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Evaluation of Barclays Bank in India - Essay Example

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The paper "Evaluation of Barclays Bank in India" has evaluated Barclays’ performance in Indian market through an extensive research analysis. Primarily, the analysis has been conducted on Indian banking sectors and on the current strategy followed by Barclays in Indian Market…
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Evaluation of Barclays Bank in India
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Evaluation of Barclays Bank in India Table of Contents 1.Executive Summary 3 2.Introduction 3 3.Brief Overview of Barclays Bank in India 4 4.Analysis 4 4.1.Environment 4 4.1.1.PESTLE 4 4.1.2.Industry life cycle 6 4.2.Competitive stance 7 4.2.1.Porter’s 5-Force analysis 7 4.2.2.Value Chain 9 4.3.Scale and scope 10 4.3.1.Industry attractiveness; Industry survival and success factors 10 4.4.Analysis of strategy 12 4.4.1.Ansoff Matrix 12 4.4.2.Porter Generic Strategies 13 4.4.3.Boston Consultancy Growth Matrix 14 5.Findings 15 6.Conclusion 16 Reference 17 1. Executive Summary This paper has evaluated Barclays’ performance in Indian market through an extensive research analysis. Primarily, the analysis has been conducted on Indian banking sectors and on the current strategy followed by Barclays in Indian Market. After the deregulation and reformation initiatives taken by the Ministry of Finance and the Reserve Bank of India for improving the structure of Indian banking Industry, the banks in India are performing better in comparison of other developing nations. Enhancing economic condition of Indian people is another key factor for the success of Indian Banking Industry and other macro-economic factors are also favourable for growth of Indian banking sector. However, due to dominance of Indian domestic banks, Barclays have wisely selected its target market i.e. the HNI and HRI clients. Besides, it is also trying to offer world class services to position itself as a leading global bank. 2. Introduction The process of globalisation has influenced the entire process of human activities and globalisation of trade and business in one of the most significant instance for global economies. It has also given birth to the global banking sectors as many banks from developed countries are trying to enter in the emerging nations like China and India. The growing economic stability and increasing disposable income of India, many multinational companies including banks have entered in this market and these MNC banks are also experiencing a rapid growth in Indian market (Arasu, 2008, p.274). This paper will attempt to present an evaluation of Barclays Bank, a leading global bank for its Indian market business. The primary objective this paper is to evaluate the effectiveness of Barclays in India using multiple analytical strategic tools. 3. Brief Overview of Barclays Bank in India Barclays bank is basically a UK-based multinational bank established in more than 330 years ago, and for market expansion, it has also entered into the most of emerging and developed countries like Middle East, U.S.A., Asian countries, European countries (Barclays-a, 2011). Barclays bank entered into the Indian financial market during 1970s and since then, it has experienced tremendous growth and success. In Indian market it offers retail as well as commercial banking services catering more than 400,000 customers and clients. It has opened its multiple banking units in most of Indian cities. Initially, it is used to offer retailing banking services in India by providing a premium banking services to its Indian clients. However since November 2006, it has also started its commercial banking services by offering financial services to SME sectors (Barclays-b, 2011). 4. Analysis 4.1. Environment 4.1.1. PESTLE The banking sectors of Indian are highly depended of the political parties and governments’ policies for encouraging the trade and business. Indian political and government system are quite stable and favourable for the banking sectors. The Reserve Bank of India and Ministry of Finance are two apex regulator body responsible bringing improvement in banking sector and trade & commerce respectively. Favourable economic policies of Indian government have brought the significant growth in economy. India has achieved 8.3% GDP growth rate with $4.046 trillion of overall GDP as per purchasing power parity (CIA, 2011). The increasing disposable income of Indian populations is another major attractiveness for Indian banking sectors. The monetary policies and financial market regulations are effective for controlling inflation and other rates. The following table shows major rates of Indian economy affecting the banking sectors Table 1: Key Rates and Ratios (Source: Reserve Bank of India, 2011) India is the country with second highest population (1.17 billion) with literacy rate of 61% and consumer awareness related banking services are increasing among them and people are availing latest banking services and products (U.S. Department of State, 2010). Indian IT sector is considered to one of the advanced in the world, and due to these technological factors, Indian banking sector has experienced a massive growth. Indian banks are using latest technologies like internet & mobile banking, core banking, CMS, RTGS, NEFT, INFINET etc (IDRBT, 2004). 4.1.2. Industry life cycle Indian banking sector is primarily divided into major categories i.e. nationalised and privatised banks. The nationalised banks are currently going through the transition period by introducing major developments in terms for technology and products. On the other hand, the privatised banks have already crossed the transition period. It is very difficult to determine the specific industry cycle period of banking sectors as constant development of technology and products are regular trend. Therefore, considering major area of improvements, Roussakis has present system life cycle for commercial banks after deregulation using the following model developed by John F. Fisher. Figure 1: Industry Life Cycle (Source: Roussakis, 1997, p.153) Considering the above factors shown in above diagrams, it can be interpreted that Indian banking industry is constantly experiencing multiple improvements and it is still in transition period. 4.2. Competitive stance 4.2.1. Porter’s 5-Force analysis To evaluate the Indian banking sectors’ competitiveness, porter’s five forces models are very useful as it analyse five major factors driving the industry competitiveness. The following model depicts the model for Indian banking sector. Figure 2: Industry Forces for Indian Banking Industry (Source: Kavita and Divya, 2011) The emerging markets of Indian economy has attracted a number of MNC for making FDIs, and specifically, in Indian Banking sectors, after the initiative taken by Indian Government and Reserve bank of India for major banking reforms like free trade, deregulation of interest rate, reduced CRR and SLR, the competitiveness has intensified. The bargaining powers of customers are rising very high as a large number of nationalised and privatised banks are present. Besides, customers are having ways to avail loans from different sources. In banking industry, the suppliers’ group includes the account holders, IT services providers and employees. The bargaining power of IT services providers and employees are comparatively low as India has huge labour forces. However, account holders bargaining power is high as they have identified other ways of investing their money. The core banking services can only be offered by the banking institutes and hence, threat from the substitute is comparatively low. Indian banking industry is crowded with multiple number of banks and after the entrance of foreign banks, the degree of competition raises very high. The following table shows summery of Indian banking industry. Table 2: Summary of the Banking Industry: 1990-91 to 2003-04 (in Rs. billion) (Source: Prasad and Ghosh, 2005) 4.2.2. Value Chain The banking industry is a financial services sector and hence, its value chain is different from the value of the manufacturing firm which was developed by Michael E. Porter. Therefore, Barclays’ value chain follows the value chain of a bank as its operational processes have multiple layers. The following model presents a typical value model for baking operations. Figure 3: Banking Industry Value Chain (Source: Duke University, n.d.) 4.3. Scale and scope 4.3.1. Industry attractiveness; Industry survival and success factors The Indian banking sectors has been experiencing a missive growth after the deregulation and globalisation process. “Financial Sector Reforms set in motion in 1991 have greatly changed the face of Indian Banking” (IBA Committee, 2003). The Indian banking sectors has increased their efficiency by introducing better management system for risk policy, product development, customer relationship, wealth management etc. This has caused to increase their revenues which help to maintain a higher capital adequacy ratio (CAR). The following diagram shows the industry average of CAR. Figure 4: Capital Adequacy Ratio (Source: Aswin and Sabu, 2010) On the other hand, comparing to the global banking sectors, Indian banking sectors’ performance are above average. Banks in Indian market has offered a better return to its shareholders and comparing to other developing countries. The performance indicators are shown in the figures given below. Figure 5: Indian Banks Performance (Source: McKinsey & Company, 2007) Moreover, the appreciating Indians’ economic condition has led to increase the gross national savings of India and the Indian financial market pulls 47% of total national savings. The following depicts the share of household savings. Figure 6: Indian Household Saving as a Share of Gross National Saving (Source: McKinsey & Company, 2007) The above figures and charts indicates better performance of Indian banking industry and in future, the market opportunities is going to be better and more stable. 4.4. Analysis of strategy 4.4.1. Ansoff Matrix The Ansoff matrix is a useful analytical tool for understanding the strategic directions and for evaluating the existing strategies. Ansoff matrix helps to indentify the strategies in respect of market and product. The following model for Ansoff matrix represents the four strategic directions. Figure 7: Ansoff Matrix (Source: Mercer, 1996, p.171) As per the above matrix, Barclays already exists in Indian market and it offers existing as well as new products in this market. Constant product development is a major feature of financial markets. In this situation, Barclays is constantly focusing on marketing penetration and product developments. More specifically, Barclays is trying to penetrate market by product developments strategies to counter the highly intensified competitive market. 4.4.2. Porter Generic Strategies Barclays have been able to position itself in Indian banking market as global bank by offering world class services. Hence, in order to maintain its position in Indian market, it has developed its core and focused generic strategy. The generic strategy developed by Michael E Porter offers a comprehensive strategic framework for achieving sustainable competitive advantage. Figure 8: Porter Generic Strategies (Source: Stonehouse and Campbell, 2004, p.175) In order to counter the existing rivalry from the domestic and other MNC bank in Indian market, Barclays is trying to focus on very niche segment of market and hence, it primarily focuses on differentiation focus. Its main target market includes the ‘high net-worth individuals’ and ‘non residential Indians’ 4.4.3. Boston Consultancy Growth Matrix The Boston Consultancy Growth (BCG) matrix is generally used for determining the business portfolio. However, in case of Barclays, it mainly deals in two business portfolios i.e. consumer and commercial banking. To explain, its business portfolio, the following Upstart Four Square Model matrix is very helpful instead of BCG matrix. Figure 9: Upstart Four Square Model (Source: Jessie, 2009) As per the above matrix, when Barclays entered in Indian market, it was at upstart position as higher superior brand value relative to growth rate. However, currently, its consumer banking segment is in matured position and its commercial banking is stragglers position. 5. Findings As per the above analysis on Indian banking industry and Barclays bank in India, overall findings can be formed to determine the effectiveness of Barclays’ success in Indian banking industry. Barclays have entered into Indian market during 1970s as it was able to identify the long term growth of Indian economy. The present market scenario of Indian banking industry depicts that better growth in economic condition of Indians and development of trade and business will offer a better exposure for banking industry. Barclays is also aware of the image of a global MNC banks in India and the nature of competitiveness in Indian banking Industry. The domestic banks are dominating in the Indian market with higher percentage of market share. These domestics banks are mainly targeting the Indian middle income people and hence, to avoid the unnecessary competition. It has focused on a niche segment of market i.e. HNIs and NRIs. Barclays have been able to capture a higher portion of market share in this market segment. With growing industrialization in Indian market, it has also entered in commercial banking during 2006. Therefore, the future opportunities for the Barclays are higher. However, as threat from the potential entrance is higher from the other global banks, this strategy can be imitated by those new entrants. 6. Conclusion Barclays is one of the leading banks in global banking industry and for market expansion it has entered into multiple global markets. Primarily it has aimed the developing nations like China and India. The emerging Indian banking sectors offers better opportunity to Barclays. The primary objective of this paper was to evaluate Barclay’s performance in Indian market, and In spite of high competitiveness in Indian banking sector, Barclay’s performance has been commendable. It has successfully identified its niche target market and developed strategy accordingly. However, the competition in Indian market is being more intensified and it must bring new development in its operational process by offering better and innovative services and products. Reference Aswin, R. V. B. and Sabu, K. (November 11, 2010). THE RELATIVE PERFORMANCE OF SOUTH INDIAN BANK LTD. WITH OTHER BANKS BASED ON CAMELS RATING SYSTEM. [Pdf]. Available at: http://117.211.100.42:8180/jspui/bitstream/123456789/996/3/MEIE03.pdf. [Accessed on April 15, 2011]. Arasu, J. G. V. (2008). Globalization and Infrastructural Development in India. Atlantic Publishers & Dist. Barclays-a. (2011). Barclays at a glance. [Online]. Available at: http://group.barclays.com/About-us/Barclays-at-a-glance. [Accessed on April 15, 2011]. Barclays-b. (2011). Barclays in India. [Online]. Available at: http://www.barclays.in/about/about_us.htm. [Accessed on April 15, 2011]. CIA. (April 6, 2011). The World Factbook: India. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/in.html. [Accessed on April 15, 2011]. Duke University. (No Date). Banking Industry Value Chain. [Pdf]. Available at: http://www.soc.duke.edu/NC_GlobalEconomy/pdfs/banks/bankingVC.pdf. [Accessed on April 15, 2011]. IBA Committee. (November 2003). BANKING INDUSTRY VISION 2010. [Doc]. Available at: http://www.mckinsey.com/locations/india/mckinseyonindia/pdf/India_Banking_Overview.pdf. [Accessed on April 15, 2011]. IDRBT. (November 09, 2004). Technology Driven Indian Banking. [Pdf]. Available at: http://www.idrbt.ac.in/media/speeches/VK-Speech-City%20Union-Bank.pdf. [Accessed on April 15, 2011]. Jessie, P. (June 16, 2009). Think Flat, Live Frugal. [Pdf]. Available at: http://nomoneymarketing.org/chapter1.pdf. [Accessed on April 15, 2011]. Kavita and Divya. (February 28, 2011). STATE BANK OF INDIA: BATTLING FOR SHARE. [Pdf]. Available at: http://mba.ssitm.ac.in/parakh/SBI%20Case.pdf. [Accessed on April 15, 2011]. McKinsey & Company. (November 2007). Indian Banking: Towards Global Best Practises. [Pdf]. Available at: http://www.mckinsey.com/locations/india/mckinseyonindia/pdf/India_Banking_Overview.pdf. [Accessed on April 15, 2011]. Mercer, D. (1996). Marketing. 2nd ed.Wiley-Blackwell. Prasad, A. and Ghosh, P. (July 2005). Competition in Indian Banking. [Pdf]. Available at: http://www.imf.org/external/pubs/ft/wp/2005/wp05141.pdf. [Accessed on April 15, 2011]. Reserve Bank of India. (2011). Current Rates. [Online]. Available at: http://www.rbi.org.in/home.aspx#. [Accessed on April 15, 2011]. U.S. Department of State. (July 14, 2010). Background Note: India. [Online]. Available at: http://www.state.gov/r/pa/ei/bgn/3454.htm#people. [Accessed on April 15, 2011]. Read More
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