Strategic Management: The Loans and Brokerage Companies Report (Assessment)

Introduction

Strategic management of the loans and brokerage companies is generally associated with the managerial principles of global managerial practices and closely linked with the rules of financial management. Originally, the factors of the strategic management in the brokerage companies depend on the character of the financial relations with the customers and the necessity to maintain the required level of customers and companions, basing on the principles of brokerage practices. Thus, this paper aims to discuss the most important aspect of strategic and financial management of the brokerage company, based on the necessity of innovations and managing the customer care policy and relations with customers, which will be created after the implementation of the new business tool. Moreover, the issues of trading approaches will be discussed, as well as the aspects, which influence customers’ loyalty.

Selling Loans Directly to the Public

The idea of selling loans directly to the public avoiding the franchised sales staff is generally regarded to be a matter of innovations, and the success of this idea depends on the entire financial structure of the company. The fact is that selling loans in such a way is not a commonly accepted practice, as it is rather risky, and the consequences are generally unpredictable, especially within the environment of franchised selling. The practice of selling loans directly is described in Drejer (2002, p. 431):

This option provides the brokerage company with the latest information on the disposal of financial assets. Moreover, wholesale Lending offers loans to consumers whose loans are originated by another mortgage broker. These loans are funded and sold by Countrywide, but originated by other lenders.

Nevertheless, despite the promising benefits, selling loans bypassing the franchised sellers, may originate a channel conflict, which is difficult to manage, nevertheless, it may be prevented. Originally, these conflicts arise as a reason for using the principles of e-commerce, thus the generally accepted practice of preventing channel conflicts is also closely associated with e-commerce. As Oladunjoye and Titi (2007, p. 592) emphasize in their research:

Despite the rapid growth of online commerce, an estimated 90 percent of brokerage loan companies do not sell online. Nevertheless, results from a survey show that click-and-mortar businesses have an 80% greater chance of sustaining a business model during three years than those operating just in one of the two channels. Nowadays, E-commerce wins in popularity as a second distribution channel, because of the low overhead expenses and communication costs. Their advantage is at the same time their disadvantage since consumers can communicate less expensive and more easily with each other too.

In the light of this fact, it should be emphasized that the channel conflict, possible in the case of McRisky Loans Brokerage will be closely linked with the decision of selling loans online. To avoid this conflict, the McRisky Loans Brokerage company should resolve the matters of the distribution channels. Thus, resorting to traditional channels will not prevent the conflict, while implementation of a new channel, which would not touch upon the interests of the franchiser will be rather helpful. Thus, as Burgelman and Christensen (2003, p. 421) claimed:

The type and magnitude of channel conflict in the electronic marketplace depend on the nature of the industry and the individual company. Companies that do not own or closely control their offline distribution channels risk damaging sometimes decades-old relationships and revenue streams. However, companies that control their channels risk cannibalizing revenues with online stores, which take customers out of existing channels and decrease the profitability of those older channels.

Brick & Mortar vs. E-business

Originally, the difference between these two approaches is obvious. B & M principle presupposes the physical (often face-to-face) contact with the consumers, thus, representing the traditional approach towards selling. E-commerce excludes this physical contact and represents the innovative approach of the informational age. The fact is that B & M approach has more disadvantages than benefits, as the necessity to have the physical space for storage and vending imposes particular financial (taxes) and physical (comfort) obligations, while the e-commerce departments are free of the main part of these necessities.

Surely, the legal requirements and the factors of governmental policy are essentially different for these two types of marketing approaches. While e-commerce principles of trading are regulated only by financial and criminal legislation, B & M trading also requires the observation of medical (sanitary code), social (rights of the workers), federal or municipal (territory and norms, associated with land rent), etc. In the light of this fact, the e-commerce approach looks simpler and more effective, as less is spent on the issues, which are not linked with trading and marketing in general. Moreover, the issues of consumers’ comfort are emphasized, as most of the consumers have an opportunity to offer the required goods or services without leaving their homes. As it is emphasized by Drejer (2002, p. 129):

Starting an internet business does not require much capital output compared to a typical brick-and-mortar business. Instead of operating the business at a four to five figures cost, some even six, why not reduce it to a two or three-figure? The cost of operating an internet business would never exit three figures unless additional advertising expenses are accounted for.

Customer Loyalty

First, it should be stated that the term itself is used for describing the customers’ behavior and attitude of the customers towards the company. This aspect is often used as the indicator of the customer care policy effectiveness and may be used for assessing the level of customers’ satisfaction with the quality of the goods and services. The aspects, which influence this loyalty are also used for defining the effectiveness of the business performance in general as if all the components of the marketing, financial, customer care, and managing the trade. Originally, the aspects of this loyalty may be defined by the four steps, which are used for gaining customers’ loyalty:

1. The most important aspect is the personnel of the company. If the customers are served by the right people, by professionals, the loyalty level increases essentially.
2. The width of services increases loyalty. Thus, diversification is one of the most important keys to customers’ loyalty.
3. The workflow, which is regarded from the viewpoint of the customers is the indicator of the quality of the working process. The smoother the process, the higher is the loyalty.
4. Customer care policy. The companies should listen to customers’ complaints for solving the problems associated with the customers’ loyalty.

Works Cited

Burgelman Robert, Christensen Clayton. “Strategic Management of Technology and Innovation” McGraw-Hill/Irwin (2003)

Drejer, Anders. Strategic Management and Core Competencies: Theory and Application. Westport, CT: Quorum Books, 2002.

Oladunjoye, G. Titi, and Godwin Onyeaso. “Differences between Resources and Strategy in Strategic Management: an Experimental Investigation.” International Journal of Management 24.3 (2007): 592