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BARCLAYS: MATT BARRETT’S JOURNEY – WINNING HEARTS AND HEADS I. CONVERSATION QUESTIONS, CASE INTRODUCTION AND KEY POINTS Launch The case covers the introduction of Shiny Barrett while CEO of Barclays and the changes this individual introduced to the corporation to maintain it is competitive location within the retail financial services industry. In an significantly competitive environment, Barclays is usually losing earth due to its insufficient data-driven actions and little global existence.
The situation outlines the actions taken by Barrett to remodel some of the key characteristics of Barclays’ business structure, and concludes by presenting the challenge he will encounter in getting management buy-in to be able to implement his vision. The key challenges that Barclays faces include: market consolidation, the emergence with the Euro and European Central Bank, elevated reliance onto it and web-affiliated platforms, plus the rigidity of its own business structure. II. EXTERNAL ENVIRONMENT ANALYSIS Summarize the exterior environment, which include conditions inside the general, sector, and competition environments. a.
The General Environment Definition: The overall environment is targeted on the future and can be analyzed by considering the STEEP structure: Social/demographic, Scientific, Economic, Environmental/geographic and Political/legal/governmental factors at play. 1 ) 2 . several. 4. five. Social/Demographic Scientific Economic Environmental/Geographic Political/Legal/Governmental Conversation Question one particular: Perform a HIGH analysis to know the general environment facing Barclays. How will Barclays be affected by external factors? Specifically, what will the effect of globalization be in terms of risks and opportunities?
Social/Demographic Part? English is now increasingly the world-wide dialect of business offering Anglophone Barclays for you to expand into international market segments with decreased language obstacles. BARCLAYS |1 BARCLAYS: SHINY BARRETT’S VOYAGE – SUCCESSFUL HEARTS AND MINDS Technological:?? Increased world-wide reliance on IT and the introduction of web-affiliated solutions in 2000 will elevate Barclays’ need to shift portfolio offerings. Barclays’ need to update it is “woefully inadequate” Management Details Systems (MIS) and begin to automate labor intensive processes to lower costs.
In order to enter fresh markets to improve revenues and satisfy institutional investors, Barclays must invest in increased technology capabilities. Financial:?? Robust economic environment due to technical boom increases liquidity in the marketplace. As a result, acquisitions will be more costly than in a down economy. However this will likely also trigger capital being more accessible. Market trends toward consolidation will pressure Barclays to gain back its market leadership placement through acquisition. Globalization and world overall economy flattening requires Barclays to become a global firm expanding its offerings over and above its current UK focus.
Environmental/Geographic:? Geographic borders and distances between countries will be shrinking with an increase of technology and a globalized economy. This will both need and help Barclays’ global presence. Political/Legal/Governmental:? Emergence with the Euro and strengthening of the EU is going to reduce FOREX exposure intended for the Western markets and stabilize European economies. Western european Central Traditional bank will control interest rates in Europe making Barclays weaker to it is decisions (versus the decentralized banks before the Euro emergence).
With a great ever increasing volume of banks working across equally political and geographic region, Barclays need to expand its reach beyond the UK to remain competitive and prevent a potential takeover. In doing this, Barclays must look at a set of risks and options that are included in operating beyond the UK: Dangers 1 . Functioning a multinational corporation requires managing throughout multiple ethnicities, languages, and economic surroundings – Barclays’ organizational framework must be adaptable enough to adapt to these kinds of.. Low brand recognition internationally would make competition against community institutions high priced. BARCLAYS |2 BARCLAYS: HE BARRETT’S JOURNEY – SUCCESSFUL HEARTS AND MINDS three or more. Relocation in foreign countries requires substantial infrastructure costs. 4. Locating Barclays’ as well as customers’ property across multiple currencies reveals both to fluctuations in exchange rates. 5. Failed growth into foreign market might damage brand image and alienate new customers. Opportunities 1 ) Increased global reach and brand occurrence. 2 . Diversified risk. several.
Possibility to produce new revenue streams through new buyer acquisition. some. Gain initial mover edge in growing markets. a few. Increases appeal of Barclays to multinational corporations. m. The Market Environment Explanation: An industry is actually a group of organizations producing items that are close substitutes. For the duration of competition, these kinds of firms affect one another. Commonly, industries will include a rich combination of competitive approaches that companies use to pursue above-average comes back. In part, these strategies are chosen as a result of influence of an industry’s features.
Compared with the overall environment, the industry environment often contains a more direct effect on the firm’s ideal competitiveness and above-average comes back. The sector environment is the set of elements that immediately influences a strong and its competitive actions and competitive answers. Porter’s your five Forces Model is a highly effective tool intended for understanding the mechanics amongst the five key factors that identify an industry’s level of rivalry and profit potential. [Outlined beneath, High=H, Medium=M, Low=L] 1 . 2 . 3. some. 5.
Threat of New Traders (or barriers to entry) Supplier Power Threat of Product Substitutes Buyer Electricity Intensity of Rivalry Debate Question two: Use Porter’s Five Pushes Model to analyze the retail financial services sector in the UK. With all this analysis, is a industry desirable or unsightly? The listed below Porter’s 5 forces examination shows that the retail financial services industry in the united kingdom is a potentially attractive industry due to low threat of recent entrants, provider power, and substitutes. However, medium client power and high competition within the industry could lessen return possibilities.
Threat of recent Entrants (or barriers to entry): Low? High facilities costs Barclays has excessive brand identification within the UK, less therefore in its additional markets BARCLAYS |3 BARCLAYS: MATT BARRETT’S JOURNEY – WINNING HEARTS AND THOUGHTS? Regulatory and security issues make marketplace entry complicated for small players TAKE NOTE: Mergers of existing banks, if considered ‘new entrants’, must be addressed given the consolidation craze existing available in the market. Smaller local banks may pull clients away from Barclays if these people were to combine and offer even more extensive services but preserve local origins and cable connections.
Supplier Electricity: Low? Switching costs between IT suppliers low in a fragmented industry Threat of Product Alternatives: Low? Traditional, paper based, systems have become outdated and are will no longer feasible. Property management advice is preferred by buyers over DIY Buyer Power: Medium? Cost sensitivity of retail customer (major revenue stream intended for Barclays) comparatively high when compared with that of corporate and business client Moving over costs of retail consumer (major income stream to get Barclays) fairly high when compared with those of business client Depth of Rivalry: High? Buyer loyalty and brand recognition make turning of bank provider more unlikely Large number of competitors within the full banking space NOTE: Competition within the market is based on the two price and services The Competitor Environment c. Description: The competitor environment may be the final subject matter of analysis instructed to gain a complete understanding of you�re able to send external environment. A competitor analysis focuses on each company against which usually a firm directly competes and involves gathering and interpreting information about its competitors.
Competitive rivalry may be the ongoing set of competitive actions and responses that occur among businesses as they move around for an advantageous market position. Particularly in highly competitive industries, companies constantly jockey for advantage as they start strategic actions and act in response or react to rivals’ techniques. It is important to understand competitive rivalry because it impact on a business ability to gain and support competitive advantages. 3 I’s Framework Leveraging the 3 I’s framework offers a thorough overview by grouping competitors in to three and therefore: immediate competition, impending competition, invisible competition.
BARCLAYS |4 BARCLAYS: SHINY BARRETT’S QUEST – WINNING HEARTS AND MINDS 1 . Immediate Competition: Immediate competitors to Barclays are considered to be the major banks located in the united kingdom such as Lloyds TSB and RBS. These kinds of institutions happen to be gaining increasing presence more than Barclays due to their lower cost constructions and increased efficiencies. 2 . Impending Competition: Impending competitors to Barclays include international financial services companies such as Credit Suisse Initially Boston, and smaller companies operating in one among Barclays’ business categories just like investment exhortatory firms (Zoete Bevan, Bore holes Fargo Nikko).. Invisible Competition: Barclays’ unseen competitors incorporate smaller UK based businesses that emphasis solely on the product offered by one of Barclays’ divisions, such as smaller mortgage lending businesses (Woolwich). 3. INTERNAL FIRM ANALYSIS Sum up internal organization factors which include: capabilities and weaknesses, benefit chain actions, strategy, and financial situation. a. Outline the company’s internal features and weak points. Definition: Capacities exist when ever resources have been completely integrated to achieve a specific pair of tasks and are frequently developed within a specific functional place.
In addition to identifying you can actually opportunities and threats from your external environment, another important target of the situation analysis is always to evaluate pros and cons as type for expanding the company’s approaches. Discussion Question 3: Precisely what are the main functions of Barclays? Does Barclays have a core proficiency? Barclays’ key capabilities contain retail finance and corporate banking within the UK. The company’s key competencies (i. e. trengths relative to rivals that give that a competitive edge) include: a strong manufacturer presence inside the UK, a solid domestic business, new impressive leadership under Matt Barrett, and excellent (276%) marketplace cap growth from 1995-2000. BARCLAYS |5 BARCLAYS: MATT BARRETT’S JOURNEY – EARNING HEARTS AND MINDS Discussion Question 4: Create a SWOT analysis to know Barclays’ abilities and failings. Does Barclays have a sustainable competitive advantage in the retail financial services industry? If so , what is the source? Talents 1 . Strong brand occurrence within UK 2 . 76% growth in market cover from 19952000 3. Strong domestic operation 4. Good new leadership with proper vision (Matt Barrett) Options 1 . Possibility to expand into global market segments (Barclays Global Investors only 2% of business) 2 . Ability to enhance existing brand presence inside Europe (10% of sales and profits) 3. Reduces costs of cost sharing among business units (HR, THAT, Finance, etc . ) Weak points 1 . Expense to cash flow ratio considerably higher than competition (business devices operate while silos) 2 . Narrow emphasis (61% of revenue by RFS, capital division aimed at debt products) 3.
Limited global existence (80% of profits via UK) Threats 1 . Administration reluctance to embrace fresh strategies, demoralized staff 2 . Competitors include lower cost benefit 3. Better global existence of foreign competitors some. Dissatisfied institutional investors a few. Inadequate THAT systems can easily inhibit progress Barclays’ competitive advantage involves its: strong presence inside the UK marketplace both in conditions of places and brand recognition, strong innovative command, and international presence. Barclays’ business approach has focused on growth within the UK and has not used enough capital into worldwide expansion.
Within a globalizing overall economy with growing multinational economic corporations, deficiency of a strong international presence is something that could significantly harm Barclays in the long-term, and even turn it right into a takeover target as institutional investors continue to lose faith in the company. b. Carry out a Value Sequence analysis to identify value-creating actions. Definition: By exploiting it is core competencies, a competitive firm makes value because of its customers. Value is tested by a product’s performance attributes and by their attributes which is why customers are prepared to pay.
Businesses with a competitive advantage present value to BARCLAYS |6 BARCLAYS: ELLEN BARRETT’S VOYAGE – EARNING HEARTS AND MINDS consumers that is superior to the value competitors can provide. Benefit is created by innovatively bundling and leveraging resources and capabilities. A value chain examination provides information relative to major (inbound/outbound logistics, operations, advertising , sales, and service) and secondary (firm facilities, human resources mgmt, technological innovations and procurement) activities.
A worth chain rendering of Barclays’ primary and support activities is offered in the diagram below. This information can be used to set up a business approach which goals select actions to create a environmentally friendly competitive benefits. Primary Activities?? Inbound/Outbound Strategies: N/A Functions: o Strong focus on Full Financial Services (RFS), account for 61% of income o Offered cash, equities, and corporate fund businesses to pay attention to debt products Service: N/A Marketing and Sales: o Strong focus on UK market and low global presence o Reliance on UK brand recognition Support Activities??
HOURS Management: u Executive committee not carrying out as decision making team u Higher than normal staff bills put large strain on cost structure Technology Creation: o Administration Information Providers (MIS) method is outdated and inadequate Company Infrastructure: BARCLAYS |7 BARCLAYS: MATT BARRETT’S JOURNEY – WINNING MINDS AND THOUGHTS o Divisions operating because silos (each has very own HR, THAT, etc . ) o Not enough data motivated decision making techniques o Intro of the European and the European Central Financial institution affect Barclays’ exposure to forex as well as rate of interest changes both equally for the corporation itself as well as clients Procurement: N/A Dialogue Question a few: Which aspects of Barclays’ benefit chain make the company effective thus far? What changes to Barclays’ organizational structure and emphasis are necessary pertaining to Barclays to remain competitive? Barclays has become a key player inside the banking sector through good brand existence within the UK, earning that one out of every five personal customers, and a clear concentrate on Retail Finance (RFS). Yet , both it is UK existence and RFS focus have got failed to provide a sustainable competitive advantage for the organization.
In order to stay competitive in the banking sector, Barclays need to examine and redesign numerous components of the value string including: 1 ) Focus on Full Financial Services: a. Barclays need to expand its focus past RFS simply by creating new product offerings pertaining to corporate clients and further increasing internationally to provide newly obtained corporate consumers global access. 2 . Out of date and inadequate MIS system: a. In order to manage the internal functions efficiently, Barclays must take up technological innovations boost its LOS system. 3. Lack of data driven making decisions: a.
In order to compete in an industry influenced by stats and analytics, Barclays need to emphasize data driven decisions throughout it is corporate composition. 4. Fragmented core divisions: a. Functioning fragmented primary divisions such as HR and Finance creates additional costs as well as paperwork and inefficiencies. Barclays must consolidate these shared solutions. BARCLAYS |8 BARCLAYS: HE BARRETT’S VOYAGE – EARNING HEARTS AND MINDS c. Financial Evaluation Definition: Economical analysis is employed to assess the viability, stableness and profitability of a company or operating division.
The analysis is done using quantitative historical functionality found in the financial revealing documents (Balance Sheet, Salary Statement, and Statement of Cash Flows). The objective of the research is to figure out a industry�s financial overall health through it is profitability, solvency, liquidity, and stability. Provided the monetary information presented in the case, it is clear that Barclays is usually lagging lurking behind its rivals in price control procedures, and allows both PP, E and Staff Expenditures to rise over its competitors’ average. Functioning expenses because % of income In addition , an research of the provider’s divisions and their respective earnings contribution uncovers that Barclays heavily depends on its Full Financial Services department for a large portion of their earnings, this suggests that diversity might be needed. NOTE: Further more analysis in the average contribution of each income stream intended for other players in the industry is necessary before diversification can be totally justified. BARCLAYS |9 BARCLAYS: MATT BARRETT’S JOURNEY – WINNING MINDS AND THOUGHTS IV. TECHNIQUE FORMULATIO And
Summarize Barclays’ strategic placement as it pertains to its current strategy as well as the components thereof. a. Sum it up Barclays’ current strategy. Barclays’ current tactical objective is to drive income by combining internal capabilities and expanding its intercontinental presence. The company is a main player in the united kingdom financial services and retail bank industry yet has dropped ground internationally despite speedily rising industry capitalization. Fragmented internal divisions and too little of aggressive development have brought up the need for comprehensive managerial and structural changes to the company.
This caused the employing of a fresh CEO, Matt Barrett, whom established a series of restructuring goals for Barclays to remain competitive. b. Ideal Analysis Definition: Conduct a great analysis of Barclays’ organization strategy by using the 4 P’s Framework. The 4 P’s Framework is used to understand a company’s technique based on where it stands (Mission, Ideals, and Vision), Priorities, Obligations (what it will eventually spend their money on reach individuals priorities), and satisfaction (how it is going to measure success).
By completing the framework, we are able to analyze a company’s current, future, or perhaps recommended focal points as well as set forth a way in order to achieve goals and measure achievements. Use the 5 P’s Platform to analyze the firm’s past/current/future strategy. 1 ) Position a. Mission: To supply innovative products, excellent professions, positive community contributions M A R C L A Con S | 10 BARCLAYS: MATT BARRETT’S JOURNEY – WINNING MINDS AND BRAINS b. Ideals: Fact structured decisions, customer care, and benefit maximizing technique c. Vision: To be probably the most admired monetary service businesses in the world installment payments on your
Priorities: 1 . Develop cross-group synergies to reduce costs and improve performance 2 . Increase reach of Barclays manufacturer abroad through strategic alliances/acquisitions 3. Carry on and diversify business portfolio a few. Payments: 1 . Invest in enough IT systems 2 . Invest in human capital initiatives to straighten incentives and boost well-being 3. Buy marketing and tactical alliances/acquisitions in underserved regions/segments 4. Performance: 1 . Aktion�r returns versus peer establishments 2 . Customer and earnings growth (double profits in four years) 3.
Increased profit because of lower costs and increased productivity (reduce costs by? 1bn) Discuss feasible recommendations that Barclays can follow going forward to improve the performance in the company. Determine the decision conditions and also evaluate the pros and cons of each recommendation. To be able to remain competitive within the market place, Barclays need to: 1 . my spouse and i. ii. iii. 2 . we. ii. a few. i. 2. iii. Develop cross-group synergies to lower costs and improve efficiency by simply: Rebuilding core infrastructure to consolidate HUMAN RESOURCES, IT, and Finance groups across individual divisions Reducing costs by 18% (? bn) Realigning incentives to reward value-add decisions, Increase Barclays manufacturer abroad even though: Increased manufacturer presence in Europe to enter top 5 rank Strengthening of the trademark in US and Africa, Continue diversifying the existing business portfolio by simply: Expanding Barclays product and service stock portfolio to strengthen poor or underrepresented areas to serve affluent/high net worth sectors Decreasing reliance on Retail Financial Services simply by strengthening Barclays Capital and Barclays Global Investors categories Entering new markets simply by acquiring major players (e. g. Woolwich). B A R C L A Y S | 11
BARCLAYS: MATT BARRETT’S TRIP – SUCCESSFUL HEARTS AND MINDS Question Reduce staff expenses Option / Speculation Reduce labor costs by simply increasing software Decision Criteria? Cost/Benefit examination? Effect on worker morale? Technology capabilities? Income growth? Barriers to admittance? Effect on current resources? Income Pros • Long term expense reduction • Streamlining of processes • More control of information stream and evaluation • Will not cannibalize existing revenue avenues • Increase global reach and manufacturer presence • Diversifies risk • Existing customer commitment and brand presence • No need for consumer acquisition
Downsides • Substantial up-front cost • Prolonged implementation period • Technology risk • Negative impact on employee well-being • High cost • Risky and FOREIGN EXCHANGE exposure • No demo period • Traditions clashes, the usage logistics • Might stretch out resources thinner • Needs investment in infrastructure and human capital • Requires new expertise Diversify concentrate on markets Boost revenue through new market entry with current merchandise suite Shift product offerings Increase collateral and investment banking focus of Barclay Capital division progress? Barriers to entry? Effect on current solutions B A R C L A Y S i9000 | 12
