Barclays Bank and Matt Barrett’s Management Report

Introduction

This paper covers the six discussion questions regarding the position of Barclays. The Porter Five Forces analysis has been done and the threats and opportunities have been identified and discussed. SWOT analysis is carried out to determine the existing position of Barclays in the market.

STEEP Analysis of the General Environment Facing Barclays

Barclays was amongst the pioneer companies who recognized the importance and significance of credit cards and such other options. Barclays started working over the credit cards since the time they realized its potential. Barclays always tried to place itself differently in the minds of financial services users and they were pioneers of many financial services that were being introduced by Barclays in the banking business.

• Barclays initially introduced the first credit card in the UK banking industry.
• Barclays has got a very important privilege of being the first online banking services provider over the internet.
• Another important part which Barclays covered was the constancy system in the UK.
• It not only provided banking services online but it also started online credit card payments.

Effects of External Factors on Barclays

1. Barclays has used many technologies to enhance its operations especially while shifting them from the US to the UK. They utilized IT software to develop systems and strategies and to make their team more effective. This use of IT systems enabled them to introduce new and effective tools of management to retailers, merchants, and credit card holders as well (Herford 105).
2. One additional service which Barclays introduced primarily is ATMs along with credit card issues. ATMs enabled the Barclays system to develop extensively in UK markets and people were conditioned to such ATM users. This additional service became a competitive edge for the company and it also becomes very difficult for the competitors to break such interconnection.

Threats & Opportunities for Barclays

Threats

• The technological development that affected card processing was the introduction of smart or chip cards.
• Other competitors launch the credit card at a low cost.

Opportunities

• The transition from paper to electronics introduced to set up the interface with a global communications infrastructure.
• Outsourcing of card services including plastic card issuing, statement printing, or even customer services became more favored with the entrance of US ‘mono-lines’ in the UK market.
• As the first credit card launcher in the UK, Barclay’s have the opportunity to develop a good image on the customer’s mind before other strong competitor came.

Porter’s Five Forces Model Analysis

Threat of New Entrants (Highly Unattractive)

In industries like banking and financial services, new entrants can bring about huge losses to existing companies. In the UK several entry barriers hinder the entry of any foreign bank. A strict check is maintained over issues like deposits and loan issues in every bank to keep them operating in the market. Although Barclays has got very high reliability and consistency in the banking sector of the UK still sometimes people want to invest their money in government banks rather than investing in private banks to save their money and deposits (Shankleman 4). When it comes to product segregation, Barclay’s approach works for commercial customers. The rapid and competent service provided by Barclays along with the ambiance attracts several clients.

Rivalry Among the Existing Competitors (Highly Unattractive)

Public and private banks both are competing in the market and thus giving hard competition to each other. Existing banks are more important if Barclays is examined because new entrants are very difficult to enter because of entry barriers. On the other hand, the policy used by Barclays in the UK is a very effective strategy. Barclays acquiring major stakes in Absa can give an easy entry in an untapped market along with its brand visibility among clients.

Bargaining Power of the Clients (Medium Attractiveness)

The bargaining power of customers in markets like banks and financial institutes is a very important factor and thus needs to be addressed critically. As major sources of deposits and banking profits come from their clients, so they are most important for them. The clients or depositors have higher bargaining power in the banking market. Whenever a bank gives a higher rate of interest, it would draw interest to a large number of financers and clients for such offers.

This is the reason that private banks usually offer a higher rate of interest in comparison with public banks because of the higher risk involved. In this way, Barclays attracts several depositors towards itself. On the other hand, the existence of other banks in the market both global and neighboring players in the market presents a superior threat of substitutes in the banking market.

Bargaining Power of Suppliers (Highly Unattractive)

The bargaining power of suppliers refers to the term economies of scale. In the banking sector, this would expand their reach to a large number of clients which would mean higher net profit margins through higher volumes. Thus new markets that are emerging in the UK are their best to reach such levels. Nevertheless, they encounter high rivalry from financial companies as well as microfinance banks that are providing simple monetary solutions to the deprived and fragile people and also to the small entrepreneurial people and companies.

Threat from Substitute (Highly Unattractive)

Banks and financial institutes like Barclays not only offer deposit services but also offer a range of financial services like, loans, depositors benefits, credit cards, etc in which they have to compete with their substitutes. If some non-financial institutes start offering such services at lower costs then it would become very difficult to keep up with that.

The main capabilities and the core competence of Barclays

Barclays is a financial services provider company. Major potentials of Barclays was its core competency in product knowledge, effective marketing strategies, novelty/research ability, monetary and economic planning, and power, HR expertise. The basic competency of Barclays lay in its abilities such as the introduction of credit cards which made them proficient to confine the market and along with that it manages to stay away from price fights. Last but not the least, Internet services and online transaction offers were among its main competencies.

SWOT Analysis

Strengths

• Barclay is the market leader in the credit card industry; it introduced the credit card machine in the UK. They started the first loyalty scheme in the UK.
• Barclay’s credit system is electronically based that can be accessed from anywhere in the world.
• Barclays has always emphasized brand and product development rather than to indulge itself in price completion. The introduction of gold cards represented a good example of how Barclaycard articulated their branding policy (Treanor 7).

Weaknesses

• In late 2001, Barclaycard became one of the last traditional players in the market to scrap its annual fee, whereas its main rivals (such as National Westminster, Lloyds TSB, and Bank of Scotland) had abolished annual fees as early as 1999.

Opportunities

• The transition from paper to electronics introduced to set up the interface with a global communications infrastructure.
• Outsourcing of card services including plastic card issuing, statement printing, or even customer services became more favored with the entrance of US ‘mono-lines’ in the UK market.
• Being the first credit card launcher in the UK, Barclays has the opportunity to develop a good image on the customer’s mind before another strong competitor can penetrate the market.

Threats

• The technological development that affected card processing was the introduction of smart or chip cards.
• Other competitors launched the credit card at a low cost.

Barclays has sustained its competitive advantage in the retail financial services industry. In the last almost 40 years, Barclays has been introducing new and innovative instruments in the banking industry and its credit cards let the whole industry develop in a new and different world of banking. It also raised the standards of the whole industry and through that, the competitors also started inventing new ways of solving financial problems. Barclays introduced several different financial services through a massive combination of software, hardware, and technological improvements.

Components of Barclays’ value chain

As discussed earlier, the major competitive advantage that Barclay carries is its electronic credit card system. This is the reason why its online transactions grew day by day over the last few years. It believes in offering new and innovative services to its clients to make them satisfy with the system. It also focuses on product and brand development and the introduction of new innovative products in the market (Tuke and Gillman 6). Barclays has to maintain its competitive advantage by thinking more creatively to keep itself ahead of its rival companies.

Matt Barrett’s challenges in achieving buy-in from Barclays’ management to enact his proposed organizational changes

Matt has faced a huge number of challenges especially the political system, downfall of the electronic system, and threats of new entrants, etc. Mr. Barrett led the Canadian bank groups in the direction of joint ventures (Hazlitt 58). Matt also worked for the organizational betterment through business system improvements. The major thing which they focused on was value-based management which believed in giving additional value to clients along with basic financial services, for instance by giving them risk reduction tips, enhanced productivity options, and customer relationship management. Such steps not only made them effective but it also led the whole industry to grow.

Works Cited

Hazlitt, William. Remains of the Early Popular Poetry of England. New York: General Books LLC, 1866. Print.

Herford, Charles. Studies in the Literary Relations of England and Germany in the Sixteenth Century. United Kingdom: Cambridge, 1886. Print.

Shankleman, Martin. Barclays ‘Corrupt Regime’ Claim. BBC News, 2009. Web.

Treanor, Jill. Barclay’s Director Lands £14.8m Bonus. The Guardian UK, 2008. Web.

Tuke, Anthony and Gillman Herman. Barclays Bank Limited 1926-1969: Some Recollections by The Eagle Looks Back .A Silver Jubilee Anthology of Twenty- Five years Contributions to “The Spread Eagle“, 1926. Web.