Transformation And Growth In The Uk Commerce Essay

Transformation And Growth In The Uk Commerce EssayThe emergence of Santander into the UK food food market with the acquisition of Abbey represents a big move across Europe in the banking industry. This report take ins to evaluate the effect of the move across b secernate while analysing various musical arrangement and tools which were utilise in the process. This report instals the structure and ki sugarics of the industry in which Santander make outs and the effect it has on the industry. It withal analyses the industry in which Santander competes in using the Positioning school, vision Based View and analytical tools such as the five forces framework, blighter, VRIN and Porters generic strategy to analysing the transformation and growth of Santander in the UK since its acquisition of Abbey in 2004.Introduction to strategyStrategy is the direction and scope of an organisation over a long term, which happen upons receipts in a changing environment finished its configu ration of resources and competences with the aim of fulfilling stakeholder expectations (Gerry Johnson, Kevan Scholes and Richard Whittington, 2008). They as well explained that the word strategy is associated with different issues, one of which is the strategic fit with the business concern environment. Here, organisations need appropriate positioning in their environment i.e. the reaping or utility should meet clearly identified market ineluctably. While the Resource-Based View of strategy is about exploiting the strategic competency of an organisation, in terms of its resources and competences, to provide combative improvement and/or yield youthful opportunities.Mintzbergs (1987) view of strategy as a Plan, Ploy, Pattern, Position and Perspective covers the various ship canal which strategy is defined. He say that strategy is a plan used to carry out an objective. It is a unified, comprehensive, and integrated plan designed to ensure that the basic objectives of the ent erprise atomic number 18 achieved (Glueck, 19809).As a plan, a strategy rear be a ploy too, really just a specific manoeuvre intended to outwit an opposing or competitor.Strategy is a pattern- specifically, a pattern in a stream of actions.It is a position a means of locating an organization in what theorists like to call an environment.It is also a perspective, its content consisting not just of a chosen position, but of an ingrained way of perceiving the world.Santander, the Spanish financial colossus in retail banking acquired Abbey, the British mortgage lender in late 2004. After stabilizing Abbey in 2005, it developed a troika (3) year pushful plan with the purpose of maintaining the act of products with already last significant market value and manage position, increasing its presence in separate banking segments such as consumer finance, insurance and SME and Commercial lending in order to transform the founding into a full-service retail bank with a wide range of p roduct and service offerings.Santander initially embarked on its strategy largely by exploiting its internal resources through Integration of human resources, introduction of its Technology, revenue growth and efficiency, maintaining a provident tone-beginning to risk management.Industry and Market in which Santander competesThe industry consists of a group of firms producing products or services that be essentially the same (Gerry Johnson, Richard Whittington and Kevan Scholes, Exploring Strategy, 2011).Santander competes in banking industry where it formulas ludicrous competition from other major players in the industry like Barclays, Lloyds TSB, HSBC, HBOS and Royal Bank of Scotland (RBS) otherwise known as the big 5 and its major argumentation of business is the retail banking which accounts for over half of its net income.Its core market in the UK is centred on Mortgages, Savings and protection while it also competes in brazil and other parts of Europeincluding Portugal where it is recognized as the fourth largest retail bank with a customer base of 1.7 million, 670 branches, 6000 employees, a mortgage market share of 16% and over 18% in mutual funds.Structure and dynamics of the market in which Santander competesAs explained by (Porter 1985), the strength of each of the five militant forces is a function of industry structure, or the underlying economic and technical characteristics of an industry (Competitive Advantage Creating and Sustaining Superior Performance by Michael Porter, 1985).To analyse the structure and dynamics of the market in which Santander dies, it is imperative to understand the major calculates which affect the Industry in general which in this case includes other major banks, their products and services, structure and also their strengths and weaknesses as this forms the warlike forces in the market4.1 The curse of entryThese are the barriers that need to be overcome by new entrants if they are to compete successfully (G erry Johnson, Kevan Scholes and Richard Whittington, 2008).Entry barrier for competing in this discipline is high because it is a capital intensive industry.Achieving economies of scale is a factor for competing in the banking industry as it would carry new entrants to compete on the same level of the other major players in the industry if they are to survive.As seen from the case, Santander was fit to gain entrance with a 9 billion acquisition of Abbey in 2004 which was at the time, Europes biggest cross-border banking deal and it already had experience in European retail banking which at the time, accounted for over half of its net income before the acquisition of Abbey.As it is a highly contested market for customer base, the level of difficulty in entry is quite high because the market is already controlled by the major banks with strong brands like Barclays, LTSB, HSBC, HBOS and Royal Bank of Scotland and It would be quite difficult for beginners to convince customers to mov e from these already known and set up brands.Santander was able to gain entrance into the market through the acquisition of Abbey which already had a strong customer base of 18 million and a well-known brand name.It also had a warlike edge. Santander introduced Partenon, its successful core banking platform and this technology enabled Santander to perform a seamless integration, launch new products with minimal sensation time.Entry barrier into the corporate and SME sector is also high. Although Abbey achieved significant growth in that area, it was still largely controlled by the enceinte 5 banks.Abbeys plan to successfully enter and compete in that segment result be dependent on the introduction of its Partenon system.4.2. Bargaining power of SupplierThe bargaining power of suppliers is high. The Big 5 banks (Barclays, HSBC, LTSB, RBS HBOS) control almost the same amount of share in some areas like the Credit Card Market and SME Banking and offer similar services. A supplie r group is powerful where it is dominated by a few companies and is more concentrated than the industry it sells to (Porter 1980).4.3 Bargaining Power of BuyersBuyers compete with the industry by forcing competition on prices, bargaining for higher quality or more services, and playing competition against each other- all at the expense of industry favorableness (Porter 1980). With this being a highly competitive market, the bargaining power of buyers is also high and there is competition on price.4.4 Threat of SubstitutesAccording to Porter 1980, the threat of substitute is high if it offers an attractive price performance trade-off to the industrys product. In this area, the threat of substitutes is quite low.4.5 Rivalry among existing competitorsThe rivalry among existing competitors is high particularly among the Big 5 banks and this reflects in the close similarity in their market shares. As mention by Porter (1980), the intensity of rivalry is greatest if competitors are nume rous or are roughly equal in size and power.Critical success factors for competing in the industryCritical success factors (CSF) are those factors that are particularly valued by a group of customers and, therefore, where the organisation must excel to outperform competition (Gerry Johnson, Kevan Scholes and Richard Whittington, 2008).To compete in its market, its new CEO Francisco Gomez- Roldan presented a three year ambitious plan for achieving success which was tagged The Three Year Plan A Blueprint for success and this was a key factor to be tooled for them to compete in the financial market with the other major banks. This new plan was put in place in order to achieve the Groups vision of becoming the outperform retail bank in the UK. To begin with, the plan was aimed at maintaining the performance of products like mortgages which already had a high market share position and increase its revenue in other banking segments such as finance, insurance, SME and commercial lending so as to transform the institution into a full service retail bank with a wide range of products. The plan focused on increasing its revenue, efficiency and maintaining a prudent approach to risk management. To achieve this, it further grouped its mathematical operation into three main divisions and this was centred on Retail, Insurance and Asset Management (IAM) and Abbey Financial Market (AFM).In the retail section, its target to achieve 75% in revenue and 70% of pre-tax profit would be through increased gross sales, customer and savings retention, cross sales and exploitation of new growth opportunities.The Insurance and asset management (IAM) section was to contribute 13% of its revenue before tax through its back prevail management. With a new regulation which allowed an individual considerable freedom in their pension contributions been put in place and becoming effective as of 6 April 2006 in the UK, it was envisaged that there would be increased demand for pension relate d products and advisory services and would lead to new opportunities for enthronization across sales. To key-in and compete in this section, Abbey will do so by developing its intermediary and end-customer focused retention programmes, introduce new stake-holder-focused communication strategies and remediation projects in order to cringe risks. Another area which would contribute 10% of Abbeys revenue and 17% of profit after tax is its financial market (AFM) and this was to be achieved by increasing its product range, customer base and transaction flow.In addition to the above, rebuilding Abbeys sales capabilities in mortgages, savings and protection, increasing its presence in bank accounts, unsecured ad hominem loans (UPL), investment and pensions through the implementation of retention and incentive schemes proposed to target higher-value segments, developing a sustainable strategy for its online business Cahoot, increasing its telephone sales capabilities and also creating ne w branch sales system with sophisticated pricing by customer segment and increased focus on existing clients and cross sales for the unsecured personal loan segment will play a major role in competing successfully in its market.Its resources, competences, capabilities and how Santander differentiates itself from competitorsResources are the assets that an organisation throw off or can call upon and competences are the ways those assets are used or deployed effectively (Gerry Johnson, Richard Whittington and Kevan Scholes, 2011) while capabilities refers to the ability to integrate, build, and configure internal and external competences to administer cursorily changing environments. Thus, it reflect an organisations ability to achieve new and innovative form of competitive advantage given path dependencies and market positions (Leonard-Barton, 1992)Santanders competence and capability in retail banking in Spain which accounts for half of its income is a strong advantage for them in terms of competing in the UK.They have an experienced and brilliant CEO in Antonio Horta-Osorio, who succeeded Francisco Gomez- Roldan after he passed away. His vision of making Santander the best commercial bank in the UK by focusing on efficiency, service quality, customer loyalty, groupwork and meritocracy showed his importance as a strong force which reflected on the growth of Santander since its entrance into the UK.Another great resource which Santander holds is its technology. The introduction of Partenon, its biggest technological asset which helped in the seamless integration and enabled them launch new products with minimal lead time.Their ability to outsource processes to Spain, Portugal and Poland in other to reduce the follow-to-income ratio while still maintaining physical interface with customers. With this resource, they were able to achieve economies of scale and offer reasonably priced products and services which meant higher income and increased customer loyalt y.The proper utilisation of these human and technological resources by its management team led Abbey to win the Euromoney award for best Bank in the UK in mid-2008.Its sources of competitive advantageCompetitive advantage is how an SBU (Strategic business unit) creates value for its users both great than the cost of supplying them and superior to that of rival SBUs (Gerry Johnson, Richard Whittington and Kevan Scholes, 2011). It is further explained that to have an advantage, they must be able to create greater value than competitors because in the absence of a competitive advantage, the SBU is always vulnerable to attack by competitors.Barneys (1991) VRIN framework is also used to determine if a resource is a source of sustainable competitive advantage. To serve as a basis for sustainable competitive advantage, resources must be valuable, rare, inimitable and non-substitutable (fig 2).Competitive advantage is realised based on three factors (Sudarshan D, 1995) (1) the firms market ing strategy, (2) implementation of this strategy and (3) the industry context which refers to Porters generic strategy.Previous study by Porter (1980) introduces generic competitive strategies for gaining competitive advantage asOverall cost leadershipDifferentiationFocusThe differentiation strategy is one of differentiating the product or service offering of a firm, creating something that is perceived industrywide as being unique (fig 1).Santanders main source of competitive advantage which is unique is its IT Partenon banking platform. They differentiated themselves and gained a competitive advantage over its competitors through the use of Partenon. With this right business mode of operation, they were able to operate from their German and Italian centre through their data centre in Madrid, gain the trust of their customers, introduce a more secure way of doing business and offer a higher quality of service compared to its major competitors.In addition, it gave them a first mov er advantage meaning they were able to eliminate duplicated processes, reduce the cost per transaction, and release new products into the market with minimal lead time before their competitors.Santander also gained competitive advantage by being the cost leader. According to Porter (1980), Cost leadership requires aggressive construction of efficient-scale facilities, vigorous pursuit of cost reductions from experience, tight cost and smasher control, avoidance of marginal customer accounts, and cost minimization in areas like RD, service, sales force, advertising, and so on.With Santanders experienced management team coupled with their experience in retail banking, they were able to introduce best practices into the UK market at low cost and with an advantage in inputs in terms of its Partenon system, they were able to cut cost in operations while providing quality services for their customers.The major Macro/ small environmental strategic marketing issues facing Santander, its vi ew as an prospect or threat, time frame for which each issue will be most relevant and the level of precedingity to be assigned to themThe Macro/Micro environment consist of broad environmental factors that impact to a greater or lesser extent on almost all organisation and the PEST framework identifies how future trends in political, economic, social, technological, environmental and legal environments power impinge on organisations (Gerry Johnson, Kevan Scholes and Richard Whittington, 2008). The analysis below shows the various environmental marketing issues faced by Santander.8.1 Political issuesThe new regulation in the UK which became effective as of 6th April, 2006 A Day afforded individuals considerable freedom in their contributions to the pension schemes and other investment assets. This increase is an opportunity for Abbey as it will bring about an increase in demand in the pension schemes and investment area through new product and advisory services offering.8.2 Econo mic issuesThe British market for motor finance which was still fragmented with the three leading providers holding a combine market share of 30% presents an opportunity for Santander to increase its activities in consumer finance in the UK as it is a leading car finance provider in Continental Europe, its expertise, product range and economies of scale coupled with a joint with a joint venture with Abbey would develop the British market.With the general business mood in the UK housing market slowing down, the mortgage lending and market share faced a downward slide and this represents a threat to Santanders 10% market share in mortgages. Its counter-intuitive decision to cut down its market share from 10% to 6% prior to the downward change in the area due to its cautious and prudent approach to business was a timely and good decision made by Santander.A repeat of economic street corner which happened in the past could be a threat to Santander.8.3 Sociological issuesCultural differ encesWith the acquisition of Abbey and entrance into the British market without prior operations in the UK market, Santander could face a brick wall at the initial stages of it operation in the UK because of the differences in national culture and business organisational culture. It is assumed that with the introduction of experienced management caterpillar track the operations, and with the gradual introduction of its other resources, the effect of change can be cushioned.At the time of its acquisition, it was noted that Abbey had a total of 18 million customers, a strong brand which was built over time, but had weaknesses in customer human relationship, poor sales productivity and sales culture. This was a weakness for Abbey because customer relationship and loyalty is a key factor for success in the industry.In other words, they were poor in customer orientation. This issue should be apportioned bloom priority considering that Santander had just gained entrance into the UK mar ket by acquiring Abbey. Further operation under those poor customer relationship circumstances would most likely lead to loss in customer base and have a negative effect on Santanders total income.8.4 Technological issuesTechnology enhancement through Partenon remains one of Santanders marketing assets which have helped to further strengthen the growth of the company since its introduction into Abbeys operations. The timely introduction of Partenon afforded Santander an opportunity to reduce cost of operation and allowed them release new products into the market in lesser time. The introduction of Partenon could be a challenge and an opportunity for Abbey. As it was a new system introduced, it necessary a lot of time and training before it could be fully implemented but proper training and gradual implementation, it turned into a major source of competitive advantage for Santander.The domination of the credit card section by the big clearing banks such as Barclays (16%), LTSB (11) , RBS (16), HSBC (14), RBOS (6), and MBNA (9%) meant Abbey had little or no control in the market and this was as a result of its lack of experience in the area. Its plan to build a new credit business by target its existing customer base and prospects in the UK through strong product offerings will be a welcome development for Santander. However, this will be more relevant in the future after Santander must have cemented its position in the market along with the big banks.To what extent can Santanders strategy be described as being marketing oriented, what other strategic orientations could be consideredA firm characterised as market oriented might have developed an appreciation that understanding present and potential customer needs is fundamental to providing superior customer value encouraged systematic assemblage and sharing of information regarding present and potential customers and competitors as well as other related constituencies and installed the sine qua non of an inte grated, organisation-wide priority to respond to changing customer needs and competitor activities in order to exploit opportunities and circumvent threats (Hunt and Morgan, 1995 Kohli and Jaworski, 190 Narver and Slater, 1990).Considering Santanders plan to build selected products areas on a stand- alone basis, both organically and by acquisitions for its somatic and SME segment, it can be said that it is quite market oriented.It can also be argued that Santander is not very market oriented because they mainly act and operate using their internal capabilities such as human, financial and technological resources to gain market presence and share without regarding the needs and wants of the customers. For instance, it acquired Abbey for its large customer base and geographic location and figured they could offer their services by mode of operation and technology (Partenon) to gain more customers and market shares even though they had no prior experience in the UK market.Other strate gic orientation that could be consideredSantander should consider a more aggressive oriented approach to compete in the market as against its prudent approach which it is currently known for. As explained by (Clark and Montgomery, 1996 Fombrum and Ginsberg, 1990), aggressiveness captures the facet of a firms strategic orientation that, in comparison with its competitors, rapidly deploys resources to improve market position.High concentration on RD in other to identify new services or products with high demand in other to create a first mover advantage while improving on its IT platform which remains one of its major sources of competitive advantage.Strategy valuation methods utilisedThe strategy evaluation method utilised in section I II was from the position school and the Resource Based perspective of strategy and the Porters five forces theory as they relate to the way in which Santander operate in the UK market and the forces which affect the market in general.Similarities and differences of the different schools in analysing SantanderFindings show similarities and differences in the position school and RBV. While the RBV refer to the internal capabilities, some of which are intangible and mostly unique assets of an organisation which they apply to gain competitive advantage, the positioning school revolves around competing with unique resources based on the analysed competitive forces of the industry. As explained with Porters three generic strategies which are cost leadership, differentiation, and focus strategy (fig 1), organisations compete using rare resources to position themselves in a profitable environment thereby gaining competitive advantage. Both of these strategies seek to exploit the organisations capabilities in other to achieve a sustainable competitive advantage.Appropriate strategy approachWith this case and having applied both the positioning and resource-based view strategy, both strategies seem to work for Santander as they both revo lve around capitalising on capabilities either by fitting into places of advantage revealed in the external environment by the five forces or by using internal capabilities or organisational resources/capabilities to create competitive advantage. In strategizing, whichever fits an organisation and allows it operate successfully should be used.Other issues that would minimise the likelihood of implementing the option and ways of overcoming these challengesAs most organisations compete using their source of competitive advantage by applying it through positioning or RBV strategy, an issue that could minimise the likelihood of implement the options is the thought of a rare resource becoming available to competitors, this might cause it to lose its competitive edge over it competitors.To overcome this change, continuous development and innovation is necessary for an organisation for it to continue to stay relevant and compete over time.RecommendationSantander has shown strong desire to compete and become one of the best banks in the UK since its entrance. However, for it to continue in its growth, high concentration on market orientation is very important in other to increase business performance across all areas of its operation.Also, continuous development of its product range should be put into consideration while it continues further development on its technology system as this has shown to be one of its driving forces in competing with the other major banks.