Strategy Evaluation for the Lloyds Bank Organisation - Assignment Example

Strategy Evaluation for the Lloyds Bank Organisation Table of Contents Table of Contents Introduction 2 Strategy ment 2 Suitability of the Strategy 3 Acceptability of the Strategy 5 Feasibility of the Strategy 6 Alternative Strategy 8 References 10 Appendix A – TOWS Matrix 12 Introduction Lloyds is one of the “Big Four” banks in the United Kingdom. It is also one of the oldest continuously operating banks in the world, with almost 20 million customers as of December 2014. As a retail bank, the organisation thrives on providing efficient and relevant services aimed at the mass market. With its powerful and highly visible brand, Lloyds has solidified its position as a leading financial services institution in the UK and the world. Strategy Statement Lloyds’ corporate strategy is based on customer satisfaction. Having been operational since 1765, Lloyds’ understanding of the UK banking industry plays a major role in its strategic development. Lloyds heavily relies on its brand to achieve success, but also combines this with an excellent grasp of consumer needs (Bicker 2013: 51). As such, the company has formulated corporate objectives that are aimed at providing relevant, customised, and superior services to consumers in all categories. Over the years, the bank has realised that although its brand is strong enough to fuel its success, that alone is not enough to ensure sustainable growth in a rapidly developing banking sector. In lieu of this, the company has developed and implemented a customer satisfaction blueprint that is aimed at providing the best banking services to current and potential customers (Wilson 2013: 36). This blueprint is guided by efficiency, good ambience, excellent customer support, cordial customer relations, and a consumer engagement mechanism that is based on feedback and interaction. Lloyds’ customer satisfaction strategy has been instrumental in its current success, particularly due to the bank’s ability to develop new, innovative services that improve service delivery. As the banking sector becomes more competitive, financial institutions realise that their service portfolios are becoming increasingly similar. This has prompted a shift to excellence in service, something that Lloyds has embraced as part of its corporate strategy. Suitability of the Strategy The UK and global banking sectors are experiencing numerous changes that are driven by innovation and technology. The rise in mobile and online banking is an example of a shift in focus that is driving growth in the sector. However, it is also becoming obvious that banks have fundamentally similar offerings and procedures. This also applies to the technological and innovation aspects of banking, which are now common in almost all banks (Casson & Rose 2014:35). For example, almost all banks in the United Kingdom have mobile and online banking services that are marketed as illustrations of commitment to convenience and efficiency. It is hard to separate, for example, HSBC’s online banking platform from Barclays’; minor differences may be highlighted, but they are fundamentally similar in their workings and objectives (International Monetary Fund 2013: 86). Consequently, the fight for market dominance has moved to customer experience, which is evolving into the most important business component in the 21st century. As technology becomes more universal, and products become increasingly similar, consumers are using customer experience to assess businesses. An average banking customer now looks for happiness and satisfaction rather than variety (Nadar 2013: 47). Customer satisfaction is a vital source of competitive advantage for Lloyds. Having experienced periods of instability in the early 2000s, mainly as a result of overreliance on its brand, the bank decided to improve its customer service aspect as a way of shoring up its profits and making it more sustainable (Harrison & Estelami 2014: 45). Customer satisfaction is, therefore, not a cosmetic feature in Lloyds’ strategic portfolio. On the contrary, it is a defining element of its long-term corporate strategy and sustainability dimensions. Currently, the organisation is synonymous with ideal and superior customer service that not only helps it to retain existing customers but also drives its customer acquisition strategy. A customer satisfaction strategy is directly related to Lloyd’s objective of becoming a simpler and highly efficient organisation that is highly sensitive to evolving customer needs. Using this strategy, the bank has demonstrated that it can adopt a more basic structure and outlook that are appealing to customers in all social classes (Goodway 2015: 1). A customer-oriented strategy is also significant in cutting operating costs by enabling more sustainable banking practices and channelling more funds towards future business growth. More efficient banking practices create greater benefits for the bank’s clients and provide a platform on which competitive advantages can be achieved. The customer-oriented strategy has allowed Lloyds to create and pursue new growth opportunities and strategies in and outside the United Kingdom (Neupane 2014: 43). In light of the regulatory reforms initiated by the UK government as part of its objective of protecting the public, Lloyds’ customer satisfaction strategy has cushioned it against the aftershocks of such changes by reducing its dependence on traditional markets and giving it enough incentives to launch more operations in emerging markets (Choudhry 2012: 17). The company’s multi-brand strategy – a direct result of its customer-oriented perspective – has enabled and will continue enabling it to grow and provide services to customers in regions where it is still dominated by rival banks. Last year, for example, the bank served more first-time customers than any other company. Acceptability of the Strategy The acceptability of Lloyds’ customer satisfaction strategy is evident in its performance in the last three years. Having adopted the policy in 2011, the company has, for three straight years, expanded its customer base and improved its service ratings (Hitz 2014: 1). This shows that clients approve of its strategic shift towards great customer experience and less reliance on its brand. Customer satisfaction strategies have been used as part of corporate strategies for centuries; this makes Lloyds’ approach not only proven but also legitimate (Duguid 2014: 25). In any market, customers’ endorsement of a product or service is regarded as the highest approval of the quality of a product or service. It is safe to say that Lloyds’ customer satisfaction strategy has a high acceptability rating. This is explained by the fact that a majority of consumers view product or service experience as a central feature of any business. Research conducted in the last decade has shown that customer satisfaction is, in some cases, more valuable than other capabilities like access to resources and size. Customers are also looking to cooperate with organisations they can trust, and this is easier when they feel valued by companies (Jones 2012: 31). Trust is priceless in the financial services industry because it is the strongest bond that links service providers and consumers, and there is nothing that creates mutual trust between consumers and service providers than an organisation’s commitment to providing the best products and services to its customers (Chew & Gillan 2013: 64). For a majority of consumers, it is more satisfying to pay for a quality service experience in a small business than to have a bad experience in a reputable organisation. This is the essence of Lloyds’ customer satisfaction strategy, which goes a step further by combining brand recognition and superior customer service. Since 2011, when the company launched its customer service strategy, it has recorded impressive growth in its customer base. This is supported by results of consumer surveys which show that Lloyds is, at the moment, the bank with the highest ratings in customer service and experience (Read 2015: 1). Other surveys also reveal that the bank has, overall, the most favourable ratings out of all banks in the UK. Such findings are more than an indication of the organisation’s progress in customer service delivery (Christophers 2013: 48). When examined closely they also represent a validation by consumers of Lloyds’ customer service initiatives. Interestingly, the degree of acceptability associated with the bank’s approach is facilitated by both its customers and non-customers. This indicates that customers of rival companies are likely to migrate to it in order to enjoy its superior service delivery. While the short-term benefits of Lloyds’ customer satisfaction strategy are already visible, the long-term impacts are likely to be felt in the next 5-10 years. Feasibility of the Strategy The feasibility of the customer satisfaction strategy is based on the fact that Lloyds has placed customers at the heart of its long-term corporate strategy. In fact, the feasibility of this strategy has already been confirmed by the success it has inspired in the last three years (Wadsworth 2013: 103). Since launching the strategy as a foundation for becoming the best bank for stakeholders and consumers, Lloyds has gained more customers more rapidly than during any other period in its existence (Davies & Green 2013:59). It is, therefore, only fair to discuss feasibility in terms of actuality rather than potential, despite the fact that the organisation still has many opportunities to improve on the strategy to maximise its benefits. As stated on its website, Lloyds uses its resources, employees and skills effectively to help the UK prosper and provide superior and sustainable dividends to its stockholders. Lloyds has put in place various measures to ensure that it achieves its aim of offering the best customer experience in the industry. For example, it has formulated strategies that have helped it maintain a constant focus on the success of this explicit and consumer-oriented strategy by placing customers at the core of all its activities. The result, so far, has been a stable and resourceful organisation with a leading profile in Britain’s banking sector (Admati & Hellwig 2013: 41). Since the implementation of the strategy, the bank has succeeded in restructuring and strengthening itself to become a less volatile, affordable and customer-focused British retail and commercial bank. Added to a focus on its primary business, and development of its standout brands, the customer satisfaction strategy has put the company in a stronger position to simplify itself, attract more customers, and become more profitable (Useem 2014: 1). In October 2014, the bank launched the next phase of its customer satisfaction strategy, aimed at capitalising on the significant achievements it has recorded in the last three years. Part of the new phase, which is still being implemented, is the vision and objective of becoming the UK’s best bank and helping the country grow (Cleaver 2013: 32). The organisation’s plan in the next two years involves acclimatising to the developments in financial services necessitated by technological changes, evolving customer behaviour, and the changing regulatory and competitive conditions. Between 2015 and 2017, Lloyds intends to create and offer the best customer experience, experience sustainable growth, and become elementary and more efficient (Wilson 2013: 28). As part of its customer satisfaction strategy, Lloyds aims at delivering the best customer experience by maintaining a high level of trust with its clients, and offering reliable and consistent services. The bank also aims to reshape its digital capability by offering clients simpler and flawless interactions between mobile, internet, and physical branches, and enhancing the efficiency of its products and services (Capie & Webber 2013: 18). The bank intends to maintain a leading system of branches that will grow to represent its clients’ evolving preferences, incorporating the functions of branches with mobile and online capabilities as part of an efficient multichannel strategy. As the organisation improves its digital capabilities at all levels, branches will remain a vital aspect of its multichannel strategy. Alternative Strategy Rather than customer satisfaction, Lloyds can also employ a differentiation strategy to improve short and long-term competitiveness. This may involve a number of facilitative policies that can move the company closer to its objectives (Piketty 2014: 57). In this case, any differentiation strategy should be based on the company’s brand visibility and recognition. The bank can exploit the prestige and history of its brand to distinguish itself from competitors. However, this policy should be inspired by aspects that are commonly valued by customers, and which the company can use to position itself to satisfy those needs (Balogh 2012:23). The most significant benefit of differentiation is the premium price it attracts. Despite wanting to implement a low-cost, low-risk strategy that will give it greater market share, the bank can also achieve success without having to practice cost leadership. It can focus on a small group of high-end customers in niche markets and then base its success on the high-profit margins enabled by this customer base. This competitive strategy has been successfully used by companies such as Starbucks and Apple, which have steered away from mass markets and still achieved phenomenal success. Successful differentiation enhances brand loyalty and enables the bank to maintain a unique character that is appealing to high-end consumers. Differentiation will also create value by concentrating on the cost value of Lloyds’ products and services versus other banks’ offerings. Using the approach, the company develops a perceived value among clients and prospective clients (Awad 2013:27). This will allow the organisation to highlight the sustainability of its product and service portfolio in relation to other products and services. Finally, differentiation will enable Lloyds to compete in aspects other than the price of its products and services. By moving away from the price factor, the bank will achieve excellent positioning and more competitive advantages (Weston 2013: 38). References Admati, A. & Hellwig, M. (2013) The bankers new clothes: whats wrong with banking and what to do about it, Princeton, Princeton University Press. Awad, S. (2013) Banking and financial analysis, München, GRIN Verlag GmbH. Balogh, T. (2012) Studies in financial organisation, Cambridge, Cambridge University Press. Bicker, L. (2013) Private banking in Europe: serious wealth, London, Routledge. Capie, F. & Webber, A. (2013) A monetary history of the United Kingdom: 1870-1982, London: Routledge. Casson, M. & Rose, M. (2014) Institutions and the evolution of modern business, London, Routledge. Chew, D. & Gillan, S. (2013) Global corporate governance, New York, Columbia University Press. Choudhry, M. (2012) The principles of banking, New York, Wiley. Christophers, B. (2013) Banking across boundaries placing finance in capitalism, Chichester, John Wiley & Sons. Cleaver, T. (2013) Understanding the world economy, London, Routledge. Davies, H. & Green, D. (2013) Global financial regulation: the essential guide, New York, John Wiley & Sons. Duguid, A. (2014) On the brink: how a crisis transformed Lloyds of London, London, Palgrave Macmillan. Goodway, N. (2015, February 27) Lloyds to pay first dividend since 2008 bailout, viewed April 27, 2015, from . Harrison, T. & Estelami, H. (Eds.). (2014) The Routledge companion to financial services marketing, London, Routledge. Hitz, L. (2014, October 17) How Lloyds Bank crushes customer service on Twitter, Simply Measured, viewed April 27, 2015, from . International Monetary Fund (2013) International Financial Statistics Country Notes 2013, Washington, D.C., International Monetary Fund. Jones, G. (2012) Banks as multinationals, London, Routledge. Nadar, E. (2013) Money and Banking, Farnham, Surrey, England, PHI Learning. Neupane, R. (2014) Relationship between customer satisfaction and business performance: a case study of Lloyds Bank UK, International Journal of Social Sciences and Management, vol. 1, no. 2, pp. 74-85. Piketty, T. (2014) Capital in the twenty-first century, Boston, Harvard University Press. Read, S. (2015, April 23) More Britons are switching current accounts as banks step up competition, Retrieved April 27, 2015, from http://www.standard.co.uk/business/business-news/more-britons-are-switching-current-accounts-as-banks-step-up-competition-10197328.html?origin=internalSearch Useem, M. (2014) The inner circle: large corporations and the rise of business political activity in the U.S. and U.K., New York, Oxford University Press. Wadsworth, J. (2013) The banks and the monetary system in the UK, 1959-1971: a banking view of developments from the Radcliffe Report to the monetary reforms of 1971, comprising articles selected from the Midland Bank Review, London, Routledge. Weston, R. (2013) Domestic and multinational banking: the effects of monetary policy, New York, Routledge. Wilson, J. (2013) Monetary policy and the development of money markets, London, Routledge. Appendix A – TOWS Matrix Strengths Highly profitable. 4th largest UK bank. Well established in the UK banking sector. Powerful and highly visible brand. Weaknesses Less appealing compared to rivals like Barclays. Yet to achieve “Superbrand” status. Declining financial performance. Smaller market share compared to rivals. Opportunities UK employment rates are rising, meaning more people wanting to bank their earnings. Numerous growth opportunities in emerging markets. Rising interest rates by the Royal bank of Scotland could drive other customers to Lloyds. Strong economic growth in the UK means more money will be flowing through banks through bank accounts. Threats Rising PPL compensation costs. Poor adaptability to technological changes and innovation could affect market share. Low environmental standards have created a negative consumer perception. Stricter regulations by the UK government. Appendix C - McKinsey 7S Framework for Lloyds Read More