In the strategic analysis report, the selected organization is a banking sector, Lloyds Banking Group. This particular report is going to evaluate the strategic point of selected banking group and propose how the emerging tools provides impact on the prospect arrangement of selected organization. This banking group is selected as it is an organization with accessible data and this strategic analysis report provides an understanding of strategies into Large Multinational Corporation.
Lloyds Banking Group is UK based banking in addition to financial services provider with operations into England, Scotland and Wales. The latest revenue of the bank is approximately £39.611 billion on the operating profits of £4.2 billion (Lloydsbankinggroup 2016). The banking group consists of approximately 30 million customers all over various brands.
There are various methods which are used to find out how the internal environment affects the strategic point of Lloyds Banking Group. There are two internal analysis tools which conclude the overall strategic position of the banking sector. The two analysis tools are VRIO and Value chain analysis.
This internal analysis used to analyze the internal resources of the bank and capabilities to search out if it is a source of sustained competitive advantages. The factors of VRIO analysis are as follows:
Valuable: The strategic alliance with other UK banking sector allows Lloyds Banking Group to provide the customers added value through loyalty program by accumulation of points (Porter 2016). It increases the number of the customers that will lead to increase into revenue as well as profit for the bank.
Rare: There are rare resources for Lloyds Banking Group as the bank was the first capitalize on the alliances (Dhingra et al. 2016). In order to compete into UK and imitate with the resources, Lloyds Banking Group would have partner with other company that can able to hold the market share of Lloyds Banking Group.
Costly to imitate: The historical conditions of the Lloyds Banking Group being the first to form of san alliances that lead the bank to benefit from first movers advantage. Due to social complex relationship between UK banks, the competitors are hard to replicate it.
Organized to capture value: Lloyds Banking Group are positioned in such way that it can exploit of particular resources (Gereffi and Fernandez-Stark 2016). Lloyds Banking Group is used of positive brand image provided by other banking sector to improve a documented brand to one more level.
|
Valuable |
Rare |
Imitate |
Organized |
Result |
|
No |
– |
– |
– |
There is some competitive disadvantage |
|
Yes |
No |
– |
– |
There is equal competition |
|
Yes |
Yes |
No |
– |
Short term of the competitive advantage |
|
Yes |
Yes |
Yes |
No |
Unused competitive advantage |
|
Yes |
Yes |
Yes |
Yes |
Long term of the competitive advantage |
Table 1: VRIO analysis
The primary activities into the Lloyds Banking Group value chain are:
Inbound logistics: Lloyds Banking Group as associated with receiving and storing along with handling of the financial services, inventory control, return of the suppliers and warehousing (Hall, Foxon and Bolton 2016).
Outbound logistics: It is associated with collecting and distributing of the product to the buyers as delivery, processing and operations.
Sales and marketing: Competition is growing intense into the banking sector and there are more international players of Lloyds Banking Group. Attracting and keeping of the customer’s needs of more focus on the marketing. The bank targets of various customer segments with proper financial plans in addition to services. Brand image is considered as key significant concern into the banking brands (Dhingra et al. 2016). Apart from entering into the new market and gaining of new customers, Lloyds Banking Group retains of existing customers.
Operations: From the loans to deposits, Lloyds Banking Group provides of various kinds of financial and banking operations to their customers. From deposits as well as loans to the credit cards, the bank provides of other operations such as providing of funds to small and big projects.
Customer service: The bank provides of transactions services to their customers. Technology makes the process of customer services more efficient and effective. From ATM to online payments, this form of transactions processes is provided to the customers (Gereffi and Luo 2015). Another type of customer service is internet based bill payment system.
The supporting activities into the Lloyds Banking Group value chain are:
Infrastructure of the company: From physical communications towards the technology and also IT, it plays a key significant role into development along with function of the banks. Because of increase into rivalry, IT infrastructure plays a key significant role into Lloyds Banking Group.
HRM: Human resources play a key significant role into the banking sector as trust plays important role into this particular environment.
Development of technology: Technology becomes a competitive source for Lloyds Banking Group as it helps to bring of better services than their participants. Technology makes banking efficient which improves the productivity of the bank (Han et al. 2014). The services are available online and the customers are not required to go for the branches to receive of the services.
E-procurement system: It includes of procure of raw materials, acquisition of goods, services and tendering along with supplier relations.
There are various methods which are used to conclude how the outside environment affects the strategic point of the selected business. There are two external analysis tools which conclude the overall strategic position of Lloyds Banking Group. The two analysis tools are PESTLE analysis and Porter’s five force analysis.
Political factors: It plays a key significant role to determine impact of the organization on long term profitability in the banking sector. Lloyds Banking Group is operated into foreign money center banks is more than dozens of countries. Before entering and investing in the market, Lloyds analyze the political stability of UK (Lloydsbankinggroup 2016). It also analyzes the level of corruption and price regulations.
Economic factors: The factors are inflation rate; rate of interest, foreign exchange rate along with economic cycle determines the demand and combined investment into UK economy. The economic factors considered are exchange rate and stability into the currency of host country (Ahammad et al. 2015). The economic risk of UK exits from Europe which provides a significant impact on Lloyds Banking Group. Based on the worldwide agreement between Britain as well as EU member states, the possible propositions to put down EU are confirmed by reject into worth of pound alongside major currencies. For Lloyds Banking Group, Brexit comes with negative consequences for regulations, capital with impact on client and employee.
Social factors: There is demographic change into the British population affects the development of Lloyds Banking Group into UK market. Ageing population of UK comes with the business opportunities as pension age consumers earn and consists of high disposal incomes (Agwu et al. 2015). Into the Lloyds Banking Group, there is a shift which means drive towards savings and investment as baseline service is required for pension age customers.
Technological factors: The banking sector reached tipping point when the evolution of banking is based on digital platform and change into customer behavior. Financial innovations leverage the technology to enter into the financial market with cost effective services. Lloyds Banking Group differentiates technology by investigating into fraud prevention, IT security and cyber risk.
Legal factors: Lloyds Banking Group is subject to lawsuit which is brought by Lloyd’s shareholder action group. The legal factors that the organization considers to enter into the market are antitrust law into the foreign money center bank, consumer protection and employment law.
Environmental factors: The transition of low carbon as well as resource efficient future affects the economy of UK. Considerations towards local environment are quality of air; flood and natural disasters are the main concerns. Lloyds Banking Group identifies of current trend into customers and governments demand to reduce of carbon footprint (Ahammad et al. 2015). The banking group is committed to reduce of carbon footprint by purchasing of renewable electricity and reduce of paper for the purpose of online statements.
Bargaining power of customers: There is higher bargaining power of the consumers which provides pressure on profitability of Lloyds Banking Group within long run (Buil, Catalan and Martinez 2016). It is seen that higher is the bargaining power, higher will be the capability to seek increase into discounts as well as offers.
Threat of new entrants: There is a medium threat of entrants. New entrants into the “foreign money center banks” brings up innovation and puts pressure on the Lloyds Banking Group throughout low pricing strategy, reduction of cost and also provides of unique value to the customers (Warth and Perren 2014). By build up the economics of scale, it results into lowering the fixed cost per unit.
Bargaining power of suppliers: There is higher bargaining power of the suppliers. Lloyds Banking Group buys of various raw materials from various suppliers. The suppliers can able to decrease margins of the bank can earn a unique value into the market (Wheelen and Hunger 2017). As higher bargaining power can harm the reputation of the organization, therefore Lloyds Banking Group should focus on improving and retaining of high customer services (Porter 2016). The bank introduces of new appliances like smart cards for bank services, it manages to impress the customers if they hike of the prices in order to match with requirements of suppliers.
Threat of substitute products: There is lower threat of the substitute of products, as Lloyds Banking Group provides services into the banking sector are not diverse. Most of the banks which threat the services of Lloyds Banking Group are small banks which try to come up with new system such that they can able to attract of more customers (Morden 2016). It is hard to realize that Lloyds Banking Group has substitutes like insurance, real estate in addition to mortgages. Therefore, it is analyzed that Lloyds Banking Group is not suffering from substitute’s form of competition.
Rivalry among existing customers: There is extreme rivalry among existing players which will drive down the price as well as reduce the entire profitability of the banking industry. By building of sustainable differentiation and building of scale so that there will a better competition with other banking sector of UK (Avlonitis and Indounas 2015). Lloyds Banking Group should collaborate with the competitors in order to increase the market size.
From the internal and external analysis, Lloyds Banking Group is restructuring the system for their bank and strengthening of their legislative rules and regulations to focus on legal issues. There is high financial crisis into Lloyds Banking Group. The effects of financial crisis are that there is lack of trust on the banking industry, falling of real income, scrutiny of closer regulatory and inconsistency of regulatory responses (Peppard and Ward 2016). The organization also faces of technology challenges such as online as well as app based banking issues which challenges the customers. The issues left with that the customers are not able to access of their accounts. There is service issue related to internet banking. The strategic way that Lloyds Banking Group follows is investment highly into technology for making the life of the customers more efficient by providing of demand digital banking services online and mobile application (Pearlson, Saunders and Galletta 2016). Over reliance on the digital banking channels create of issues in future.
Conclusion
It is concluded from both external and internal analysis is that Lloyds Banking Group is able to manage and navigate better than their rivals. A sustainable business model is characterized by lower operating cost and lower risks help Lloyds to become the second largest banking group into UK. The performance of bank linked with UK environment leaves vulnerable to the macro factors like Brexit, a lower interest environment and sluggish economy of UK. by understanding of Porter’s five force model and value chain analysis, it is understand that the managers of the organization can shape the forces and customer values in their favor.
References
Agwu, M.E., Iyoha, F.O., Ikpefan, O.A. and Atuma, O., 2015. Strategic management of operational risks in financial institutions. European Journal of Business, Economics and Accountancy, 3(1), pp.1-20.
Ahammad, M.F., Leone, V., Tarba, S.Y. and Arslan, A., 2015, September. Factors influenceing the share of ownership sought in cross-border acquisitions-UK perspectives. EuroMed Research Business Institute.
Avlonitis, G.J. and Indounas, K., 2015. Price management in financial services. The Routledge Companion to Financial Services Marketing. New York, pp.254-270.
Buil, I., Catalán, S. and Martínez, E., 2016. The importance of corporate brand identity in business management: An application to the UK banking sector. BRQ Business Research Quarterly, 19(1), pp.3-12.
Dhingra, S., Ottaviano, G., Sampson, T. and Van Reenen, J., 2016. The impact of Brexit on foreign investment in the UK. BREXIT 2016, p.24.
Gereffi, G. and Fernandez-Stark, K., 2016. Global value chain analysis: a primer.
Gereffi, G. and Luo, X., 2015. Risks and opportunities of participation in global value chains.
Hall, S., Foxon, T.J. and Bolton, R., 2016. Financing the civic energy sector: How financial institutions affect ownership models in Germany and the United Kingdom. Energy Research & Social Science, 12, pp.5-15.
Han, L., Benson, A., Chen, J.J. and Zhang, S., 2014. The use and impacts of bank support on UK small and medium-sized enterprises. International Small Business Journal, 32(1), pp.61-80.
Lloydsbankinggroup 2016. Our Group – Lloyds Banking Group plc. [online] Lloydsbankinggroup.com. Available at: https://www.lloydsbankinggroup.com/our-group/ [Accessed 5 Jan. 2018].
Morden, T., 2016. Principles of strategic management. Routledge.
Pearlson, K.E., Saunders, C.S. and Galletta, D.F., 2016. Managing and Using Information Systems, Binder Ready Version: A Strategic Approach. John Wiley & Sons.
Peppard, J. and Ward, J., 2016. The strategic management of information systems: Building a digital strategy. John Wiley & Sons.
Porter, T., 2016. States, markets and regimes in global finance. Springer.
Warth, R. and Perren, A., 2014. Construction of a business model to assure financial sustainability of biobanks. Biopreservation and biobanking, 12(6), pp.389-394.
Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. pearson.
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