangements between two or more
organisations related to allocating partial ownership, financial risks and rewards and
operational responsibilities. These above definitions have a similarity that is the companies
joining in SA definitely remain their autonomy but the purposes of using the SA are different.

There are four critical motives for alliances- scale alliance, access alliance, complementary
alliances and collusive alliances and the two major types of strategic alliance are equity
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alliances and contractual alliances (Johnson et al., , p.344; Zamir, Sahar and Zafar, 2014,
pp.36).). A research of The CMO Council resulted that 85% of respondents believed that
alliances are important for their business, but 43% of them have a great rate of failure-
around 60% and more (Whitler, 2014). It means that these SA neither meet the goals and
objectives of their parent companies nor deliver on the operational or strategic benefits
required by these companies (Zamir, Sahar and Zafar, 2014, pp.33-34).

Rebuilding trust is a strategic objective of LBG due to the negative affect of the financial
crisis and the continuous legacy of past industry misconduct (Lloyds Banking Group, 2014,
p.6). Many strategic alliances in contractual forms have been made by LBG to regain the trust

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from customers, shareholders and other stakeholders. For example, there was an important
alignment with the Alzheimer‟s Society and Alzheimer Scotland for two-year partnership as
its initial charitable programme with over £6 million (Lloyds Banking Group, 2014, p.8).
Besides that, the common goal of assisting communities across the UK and cooperating
together to make better life changes for disadvantaged children and young people, LGB
decided to choose BBC children in Need as its charity of the year partnership for 2015 and
2016 (Lloyds Banking Group, 2014, p.8). As a result, the SAs are considered as successful
decisions because they lead to a huge improvement of the customers experience toward LBG
with a 50% rise in net promoter scores and a massive decline in reportable banking
complaints to become nearly 50% less than the average of LBG‟s key banking peers (Lloyds
Banking Group, 2014, p.12). Thus, the SAs have supported LBG to achieve the desire to
become the best bank for customers.
2. Mergers and acquisitions

Different from SA, mergers refers to the coming together of two separate business entities to
form one new company under common ownership to achieve mutual objectives and
acquisition is known as that an acquirer purchasing a dominance of shares in a target
companies and taking control them (Johnson et al., 2014, p.330; Rani, Yadav and Jain, 2013,
p.179). The study of Prakash and Bolotnikova (2015, p.2) estimated that the worth of global
M&A deals in 2015 was nearly $4 trillion, the highest deal values since 2007. Johnson et al.
(2014, pp.332) suggested three key motives for M&A: strategic motives relating to enhancing
the competitive advantages of the organisation; financial motives focusing on maximise the
efficiency of financial resources and managerial motives referring to serving managers‟ self-
interests. As results of Harvard Business Review research, the failure rate for M&A is from
70% to 90% due to lack of a clear strategy, good communication between stakeholder groups
and efficient and effective project management (Europe Business Review, 2015).

In term of LBG, it is essential to mention the successful decision of Lloyds TSB to take over
HBOS plc. in January 2009 (Lloyds Banking Group, 2015 b). This decision was strategic
because it contributed an important part into its returning to profit in 2010. As the result of
the important acquisition, the corporation was the largest retail bank in the UK, which implies
it could gain more benefit from the government safety net as it became more “too big to fail”
or “too import to fail” banking group (Casu, Girardone and Molyneux, 2015, p.202; Lloyds

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Banking Group, 2015 b). This action also built up good view of LBG in customers and
stakeholders.

After the financial crisis, the UK government and EU Commission have been focused on
promoting competition in the British retail banking markets by offering more rules and
implementing restructuring plans to offset the distortion of the government safety net
(European Commission, 2015). Thus, on 9th September 2013, Lloyds TSB must demerger
into two separate banks- Lloyds and the new TSB to meet European Commission State Aid
commitments (Ahmed, 2013; Lloyds Banking Group, 2015 b). The complying with
commitments is necessary to avoid legal issues and keep their good brand image related to
social responsibilities in customers (Monaghan, 2013).

Figure 14: Lloyds Banking Group PLC

Source: http://www.londonstockexchange.com/

However, the Figure 14 showed that there was a massive downward trend of its share price
in 1 month post-event, implying that the shareholder wealth was adversely impacted. Besides
that, combination of the event with approval of EU Commission in acquisition of TSB by
Sabadell boosts competition in the British retail banking market- the biggest market of LBG
(European Commission, 2015). Furthermore, TSB has been a part of LBG for nearly 27
years, so it could have learned skills and knowledge from LBG (De Wit and Meyer, 2014,
p.315). It means that the split could cause potential issues related to imitating capabilities for
LBG (Lloyds Banking Group, 2015b).

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 3. Lloyds’ business model in a fast and dynamic 21st Century global business
environment.

The global financial services industry is a dynamic environment with a variety of continuous
new challenges; such as rapid and unpredictable transforming ways of advanced digital
technology, new regulatory and restructuring legislation and application of government and
policy makers in worldwide post the financial crisis, the effects of Internet in the way of
doing business, potential issues related to economic instability of European and emerging
countries and changes in customers‟ demands (Delloite, 2015; Gousia, 2015; Lloyds Banking
Group, 2014, p.15; Marsh et al., 2014, p.11). In the fast-changing environment of GFSI, I
think that “a low cost, low risk, customer focused, UK retail and commercial banking
business model” of LBG is considered as a good choice for some reasons (Lloyds Banking
Group, 2014, p.18).

By applying Simplification programme to be simpler and more efficient, there was a

substantial decline in its cost base by 2 billion from 2010 to 2014 to get the smallest cost to
income ratio (51.2%) among the UK banking firms (Lloyds Banking Group, 2014, p.11). The
low cost strategy gives them strategic differentiation and competitive advantages of having
cost leadership position (Lloyds Banking Group, 2014, p.11). Additionally, achieving a low
risk by decreasing earnings volatility supports them sustainably maximize shareholder wealth
(Lloyds Banking Group, 2014, p.11).

Besides that, simpler and more efficient processes with customer focused model gives LBG
more flexibility and responsiveness to identify the continuously changing demand trends of
customers. Then, they could seize more opportunities to meet the needs through multi-brand
and multi-channel and create greater value for customers with better product and appropriate
innovation and enhance their long term competiveness by operating sustainably and
responsibly (Lloyds Banking Group, 2014, p.19).

Last but not least, focusing on UK market is aligned with LBG‟s commitment of helping
Britain proper. Additionally, 69% of its total income is from retail and commercial banking
sectors but there have been massive transformations related to regulation, competition and
customer demands in the mentioned markets (Lloyds Banking Group, 2014, p.41). Therefore,
choosing UK retail and commercial banking focused business model is essential to protect
their current leading position in these markets.

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Subsequently, thanks to an efficient combination of outside in perspective and continuous
revision and development of core competences, the business model provides LBG high
dynamic capabilities (De Wit and Meyer, 2014, p.217).

IV. Corporate Governance, CRS, leadership and competitiveness.

Due to the negative influences of several accounting scandals and global financial crisis,
ethics and corporate governance (CG) issues have been significant concerns of researchers,
practitioners and policy makers (Darrat et al., 2016, pp.163). Moreover, because of having
the special features of deposit institution, the CG of banks has usually been attracted the more
attention by government than others (Kim, 2016, pp.707). Johnson et al. (2014, p.113)
defined CG as the controlling structures and systems by which managers have
accountabilities to organizations and individuals having a legitimate stake in an organization.
Meanwhile, De Wit and Meyer (2010, p.600) stated CG refers to every task or activity aimed
to supervise and guide the behavior of board of directors and top managers. Whatever the
definition is, three key functions of CG comprise affecting formulation of mission and
strategy, contributing to develop future corporate performance and verifying conformance of
corporate to the mentioned mission and strategy (De Wit and Meyer, 2014, p.123).

Senior management team plays important role in managing both daily activities and long-
term strategy implementation (Lloyds Banking Group, 2014, p.16). In order to gain long-run
success and enhance sustainable return for shareholders, it is critical to establish high
standard of CG to avoid managerial mischief and moral mazes of them (Lloyds Banking
Group, 2014, p.9). LBG has built a good top-to-bottom governance structure to create an
effective environment in which colleagues are motivated to do rightly and work responsibly
(Lloyds Banking Group, 2014, p.22). All decisions related to CG and responsible business
objectives are made by the Group Board, Group Executive Committee and Responsible
Business Committee to ensure the comprehensiveness and objectiveness (Lloyds Banking
Group, 2014, p.22). To ascertain that managers act in the greatest benefits of customers and
shareholders, their remuneration is strongly aligned with the strategic development, financial
performance and risk management (Lloyds Banking Group, 2014, p.22).

According to Dahlsrud (2006, pp.1), there have been various definitions of CSR. Johnson et
al. (2014, p.127) claimed that CSR is the commitment by companies to behave ethically and
take role in economic development while developing not only the quality of workforce and
their families‟ life but also the local community and society. Whereas, in 2003, Business for

21
Social Responsibility defined CSR as achieving commercial success in ways honoring ethical
values and respecting people, communities and the nature environment (Dahlsrud, 2006,
pp.8). Different definitions mainly take into account dissimilar dimensions. It is essential for
businesses to define their roles in society and implement proper social and ethical standards
to them (Lindgreen and Swaen, 2010, pp.1).

Figure 15: Shareholder value approach versus stakeholder value approach

Source: Johnson et al. (2014, p.135)

Furthermore, there is an increasing controversial involving managing the paradox of profit

and responsibilities. As can be seen from Figure 15, shareholder value perspectives focuses
on profitability over responsibility but responsibility is more vital than profitability in the
stakeholder values perspective. While the significance of CSR grows, shareholders continue
to require managers to increase profitability (Johnson et al., 2014, p.135). As a result, it is
suggested to offer a win-win scenario for the business and its community (Lindgreen and
Swaen, 2010, pp.1). It means that a synthesis between firm profitability and societal
responsibility should be created (Johnson et al., 2014, p.135). For example, the improvement
of value chain management should consider not only economic value but also environmental,
social and legal aspect (Drucker, 2012, p.2).

After financial crisis and continuous legacy in GFSI, regaining trust with not only
shareholders after long period without dividend payment but also Britain‟s household,
businesses and communities is the key of business success (Lloyds Banking Group, 2014,
p.6). Thus, LBG decided to build up a responsible business which balances profitability and
responsibility. It is reflected to the long term objectives of company, comprising maximising

22
sustainable shareholder returns, becoming the best bank for customers and helping Britain
prosper (Lloyds Banking Group, 2014, p.16). For achieving the strategic objectives, Code of
Business Responsibility (CBR) is established as guiding principles for the way LBG do fairly
and responsibly (Lloyds Banking Group, 2013, p.5).

There are some key point listed in the strategic report and to ensure doing business honestly
and ethically. Firstly, “Putting Customers First, Keeping It Simple and Making a Difference
Together” is their group values and the guidelines for their performance (Lloyds Banking
Group, 2013, p.8).

Secondly, they commit to contribute to society by helping Britain proper. In specific, they
have invested in the long-term economic future of UK through dramatic lending to
customers, SMEs and first-time buyers as well as community programmes, including Lloyds
Scholar programmes, Social Entrepreneurs programme and Career Academies (Lloyds
Banking Group, 2014, p.7).

Thirdly, colleagues are the core in implementing the vision of becoming the best bank for
customers. Hence, they create a great company to work with high standards for: Diversity and
Inclusion, Human Rights, Behaviour at Work, Disputes, Grievances and Redundancy,
Reward, Training & Development and Health and Wellbeing (Lloyds Banking Group, 2013,
p.10-11).

Thirdly, they committed to provide information about the strategy and financial performance
to shareholders fairly, honestly, accurately, timely and transparently (Lloyds Banking Group,
2013, p.12). Additionally, creating strong and sustainable returns to shareholders is one of
their major goals (Lloyds Banking Group, 2014, p.18).

Fourthly, to maintain the long lasting relations with other stakeholders, having two-way
dialogue, listening and understanding their requirements is the way they do (Lloyds Banking
Group, 2014, p.29). In terms of investors and rating agencies, more than 1,000 meetings are
undertaken in 2014 to keep them informed (Lloyds Banking Group, 2014, p.29). For
suppliers, they establish strong and collaborative relationships in the foundation of ensuring
responsibilities, sustainability and mutually beneficial ways (Lloyds Banking Group, 2014,
p.29). Then, they could have sustainable development and innovation in their supply chain
and manage risk effectively to create greatest value to customers and shareholders (Lloyds
Banking Group, 2013, p.13). Besides that, they directly work with UK government to

23
enhance ethical and quality standard in the industry (Lloyds Banking Group, 2014, p.29).
Additionally, ensuring their operation complying with the regulatory, legal and tax
requirements is their aims (Lloyds Banking Group, 2013, p.14). Moreover, lessening
environmental issues is also taken into account in their practices (Lloyds Banking Group,
2013, p.16). In 2014, £3.8 million was spent in energy saving technology and 13.1%
decrease in energy use compared to the previous year (Lloyds Banking Group, 2014, p.29).

Furthermore, the synthetic of profitability and responsibility is also reflected in performance

assessment (Lloyds Banking Group, 2014, p.29). The performance of all staff is evaluated on
the balance scorecard of objective and five key areas- customer, building the business, risk,
people and finance (Lloyds Banking Group, 2014, p.29).

Thanks to the consistency in objectives and operational guidelines related to managing the
paradox efficiently, Lloyd‟s Chairman and senior management teams could have appropriate
self-management. Besides that, they have proper guidelines for shareholder and stakeholder
relationship management. They also have obvious benchmarking systems to manage, lead
and control the performance of employees and other related parts to implement the vision,
mission and strategic objectives efficiently and effectively. Moreover, they could improve the
value chain management to gain long-term benefits based on the balance of stakeholder and
shareholder value approach (Appendix 2). Therefore, LBG could become the best bank for
all stakeholders.

V. Personal reflections on learning

In my point of view, GFSI in general and UK financial services segment in specific are
considered as a complex and high competitive environment. Due to the special nature of
banking and financial services, the customers are also suppliers sometimes. Besides that, the
key suppliers of this industry include government and financial authorities. There has been
continuous new changes related to fast transforming ways of digital technology, changes in
regulatory and legal requirement post-crisis, fast-changing demands trend of customer and
the increase of SA and M&A of big global financial services company (Delloite, 2015;
Gousia, 2015; Lloyds Banking Group, 2014, p.15; Marsh et al., 2014, p.11). Thus, the
competition of the industry has boosted sharply. It leads to some opportunities and threats to
the Lloyds Banking Group as the SWOT summary on Figure 16.

24
 Strengths Opportunities
Totally focus on the UK market The economy and financial services
industry are recovered
Multi-brand and muti-channel with good Low cost position
digital facilities
Low risk with a strong balance sheet and Clearer regulatory requirements
funding position
Industry cost leadership strategy Changes customer needs have been well-
positioned
Being simpler and more efficient systems
and proccesses
Weaknesses Threats
Lower flexibilities in some cases due to Highly competitive market
weaker financial capability compared to
other groups and less international
apperances
Low differentiate products Fintech
Lower regulatory barriers
Horizontal Mergers and Acquisitions in
UK of big global financial services
companies

Figure 16: SWOT summary

Furthermore, SA and M&A have been tools to implement growth strategies (Rani, Yadav and
Jain, 2013, pp.179). To rebuild the trust from customers, shareholders and other stakeholders,
there are many strategic alliances in contractual forms, such as the SA with Alzheimer‟s
Society and Alzheimer Scotland or BBC children in Need (Lloyds Banking Group, 2014,
p.8). They are successful decisions as it has resulted in improvement of the customers
experience and brand images. Thus, the SAs have supported LBG to reach the desired vision
to become the best bank for customers.
Furthermore, I think that the recovery of LBG in 2014 is also thanks to the right business
model, a good top-to-bottom governance structure and comprehensive and objective
corporate governance highly aligned with the strategic development, financial performance
and risk management (Lloyds Banking Group, 2014, p.22). The balance of shareholder value
approach and stakeholder value approach has supported LBG to achieve sustaining growth
through being responsible business. Therefore, LBG could become “the best bank for
customer” to help Britain prosper and provide returns for shareholders significantly and
sustainably.

25
 VI. Conclusion

LBG has been operating in a highly competitive and dynamic industry, so there have been
various opportunities and threats to them. Thanks to an efficient and effective combination of
outside in perspective and continuous revision and development of core competences, the
business model provides LBG high dynamic capabilities (De Wit and Meyer, 2014, p.217).
The successful SAs have supported LBG to regain the trust of Britain‟s households, business
and communities and then achieve the aim to become the best bank for customers. The proper
business model, good corporate governance and efficient management of paradox between
profitability and responsibility play critical roles in achieve vision, mission and strategic
objectives.

26
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 APPENDICES

Appendix 1: Detailed analysis about 4 first forces of Porters’ Five Forces Model

The analysis of this tool is complemented by some elements of PESTLE model and resource-
based view to define the reasons for changes of competitive nature in the recent years as well
as evaluate how Lloyds Banking Group and their competitors use the strategy, internal
resources, capabilities and core competences to gain and sustain competitive advantages in
the industry (Hamilton and Webster, 2015, p.80).

Force 1: The bargaining power of suppliers

Johnson et al. (2014, p.46) stated that suppliers are known as people or organizations
supplying the business with what it needs to provide products or services and their bargaining
power is high when there are few suppliers, high switching costs and supplier competition
threat. Besides that, Lynch (2015, p.89) suggested if there are substitutes for input, the
suppliers prices are a main part of the total cost and they potentially undertake the value-
added process of the business, they are more powerful. According to Code of Suppliers
Responsibilities, Lloyds Banking Group (2015, p.16) a states that suppliers refer as “all third
party organizations providing goods or services to Lloyds Banking Group, excluding
individual contractors, agents or intermediaries”, which means that suppliers could be the UK
government supporting this group a huge amount of funds in the financial crisis and the
enterprises lending money to it. The different suppliers will have dissimilar bargaining power
with Lloyds Bank Group.

In terms of providing the money and funds- which is main input of a bank, it is divided into
two main groups of suppliers: small suppliers which are the organizations having an annual
revenue under £8m or less than 50 employees and larger suppliers, the organizations with an
annual revenue over £8m or 50 or more employees (Lloyds Banking Group, 2015, p.16) a.
The small suppliers are mainly SMEs with an annual turnover less than £8m and usually have
low bargaining power of suppliers. Compared to these suppliers, SMEs with an annual
turnover more than £8m and large enterprises, which are included in larger suppliers, have
greater power because they frequently have better financial background and have more
substantial and sustainable lending amount. For Lloyds Bank Group, liquidity management is
one of the key strategies for business success and the total customer deposits in retail and
commercial banking sectors in 2014 accounted for 90.67% of total customer deposits in

32
2014, so the enterprises are very important for this corporation and they always try to build
up a good relationship with the suppliers in its supply chain in responsible, sustainable and
mutually beneficial ways to ascertain that they could provide best goods and services with
greatest value for their customers and shareholders (Lloyds Banking Group, 2014 a, p.29;
Lloyds Banking Group, 2015a, p.14). Moreover, if there is a mass of suppliers withdrawing
money at the same point of time, as the situation in the financial crisis in 2008, the
corporation operation could massively has adverse impacts.

Additionally, it is essential to mention the UK Government and Bank of England who has a
significant bargaining power with Lloyds Bank Group because they not only provide massive
funds but also have legal and regulatory power. For example, they aided a recapitalization of
£17 million for this bank to take over HBSO in 2008 and £5.7bn to purchase more shares in
this bank in the end of 2009 after Lloyds Banking Group manifested £11bn of losses at
HBOS (European Commission, 2015; Monaghan, 2013). Furthermore, Bank of England, who
has priorities to decide the London Interbank Offer rate, is a key supplier providing short-
term fund with usually one day period in order to meet reserve requirements (Howells and
Bain, 2008, p.308).

On the other hand, it is also vital to mention suppliers providing intangible assets, such as
data security systems, digital system, operating and managing software and others, for Lloyds
Banking Group because they get access into the important managerial and operational
information (Lloyds Banking Group, 2016b, p.1). For example, SAP is its key supplier
providing Supplier Relationship Management (SRM) E-Procurement solution software and
they are also the suppliers for its other banks and financial services companies, including
HSBC, Barclays, Nationwide, UBS, Citigroup, Allianz and others, so they has a high
bargaining power of suppliers (King, 2011). To ensure management of information security,
Lloyds Banking Group listed some regulations for the suppliers in Group information and
cyber security policy for third party supplier summary (2016 b, p.1).

Force 2: The bargaining power of buyers

Buyers are the immediate customers of the business and more concentrated buyers, less
switching costs and great buyer competition threat could leads to their high bargaining power,
implying that they can require reducing cost or improving products and services negatively
affecting its profits (Johnson et al., 2014, p.46). Besides that, Hamilton and Webster (2012,

33
p.88) added that they are more powerful when there are less differentiated products and
higher opportunities and ability of customers to integrate vertically.

In this case, there are various level of bargaining power of different types of buyers. In
specific, buyers who are personal and small businesses in retail subdivision usually has low
negotiating power because there is an insignificant effects on the profits and long-term wealth
of Lloyds Banking Group if one of them stop their account and switch to other competitors.
However, the retail turnover achieved the greatest contribution to the total income of Lloyds
Banking Group with £8,291 million in 2014 and its proportion increased to 41% in 2014
(Lloyds Banking Group, 2014a,p.41). It implies that if there is a revolution of a lot of these
customers at the same time, the corporation could be negatively affected. Compared to this
group of buyers, large corporates and high net worth individuals could have more bargaining
power as their profitability and cash flows could be dramatically impacted when there is any
loss of these great accounts and sources of turnovers. Besides that, its products is low
differentiated, so it is non-difficultly switch from this financial services company to other
competitors without any serious issue (Lynch, 2015, p.89). Moreover, some non-bank
companies having high ability to integrate vertically to take part in this industry are large
corporate customers of Lloyds Banking Group, so they has a high bargaining power (Lloyds
Banking Group, 2014a, p.15).

Slater and Olson (2002, pp.15) recommended that the company should provide more value to
the customer than competitors do by disruptive innovation, sustaining innovation or lower
cost strategy in order to create and increase the customer loyalty. To attract the potential
buyers and maintain the sustainable relationships with the existing ones, Lloyds Banking
Group established a customer focused bank with the greatest possible standards of integrity to
meet its customers and clients‟ satisfaction by creating distinctive value for customers
through their unique multi-brand and multi-channel model, superior products and services
with low cost and low risk advantages, improvement in the digital capability good customer
services and relationship focus (Lloyds Banking Group, 2014a, p.20).

Force 3: The threat of substitutes

Substitutes are products or services offering a similar benefit to the existing products and
services in the industry with a dissimilar nature and two main points considered to evaluate
their threat include the price per performance ratio and extra- industry effects (Johnson et al.,
2014, p.45). Lynch (2015, p.91) claimed that substitutes might not completely replace

34
existing products and services but it could reduce the profits in an industry by introducing
new advanced technology or decreasing the costs of producing the product with same
functions. Besides, the level of threat of substitutes also depends on the obsolescence of
existing products and services, the ability of customers to switch to use the substitutes, costs
of transferring and the decline in the profit margin (Lynch, 2015, p.91). According to Rodrigo
(2012), there is extremely low threat from substitutes because financial services comprising
both traditional and modern financial services as well as alternative financial services have
played a core role in the economy and individual life and there has been no substitute
products and services.

On the other hand, Maverick (2016) and Ross (2016) argued that there has been an upward
trend of the threat of substitute products because companies outside the industry have some
disruptive innovation related to modern and technologically advanced facilities for financial
services. For instance, many types of the substitutes for payment processing and transfer
services are created and used widely, including Apple Pay or online peer-to-peer lenders
such as Prosper.com or LendingClub.com. In addition, another creation is Bitcoin, which is
known as a cryptocurrency- a digital alternative to traditional money based on cryptography
for its operation, and its systems manages and trades the currency primarily by a peer-to-peer
network (Delloite, 2014). It means that Bitcoin has advantages of low transaction costs and
ease in international transferability (Delloite, 2014).

Force 4: The threat of new entrants

The threat of new entrants focuses on how easy the new entrants could get access into the
industry and influence the level of competition and some factors considered as vital entry
barriers are scale and experience, access to supply or distribution channels, expected
retaliation, legal entry and differentiation (Johnson et al., 2014, p.45). Grundy (2006,pp.221)
supported that four main forces for new entrants are physical elements, information,
economic motivators and psychological factors.

After the financial crisis, the UK government and EU Commission have been focused on
promoting competition in the British retail banking markets by offering more rules and
implementing restructuring plans to offset the distortion of the government safety net
(European Commission, 2015). London is the largest financial centers globally and
The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) decided

35
to lessen the barriers to entry for new financial institutions by some new regulations related to
simplifying the authorization process for new banks as well as changing capital requirement
for new entrants in the prudential regulation in the UK financial services industry with the
aim to enable boosting competition in the banking industry for the benefit of customers in
2013 (Bank of England, 2014). It means that there are lower legal barriers for new entrants to
access into this global financial services industry.

Moreover, economies of scale is not considered as a main barrier in this sector as there has
been a lot of disruptive innovations destroying the traditional products and businesses such as
digital facilities, online and Fintech (Slater and Olson, 2002, pp.17). Hence, there is a rise in
access of new entrants to the market with diversified business models (Lloyds Banking
Group, 2014a, p.15). These new entrants are likely to have expertise and experience in digital
product offerings, with strong funding positions, credible challenger brands, and in some
cases pre-existing customer bases and branch networks (Lloyds Banking Group, 2014 a, p.15).
In addition, non-banks such as technology firms and supermarkets have the potential to
disrupt the traditional banking sector (Lloyds Banking Group, 2014a, p.15). For example, For
example, digital technology allowed Tesco, Sainsbury‟s and M&S to enter the banking world
and changed the habit and demand of customer significantly (Barty and Ricketts, 2014, p.56;
Delloite, 2015, p.9). The increase in cashless trend and digital transformation has led to an
unfavorable situation for Lloyds Banking Groups and other existing companies in the
industry.

Figure 17: Business activities undertaken using smartphones and tablets with mobile
internet access, 2013

Source: Delloite, 2015, p.73.

36
The Figure 17 shows that there has been a significant trend of using undertaken using
smartphones and tablets with mobile internet access in business activities of SMEs. Their
major purposes are checking business bank account balances and making payment from
business bank account.

Appendix 2: Value chain of Lloyds Banking Group

Wit and Meyer (2014, p.179) stated that a value chain is an integrated set of value creation
processes resulting in supplying products and services and there are different value chain for
different industries. A unique and good value chain could help the firm to create more unique
value for customers by doing more efficiently and effectively (Wit and Meyer, 2014, p.179).

There have been many different opinions about value chain of the financial services industry.

Figure 18: The simplified framework of bank value chain

Source (Gordon, Oldenburg and Parmaksizian, 2013, p.4)

According to Gordon, Oldenburg and Parmaksizian (2013,p.4), the simplified framework of

bank value chain included originating and extending credit to businesses and consumers,
distributing, selling and servicing and risk management as presented in Figure 18.

Figure 19: The Ashoka Hybrid Value Chain

Source: (Gordon, Oldenburg and Parmaksizian, 2013, p.12)

37
However, a lot of banks have connected with Social Enterprises through their corporate social
responsibility programmes, so it is suggested to use the Ashoka Hybrid Value Chain as
Figure 19 (Gordon, Oldenburg and Parmaksizian, 2013, p.12)

Figure 20: Activities along the financial services value chain by sector.

(UK Commission for Employment and Skills, 2010, p.22).

On the other hand, as can be seen from the Figure 20, UK Commission for Employment and
Skills (2010, p.22) suggested that the financial services value chain usually divides into front,
middle and back office. The front office is related to revenue generating activities; the
middle-office focuses on monitoring and control operations and risks; and the back office
mainly involves with support functions, such as compliance, IT and accounting (UK
Commission for Employment and Skills, 2010, p.22). The financial services industry includes
various segments with diversified activities, so there are some differences in the back office
stage of banking, insurance and asset management segments (UK Commission for
Employment and Skills, 2010, p.22).

38
 Figure 21: The value chain within an organization

Source: Johnson et al. (2014, p.84).

According to Porters, the value chain is the tool linking the value of activities of a company
with its major functional parts and it includes primary activities and support activities (Lynch,
2015, p.120) (Figure 21). To analyse the value chain of Lloyds Banking Group, this model
will be used because it is more comprehensive than these others as Figure 22:

Lloyds Banking Group has built a strong and collaborative relationships with both
Inbound intangible and tangible suppliers in in a way that adding mutual value
Low cost, low risk, customers focused bank stategy and making it simple is their
Operations competitively differentiated
Multi-brand with well-known brands including Lloyds Bank, Halifax, Bank of
Scotland, and Scottish Widows and it has a multi-channel model with a
Primary comprehensive network including digital, telephony and mobile services besides the
activities Outbound direct services at office branches
Brand marketing is their priorities and they make a lot of efforts to rebuilt trust of
Marketing and Sales customers through social campaign, operational and strategic activities
They open training courses on essential topics related to new technology,new
products and services as well as illegal issues prevention for all employees.
Furthermore, upgrading digital technology is also their focus and they have used
Services „tap to bank‟ technology for mobile banking authentication
A differentiated customer focused strategy, meaning that they always take into
account changes in customers demands and then adjust themselves to meet
Procurement customers' needs.
A secure and resilient digital processes and infrastructure are being invested in to
Supporting Firm infrastructure further improve our risk management capabilities.
activities Technology
development They have used many total quality management software to improve their efficiency
They provide a compelling reward package, salary and performance bonus as well
Human resources as offers flexibility and choice. Reward is directly linked to performance, considering
management both „what‟ is delivered and „how‟ it is achieved.

Figure 22: The value chain of Lloyds Banking Group

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Appendix 3: Study key success factors and capacity analysis

Key success factors (KSF), known as critical success factors (CSF) also, are factors either
valued by customers or giving a huge advantage related to cost, so they contributes an
essential parts in establishing and maintaining the competitive advantages of the company in
its industry (Johnson et al., 2014, p.58). The research related to assessing KSF of the financial
services industry based on investigating Slovenian market of Nekrep (2009, pp.30) concluded
that marketing synergy, market characteristics, new service quality, organizational culture
and knowledge are the CSF .

However, there has been a dramatic changes in the customers‟ demand and the industry
environments post-crisis, including changes of advanced digital technology, new regulations,
the effects of Internet and digital tools and transformation in customers‟ demands (Delloite,
2015; Gousia, 2015; Lloyds Banking Group, 2014a, p.15; Marsh et al., 2014, p.11). Hence,
Shaw (2013 features: client centered model, operational and accounting transparency, high
business ethics to build trusts, level of applicable real-world experiences of employees, savvy
knowledge about know-how) claimed that this industry the best financial services company
for customers usually has 7 critical and expertise, versatility to meet changing needs and
good reputation as it is important that the company should have a high adaptability to
constant changes and maintain long term relationship with customers.

Besides that, the paper related to the transformation of the global financial services of Towers
Watson (2014, p.2) stated that there has been reframing businesses, organizational structures
and cultures trends to adapt and improve to meet new regulatory requirement and rising needs
of transparency. Three main recommended areas of focus to growth are the reframing
employment deal and establishing a total rewards strategy and programs, realigning the
organization‟s talent management and workforce practices with the significant transformation
and applying sound cost and risk management principles in doing all activities of financial
company (Towers Watson, 2014, p.2). To achieve these KSF in the UK financial services
segment, different financial services group has different strategy with mostly dissimilar
strengths and weaknesses. Thus, it is vital to determined KCF and capability analysis of this
industry and these companies (Figure 23). Capability analysis refers to identifying the core
strengths and weaknesses of the organization and products and services compared to its
competitors and then give a comprehensible statement of competitive advantages (Johnson et
al., 2014, p.523).

40
 Critical Success Factors Lloyds Banking Group Royal Bank of Scotland
Building the number one bank for customer
Low cost, low risk, customers focused bank
Client centered model service, trust and advocacy in the UK (Royal
stategy (Lloyds Banking Group, 2014a, p.2).
Bank of Scotland, 2016a)
During 2014, the Group was invited to apply,
and was subsequently approved, for membership
of Transparency International UK‟s Business
Integrity Forum (Lloyds Banking Group, 2014a, They build trust by deliberate approach to be
p.26). as more transparent as possible about their
business operations and challenges also and
The interaction of the executive and non- quality and transparency of disclosure in
executive governance structures relies upon a
Operational and accounting annual report is the main priority (Royal Bank
culture of transparency and openness that is
transparency of England, 2014, p.39&57). RBS scored top
encouraged by both the Board and senior
in the UK for corporate transparency in a
management (Lloyds Banking Group, 2014a, study conducted by Transparency
p.31). International (Royal Bank of England, 2014,
The committee committed to provide greater p.5).
transparency in performance measurements as
well as annual report (Lloyds Banking Group,
2014a, p.89)

The key strategic objective is becoming the best

High business ethics to build
trusts
bank, implying that they do business with honest
and ethical ways to benefit their
customers,colleagues, communities,other
stakeholders and the environment and help
Britrain proper. (Lloyds Banking Group, 2014a,
p.28).They deliver outstanding service and
ascertain that rebuilding trust is at the core and
imperative action of business and the group
thoroughly committed to attain this objectives by
establishing the greatest possible standards of
integrity to meet its customers and clients‟
satisfaction (Lloyds Banking Group, 2014a, p.6).
Moreover, delivering strong and sustainable
returns for shareholders is considered as one of
their goals (Lloyds Banking Group, 2014a, p.2).
Building a bank that is stronger, simpler and
better for both customers and shareholders is
their major aim (Royal Bank of England,
2014, p.2). Besides that, continuous
commitment to stakeholder engagement
through face to face sessions and a greater
focus on ethics and sustainability are their vital
concern to regain customers, shareholders and
stakeholders' trust (Royal Bank of England,
2014, p.71).

Changing the Board of Directors to bring a great

Level of applicable real-world group always has training courses on essential
experiences of employees
balance of additional skills and experience(Lloyds
Training plans are conituously implemented to
Banking Group, 2014a, p.7). Furthermore, the
improve staffs' skills and capabilities and to
meet changing regulatory and policy
topics related to new technology,new products
requirements(Royal Bank of England, 2014,
and services as well as illegal issues prevention
p.183).
for all employees(Lloyds Banking Group, 2014a,
p.145).

They improve digital capacity and make
multibrand and multi channel strategy to meet
Know-how and expertise
customers needs(Lloyds Banking Group, 2014a,
p.13).
They develop online and mobile banking
services to meet higher digital demands and
enhance services to Post Office Networks
(Royal Bank of England, 2014, p.131).

The group has a diversification of products and

Versatility to meet changing
needs
services in four segments: Retail, Commercial
A great capital provide them a highly financial
Banking, Consumer Finance and Insurance.
flexibility to deal with problemns related to
Their operation becomes simpler and more
economic uncertainty in its core UK, US and
efficicent, so they can highly be responsive to
European markets and others (Royal Bank of
changing customer expectations and maintaining
England, 2014, p.183).
cost leadership competitive differentiation (Lloyds
Banking Group, 2014a, p.12).

The group try to maintain and increase its security

and reputation by not only improving services but
also involving more activities related to corporate
social responsibilities (Lloyds Banking Group, They have tried to rebuild up bank-wide
2014a, p.15). In a survey, 47%, 40% and 13% reputation and trust but its reputation of the
of respondents voted that Lloyds Banking Group company has been negatively affected by the
Good reputation
is great, good and poor, respectively (Christie, problems related to IT faults and foreign
2014). The reputation has become better since exchange rate rigging in November 2014
acquiring HBOS (Chester, 2014). They has built (BBC News, 2014).
up superior customer insight with distinct brand,
high qualty products and services and relationship
focus (Lloyds Banking Group, 2014a, p.19).

Figure 23: Key success factors (KSF)

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 From the analysis, the main advantages and disadvantages of Lloyds Banking Group and
Royal Bank of Scotland are revealed as Figure 24:

Lloyds Banking Group Royal Bank of Scotland

Totally focus on the UK market
Multi-brand and muti-channel with good digital
facilities
Low risk with a strong balance sheet and funding
Advantages position
Industry cost relationship
Being simpler and more efficient to meet
customer demand changes and ensure cost
leadership
Lower flexibilities in some cases due to weaker
Disadvantages financial capability compared to other groups and
less international apperances
UK-centered bank
Transparency about operation and reporting
Diversified apperance in not only the home
countries but also foreign countries
Greater financial capability
Slightly higher cost than Lloyds Banking
Group brand negatively affected due to some
problems. Not good IT system and equipment

Figure 24: Main advantages and disadvantages

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