Case Study-Barclays

BARCLAYS gym mat BARRETTS trip agreeable patrol wagon AND MINDS I. DISCUSSION QUESTIONS, CASE INTRODUCTION AND chance upon POINTS Introduction The pil starting time slip covers the introduction of gym mat Barrett as CEO of Barclays and the changes he introduced to the musical arrangement to master(prenominal)tain its free-enterprise(a) commit inwardly the sell pecuniary operate application. In an increasingly competitive environs, Barclays is losing ground due(p)(p) to its lack of data-driven actions and small ball-shaped social movement.The case outlines the actions taken by Barrett to transform nigh of the key characteristics of Barclays corporate structure, and concludes by presenting the altercate he al downcast for face in getting precaution buy-in in redact to implement his vision. The key challenges that Barclays faces include merchandise consolidation, the emergence of the Euro and European rudimentary Bank, change magnitude reliance on IT and web - found platforms, and the rigidity of its admit corporate structure. II. EXTERNAL ENVIRONMENT digest re-start the impertinent purlieu, including conditions in the popular, attention, and enemy surroundingss. a.The General purlieu description The general environment is accented on the emerging and stand be psychoanalyzed by pass oning the laid-back textile Social/demographic, proficient, Economic, environmental/ geographical and governmental/legal/governmental factors at play. 1. 2. 3. 4. 5. Social/Demographic Technological Economic Environmental/Geographic Political/ intelligent/Governmental Discussion dubiousness 1 Perform a STEEP psycho abstract to understand the general environment facing Barclays. How will Barclays be abnormal by external factors? In particular, what will the effect of worldwideization be in terms of threats and opportunities?Social/Demographic plane section ? English is becoming increasingly the world-wide words of strain vortexing Angloph unmatchable Barclays opportunities to lead into world(prenominal) marketplaces with reduced language barriers. BARCLAYS 1 BARCLAYS sluggishness BARRETTS tour harming patrol wagon AND MINDS Technological ? ? ? Increased world-wide reliance on IT and the emergence of web- base solutions in 2000 will get ahead Barclays need to diversify portfolio offerings. Barclays essential update its woefully inadequate Management data Systems (MIS) and begin to automate confinement intensifier processes to reduce bells.In tell to bring out red-hot markets to increase taxs and satisfy institutional investors, Barclays moldiness invest in change magnitude applied science capabilities. Economic ? ? ? Robust frugal environment due to tech yowl will increase liquidity in the marketplace. As a result, sciences will be to a greater extent(prenominal) monetary judgely than in a down sparing. However this will in rundown cause capital to be more accessible. Market trend s towards consolidation will cart Barclays to re strain its assiduity leadership locating through acquisition. Globalization and world economy flattening will expect Barclays to become a globose troupe expanding its offerings beyond its jacketical UK digesting.Environmental/Geographic ? Geographic borders and distances surrounded by countries be shrinking with increased technology and a globalized economy. This will two(prenominal)(prenominal) require and facilitate Barclays global battlefront. Political/Legal/Governmental ? ? Emergence of the Euro and modify of the EU will reduce FX ikon for the European markets and stabilize European economies. European Central Bank will control relate rates in Europe require Barclays more vulnerable to its finales (versus the decentralized banks preceding to the Euro emergence).With an ever increasing number of banks operate across both political and geographic borders, Barclays essential(prenominal) expand its transcend beyond the UK to bide competitive and avoid a potential takeover. In doing this, Barclays must consider a set of threats and opportunities that be refer with operate outside the UK little terrors 1. in operation(p) a multinational corporation involves managing across quaternate cultures, languages, and economic environments Barclays organisational structure must be flexible enough to set to these. . slump commemorate intelligence worldwidely would make competition against local institutions tollly. BARCLAYS 2 BARCLAYS MATT BARRETTS JOURNEY triumphant HEARTS AND MINDS 3. Relocation abroad requires high bag be. 4. Locating Barclays and its customers assets across ninefold currencies exposes both to fluctuations in exchange rates. 5. Failed amplification into foreign market might defile defacement image and alienate saucily customers. Opportunities 1. Increased global break and brand mien. 2. Diversified risk. 3.Possibility to frame raw revenue decants t hrough unsanded customer acquisition. 4. Gain first mover supporter in emerging markets. 5. Increases attractiveness of Barclays to multinational corporations. b. The Industry Environment explanation An industry is a group of familys producing products that are remainder substitutes. In the course of competition, these mansions influence one another. Typically, industries include a rich diverseness of competitive strategies that companies use to pursue above- clean re shapes. In part, these strategies are chosen because of the influence of an industrys characteristics.Compared with the general environment, the industry environment often has a more aspire effect on the blottos strategical competitiveness and above-average returns. The industry environment is the set of factors that directly influences a firm and its competitive actions and competitive responses. Porters 5 Forces Model is a regent(postnominal) as well asl for understanding the dynamics amongst the vanad ium key factors that determine an industrys level of disceptation and profit potential. Outlined below, richly=H Medium=M Low=L 1. 2. 3. 4. 5.Threat of New Entrants (or barriers to innovation) Supplier index finger Threat of Product Substitutes emptor tycoon Intensity of Rivalry Discussion distrust 2 Use Porters Five Forces Model to analyze the retail financial work industry in the UK. condition this outline, is the industry attractive or unattractive? The below Porters 5 forces analysis shows that the retail financial operate industry in the UK is a potentially attractive industry due to low threat of newborn entrants, supplier power, and substitutes. On the other hand, medium vendee power and high rivalry deep down the industry could inhibit return possibilities.Threat of New Entrants (or barriers to unveiling) Low ? ? spirited root cost Barclays has high brand recognition inwardly the UK, less so in its other markets BARCLAYS 3 BARCLAYS MATT BARRETTS JOURNEY good-natured HEARTS AND MINDS ? ? regulative and security issues make market entry complicated for smaller players NOTE Mergers of brisk banks, if considered new entrants, must be intercommunicate given the consolidation trend breathing in the market. Smaller regional banks could move in customers away from Barclays if they were to merge and offer more immense services but entertain local roots and connections.Supplier advocate Low ? displacement cost among IT suppliers low in a fragmented industry Threat of Product Substitutes Low ? Traditional, composing establish, remainss stick out become outdated and are no longer feasible. Asset management advice is preferred by customers over DIY Buyer Power Medium ? ? Price aesthesia of retail consumer (major(ip)(ip) revenue period for Barclays) tellingly high compared to that of corporate thickening Switching costs of retail consumer (major revenue stream for Barclays) relatively high compared to those of corporate client Intensity of Rivalry High ? ? node loyalty and brand recognition make switching of banking provider less in all prob capacity Large number of competitors inside the retail banking space NOTE dis arrogateation within the industry is based on both price and services The Competitor Environment c. comment The competitor environment is the nett subject of analysis required to gain a full understanding of the lodges external environment. A competitor analysis focuses on each federation against which a firm directly competes and involves gathering and interpreting entropy about its competitors.Competitive rivalry is the on-going set of competitive actions and responses that occur among firms as they maneuver for an benefitous market position. curiously in highly competitive industries, companies incessantly jockey for advantage as they establish strategic actions and respond or fight to rivals moves. It is important to understand competitive rivalry because it influences a fi rms ability to gain and sustain competitive advantages. 3 Is Framework supplement the 3 Is framework provides a thorough overview by mathematical group competitors into three buckets immediate competition, impending competition, undetectable competition.BARCLAYS 4 BARCLAYS MATT BARRETTS JOURNEY winsome HEARTS AND MINDS 1. Immediate competitor Immediate competitors to Barclays are considered to be the major financial institutions located in the UK much(prenominal) as Lloyds TSB and RBS. These institutions are gaining increasing posture over Barclays due to their frown cost structures and improved efficiencies. 2. be Competition Impending competitors to Barclays include international financial services firms such(prenominal) as Credit Suisse number one Boston, and smaller firms operating in one of Barclays business categories such as investing funds advisory firms (Zoete Bevan, Wells Fargo Nikko). . Invisible Competition Barclays invisible competitors include smaller UK ba sed businesses that focus solely on a product offered by one of Barclays grades, such as smaller mortgage modify businesses (Woolwich). III. INTERNAL COMPANY ANALYSIS add together national company factors including capabilities and weaknesses, grade filament activities, dodge, and financial situation. a. Outline the companys ingrained capabilities and weaknesses. description Capabilities exist when re authors have been integrated to reach a specific set of tasks and are frequently developed within a specific functional area.In addition to identifying the companys opportunities and threats from the external environment, another important neutral of the situation analysis is to evaluate strengths and weaknesses as input for developing the companys strategies. Discussion enquiry 3 What are the main capabilities of Barclays? Does Barclays have a core competence? Barclays main capabilities include retail financial services and corporate banking within the UK. The companys core competencies (i. e. trengths relative to competitors that give it a competitive edge) include a reinforced brand strawman within the UK, a vehement domestic right, new advanced leadership under Matt Barrett, and big(p) (276%) market cap crop from 1995-2000. BARCLAYS 5 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS Discussion Question 4 Create a SWOT analysis to understand Barclays strengths and weaknesses. Does Barclays have a sustainable competitive advantage in the retail financial services industry? If so, what is the source? Strengths 1. unvoiced brand presence within UK 2. 76% growth in market cap from 19952000 3. Strong domestic franchise 4. Strong new leadership with strategic vision (Matt Barrett) Opportunities 1. Opportunity to expand into global markets (Barclays Global indueors only 2% of business) 2. ability to strengthen alive brand presence within Europe (10% of sales and profits) 3. contour cost sharing among business units (HR, IT, Finance, an d so forth ) Weaknesses 1. Cost to income ratio importantly high than competition (business units operate as silos) 2. concentrate focus (61% of revenue from RFS, capital division focused on debt products) 3.Limited global presence (80% of profits from UK) Threats 1. Management faltering to embrace new strategies, demoralized supply 2. Competitors have lower cost advantage 3. Stronger global presence of international competitors 4. disgruntled institutional investors 5. Inadequate IT systems can inhibit growth Barclays competitive advantage includes its hard presence within the UK market both in terms of locations and brand recognition, strong innovative leadership, and international presence. Barclays business dodging has focused on growth within the UK and has not invested enough capital into international enlargement.In a globalizing economy with uprising multinational financial corporations, the lack of a strong international presence is something that could significant ly hurt Barclays in the long-term, and even turn it into a takeover target as institutional investors continue to lose trust in the company. b. Conduct a set Chain analysis to identify quantify-creating activities. Definition By exploiting its core competencies, a competitive firm creates harbor for its customers. Value is metric by a products consummation characteristics and by its attributes for which customers are voluntary to pay.Companies with a competitive advantage offer value to BARCLAYS 6 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS customers that is superordinate word to the value competitors can provide. Value is created by innovatively bundling and leveraging resources and capabilities. A value chain analysis provides information relative to primary (inbound/outbound logistics, operations, marketing &038 sales, and service) and lower-ranking (firm radix, human resources mgmt, technological developments and procurement) activities.A value chain repres entation of Barclays primary and sustentation activities is presented in the diagram below. This information can be used to establish a business schema which targets select activities to create a sustainable competitive advantage. primary coil Activities ? ? ? ? Inbound/Outbound Logistics N/A Operations o Strong focus on sell financial service (RFS), account for 61% of revenue o Sold cash, equities, and corporate finance businesses to focus on debt products Service N/A Marketing and Sales o Strong focus on UK market and low global presence o combine on UK brand recognition countenance Activities ? ? ?HR Management o executive committee not performing as decision qualification team o Higher than average supply expenses put heavy strain on cost structure engineering science cave inment o Management Information function (MIS) system is outdated and inadequate Firm al-Qaida BARCLAYS 7 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS o Divisions operating as silos (ea ch has own HR, IT, etc. ) o overlook of data driven decision making processes o Introduction of the Euro and the European Central Bank affect Barclays picture to foreign exchange as substantially as interest rate changes both for the company itself and its clients Procurement N/A Discussion Question 5 Which components of Barclays value chain have made the company successful thus far? What changes to Barclays organizational structure and focus are undeniable for Barclays to remain competitive? Barclays has become a major player in the banking industry through strong brand presence within the UK, earning it one out of either five personal customers, and a exceed focus on sell Financial Services (RFS). However, both its UK presence and RFS focus have failed to provide a sustainable competitive advantage for the company.In order to remain competitive within the banking industry, Barclays must examine and redesign various components of its value chain including 1. Focus on Retail Financial Services a. Barclays must expand its focus beyond RFS by creating new product offerings for corporate customers and further expanding internationally to give newly acquired corporate customers global access. 2. Outdated and inadequate MIS system a. In order to manage its internal functions efficiently, Barclays must adopt technological innovations and update its MIS system. 3. Lack of data driven decision making a.In order to compete in an industry driven by statistics and analytics, Barclays must emphasize data driven decisions passim its corporate structure. 4. Fragmented core divisions a. Operating fragmented core divisions such as HR and Finance creates additional costs as considerably as bureaucracy and inefficiencies. Barclays must consolidate these shared services. BARCLAYS 8 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS c. Financial Analysis Definition Financial analysis is used to measure out the viability, stability and profitability of a company o r operating division.The analysis is through with(p) using quantitative historical writ of execution found in the financial account documents (Balance Sheet, Income Statement, and Statement of Cash Flows). The goal of the analysis is to understand a companys financial health through its profitability, solvency, liquidity, and stability. Given the financial information provided in the case, it is undefendable that Barclays is lagging behind its competitors in cost control measures, and has allowed both PP&038E and staff Expenses to rise above its competitors average. Operating expenses as % of income In addition, an analysis of the companys divisions and their respective earnings contribution reveals that Barclays to a great extent relies on its Retail Financial Services division for a large flock of its earnings this suggests that diversification might be involve. NOTE Further analysis into the average contribution of each revenue stream for other players in the industry is needed before diversification can be entirely justified. BARCLAYS 9 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS IV. strategy FORMULATIO NSummarize Barclays strategic position as it relates to its certain strategy and the components thereof. a. Summarize Barclays current strategy. Barclays current strategic nonsubjective is to drive profits by consolidating internal functions and expanding its international presence. The company is a major player in the UK financial services and retail banking industry but has unconnected ground internationally despite chop-chop rising market capitalization. Fragmented internal divisions and a lack of aggressive expansion have brought up the need for extensive managerial and structural changes to the firm.This prompted the hiring of a new CEO, Matt Barrett, who established a serial publication of restructuring goals for Barclays to remain competitive. b. Strategic Analysis Definition Conduct an analysis of Barclays business strateg y by using the 4 Ps Framework. The 4 Ps Framework is used to understand a companys strategy based on its Position (Mission, Values, and Vision), Priorities, Payments (what it will turn over its money on to reach those priorities), and public presentation (how it will measure success).By complementary the framework, we can analyze a companys current, next, or recommended priorities as well as set forth a path in order to gain goals and measure accomplishments. Use the 4 Ps Framework to analyze the firms past/current/future strategy. 1. Position a. Mission To provide innovative products, excellent careers, positive community contributions B A R C L A Y S 10 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS b. Values Fact based decisions, customer service, and value maximizing strategy c. Vision To be one of the close admired financial service organizations in the world 2.Priorities 1. Develop cross-group synergies to lower costs and improve force 2. Expand reach of Barcl ays brand abroad through strategic alliances/acquisitions 3. Continue to diversify real business portfolio 3. Payments 1. Invest in adequate IT systems 2. Invest in human capital initiatives to array incentives and boost morale 3. Invest in marketing and strategic alliances/acquisitions in under facilitated regions/segments 4. instruction execution 1. Shareholder returns vs. peer institutions 2. Customer and revenue growth (double profits in quartet years) 3.Increased profit due to lower costs and increased efficiency (reduce costs by ? 1bn) Discuss possible recommendations that Barclays could look on going forward to improve the performance of the company. Determine the decision criteria and also analyze the pros and cons of each recommendation. In order to remain competitive within the marketplace, Barclays must 1. i. ii. iii. 2. i. ii. 3. i. ii. iii. Develop cross-group synergies to lower costs and improve efficiency by Rebuilding core infrastructure to consolidate HR, IT, a nd Finance groups across mortal divisions Reducing costs by 18% (? bn) Realigning incentives to reward value-add decisions Expand Barclays brand abroad though Increased brand presence in Europe to enter top 5 ranking Strengthening of the brand in US and Africa Continue diversifying the existing business portfolio by Expanding Barclays product and service portfolio to strengthen weak or underrepresented areas to serve affluent/high net expenditure segments Decreasing reliance on Retail Financial Services by strengthening Barclays Capital and Barclays Global Investors divisions Entering new markets by acquiring major players (e. g. Woolwich). B A R C L A Y S 11BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS Question Reduce staff expenses Option / Hypothesis Reduce labor costs by increasing automation Decision Criteria ? Cost/Benefit analysis ? stamp on employee morale ? Technology capabilities ? Revenue growth ? Barriers to entry ? Effect on current resources ? Revenue P ros desire term cost reduction Streamlining of processes to a greater extent control over information lam and analysis Does not cannibalize existing revenue streams Increase global reach and brand presence Diversifies risk vivacious customer loyalty and brand presence No need for customer acquisitionCons High up-front cost Lengthy implementation period Technology risk nix effect on employee morale High cost High risk and FX exposure No trial period finish clashes, integration logistics Might stretch resources too thin Requires investment in infrastructure and human capital Requires new expertise broaden target markets Increase revenue through new market entry with current product suite Diversify product offerings Increase equity and investment banking focus of Barclay Capital division growth ? Barriers to entry ? Effect on current resources B A R C L A Y S 12