Strategic Management in Barclays Bank - Case Study Example

Strategic Management in Barclays Bank This paper is about the application of various tools and techniques of strategic management, illustrating how businesses are analyzed, their strategies are criticized, and strategic plans are developed and proposed. Task 1: Elements of Standard Strategic Management Model According to Hill (2008), there truly exists no standard strategic model, because strategic management varies from scenario to scenario and so does its application. However, there are certain ingredients within the strategic framework that tend to replicate themselves. These elements include, and are briefly discussed as below: Vision: David (2005) states that vision is the bigger picture i.e. the strategic aim of the organization of where it sees itself in the future. The term future here implies a minimum of 20-years, implying the importance of long term thinking of where the firm wants to be. Mission: Hill (2006) states that a mission statement is rather the short term spot that the firm aims to achieve in the time of few years, generally a 5-year plan. Mission statement is generally derived from the vision, and is also assumed as a subset of the same. Goals & Objectives: Hunger (2006) states that goals and objectives are the further derived version, generally obtained from the mission statement defining the milestones that would ultimately lead to the achievement of mission. Corporate Strategy: Corporate strategy is defined by Lamb (1984) as the overall strategy of a diversified firm that is indulged in various businesses, and aims at creating synergy amongst all, moving ultimately towards the organizational vision. Business Strategy: According to Michlitsch (2006), business strategy is the long term approach towards a single business i.e. defining the strategy of a business or an SBU (Small Business Unit) Functional Strategy: Sharma (1998) defines the functional strategy as the one that is deployed at the grounds level for operations and functions in an organization. In accordance with Peterson (2006), the relationship between these six elements is fairly simple; Vision is the ultimate aim of the organization, around 20 years down the road, so to speak. Mission is the subset of vision, defining where the firm needs to be 5 years down the road, to achieve the vision in 15 years from then, and the goals and objectives are further short term in nature like annualized aims for a firm. Business strategy, at the same time, is the strategy that a single standalone unit deploys, while functional strategy is the grounds level strategy. This implies a strong relationship present amongst the 6 variables. For example, the vision of my organization is to be the market leader and be the first consumer preferred brand in the respective industry. Their mission is to attain a 20% market share by the end of the year 2012; this mission was established two years back and is expected to be revised. The goals and objectives are mainly to achieve customer satisfaction and provide the best quality of products and services. We only have a single unit operating to the business strategy is the corporate strategy i.e. product differentiation i.e. providing differentiated product for a price elastic consumer market. The functional policy is to retain good and competitive human resource that can lead the way for customer satisfaction. If critically analyzed, the sentences here clearly illustrate their inter connection with each other also showing how well these elements need to be tied up. Another example can be given of Barclays; their vision is to build a world-class organization – highly subjective in approach and very broad statement, capable of churning up any progress that they make towards becoming great. Their mission is to be innovative and customer-centric organization, contributing to people, their careers, and their lives. Their goals include being consistent on the quality they deliver. If read carefully, the three statements have a synergy within themselves that depicts that the firm is aimed at achieving high quality of performance. Task 2: Key Drivers of Change at Barclays The organization undertaken for study here is Barclays bank. Banking sector has been booming globally for the past few years, while the present global economic recession has certainly caused a quick downfall, with many banks looking for survival strategies in different areas. They key drivers for change in current strategic environment are described as below, along with brief explanation of the same: Economic Conditions: For any sector in the world, the prevailing economic conditions play a vital role and are significant because nothing can operate in isolation in the world today. This is mainly attributed to the advancement of technology and globalization. Economic conditions are driving the strategic environment as strategic planners are made to think where economy is heading and where the respective future lies. Economic conditions derive the change in the banking sector because the position of the country in terms of its economy derives the attitude of people towards managing their finances and the financial position, which in turn affects the banking sector on the whole. Technological Advancements: Technology has increased the pace of competition in the world today, and particularly in markets where the products and services offered are relatively homogenous in nature. Subsequently, technology plays a major role in giving a competitor an edge over the other. However, despite the proprietary nature and facilities associated to technology, it is easily replicable amongst the competition. But the point remains that if one bank introduces a technological advancement, the other banks have to move in that direction and adapt to that ‘change’, else the loss of customer is inevitable. Thus, technological advancement is a key driver for change. Innovation & Creativity As mentioned earlier, and known, that banking products and services are easily replicable in nature and replication is one factor that destroys the willingness to be innovative. But at times, this also acts as a negative reinforcement as entities wish to lead the way into innovation and creativity. Along the similar lines, innovation and creativity does become an integral driver to change in a bank. For example, the advent of internet banking has changed how banks operate. Another example is the automated machines that collect checks and cash within the branch, without any human involvement. These are radical changes and the key drivers are innovation and creativity. Task 3: Strategic Decisions faced by Barclays plc This section highlights the key strategic decisions that are currently faced by Barclays. Prior to listing and describing these key decisions, it is essential to conduct the PLEST analysis for the bank. The PLEST analysis for Barclays plc is as below: Political Scenario: Presently, the world is going through an instable political situation, with lacking of a good political leader or any futuristic symbols of a strong political leadership emerging on the global scenario. Legal Factors: The legalities associated with the banking sector are tightened as well as weakening; tightening for the fact that the world economy is in the downturn so the banks are moving to a rather survival kind of a strategy, which is a cause of concern since banks are major drivers of economy, so the governments are tightening the screws to ensure that, for example, no excess firing of individuals take place that would further hamper the global and local job markets. At some places, relaxations are also given for example in minimum capital reserve requirements to ensure availability of funds for the banks so it is overall a mix kind of a scenario. Economic Situation: The world today is moving towards what economists call a recession worse than the great depression. In such economic situations, survival is the first line of fire from all firms existing in any line of business. As an outcome of overbooking debts in the past, consumers today are looking for economic stability to ensure that their incomes are ample to meet only their expenses, let alone paying off debts. Social Influences: The society has a dual impact on the banking sector; as a customer and as a stakeholder, as bank takes deposits, lends, and also is a major job provider in the market. Today, as the society is in trouble, its causing a chain pull on the banks, as it wants the deposits back, lended money to be extended in terms of tenure and reduced interest rates, and it also wants banks not to fire employees. Technological Advancements: Technological advancements have costs associated; today, banking sector stands tall as it has moved from paper work to a virtual world in less than a decade. But more technological advancements can yet be deployed; however, these need capital foundations. Till the time depositors place their cash and reserves, and bank lends them out at a higher rate, it cannot earn the money it would want to deploy technological set up of its own. This is the scenario with almost all banks not just in the UK or the US, but world over. Overall, the PLEST analyses reveal that the banking sector globally is not in a very good position to be in, with pressures rising from stakeholders, shareholders and the governments themselves; banking sector is facing a crunch of its life… Posterior to the PLEST analysis, following is the list of the three key decisions that Barclays faces today, along with their brief explanation and also stated is their origin in terms of influence: Should Barclays expand or contract its line of products and services? This question originates from the economic scenario prevailing in the world today i.e. should Barclays look for further expansion when everyone is being defensive by looking for survival or should the bank go for defensive and survival strategy? Should Barclays curtail its not-so-profitable ventures? This question also originates from the present economic scenario. Banks are in the process of selling off their business in the countries where they are not getting good profits from, let alone loses, so Barclays faces a similar question that should they adopt to a similar strategy? Should Barclays downsize its human resource and cut other costs? This pertains to the cost cutting measures i.e. since institutions are adopting cost cutting approaches by mainly reducing the human resource, where they are not necessarily needed, Barclays can also move in the same direction. Task 4: Key Strategic Decision – Expansion or Contraction? This section has selected one strategic issue amongst the three as highlighted in the previous task and aims at generating and analyzing options associated with issue: The strategic options associated with the issue are i.e. the bank can opt to: Expand its operations Contract its operations Not react in any radical manner Following is the analysis of the three options based on benefits, concerns, and SAF analysis. Expansion Benefits: A big bank expanding would give a good indication about growth to the world, and may attract people towards investments, assisting in revival of the global economy. Concerns: In case the economy moves to a deeper hole, as it is anticipated, the investment decision may turn faulty, and the bank may need to revert from its expansionary stance. Suitability: The option seems suitable because Barclays has always been an aggressive bank looking for opportunities to grow and expand. Acceptability: The stakeholders and the shareholders may not accept such aggression because the future today is highly unpredictable. Feasibility: The solution is feasible though because Barclays has ample funds to expand in any region they wish to. Contraction Benefits: Contraction can actually lead to profit maximization as it would imply closing down product lines and centers that are running in losses and also contributing not-so-good profits to the overall existence. Concerns: Concerns would definitely rise as an individual would assume that the economic crisis are big and will get bigger as a big bank is contracting its line of products and services. Suitability: The solution does not suit the bank’s renowned repute of being aggressive and expansionary. Acceptability: The stakeholders and shareholders would love it because it will reduce the less profit centers and increase the earnings, thus, allowing good dividends, and once they curtail the present workings, there can be ample funds to expand again in the future. Feasibility: This solution is viable, as many institutions would be ready to buy Barclays’ set up anywhere in the world, because of big brand name association. No Reaction Benefits: The biggest benefit would be of a normal movement along the course of business as it has been doing in the past, with no emotions loss or restructuring needed. Concerns: The not-so-much profit making centers can move into negative (losses) as the global economy slides. Suitability: It is suitable, but here the question mark remains on the term ‘sustainable’. Acceptability: It would definitely be acceptable since no questions would be asked and routine operation runs about. Feasibility: Definitely feasible, because something that has been running in good profits, can sustain a few less-profit-years. References 1. Charles W. L. Hill (2008) International Business. McGraw-Hill/Irwin 2. David, F. (2005) Strategic Management: Concepts. Prentice Hall. 3. F. Robert Dwyer (2008) Business Marketing: Connecting Strategy, Relationships, and Learning. McGraw-Hill/Irwin 4. Hill, C. (2006) Strategic Management: An Integrated Approach. Houghton Mifflin 5. J.David Hunger, Tom Wheelen (2006) Essentials of Strategic Management. Prentice Hall 6. Lamb, R. (1984) Competitive Strategic Management. Prentice Hall. 7. Michael E. Porter (1998) Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press 8. Pamela S., Stephen H., Patricia M., Joseph Michlitsch (2006) Management: Challenges for Tomorrow's Leaders. South-Western College Pub 9. Peter Rebello, S.D. Sharma (1998) Business Environment and Global Challenges. Anmol Publications Pvt. Ltd. 10. Roger Kerin, Robert Peterson (2006) Strategic Marketing Problems: Cases and Comments. Prentice Hall 11. Saloner, G. (2001) Strategic Management. John Wiley Read More