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I take pride in making people’slives that little bit easier.
I take pride in making people’slives that little bit easier.
fdfdTM (First Direct) : Branchless BankingGroup 2B FT 2005Simone Huijs / Suraj Basnet / Ken Kodaka / Eugene Kolesnikov / Joan Moreau / Piercarlo Oddone
Rotterdam School of ManagementErasmus Graduate School of Business
Agenda
1. Case summary
2. Business model
3. Competitive advantages
4. Current Challenge (1996)
5. Strategic Recommendations
6. Case update
1 2 3 4 5 6
Case summary
1988 : Market trend : Downsizing and cost reduction Midland Bank was the 4th largest bank in UK A significant proportion of customers were reluctant to visit
branch offices, dissatisfied with banking hours
1989 : Starting of First Direct , using Midland network Telephone banking, opened 7/7, 24/24, Branchless Characteristics :
No differentiation in products, but only in service Rivalry in B2C banking market
1989 – 1996 : Fast growth Fast consistent growth Trained experienced employees in telephone services High Quality and Reliable image
1 2 3 4 5 6
Business modelPEST Analysis
PoliticalPolitical
Deregulation in banking↓
Many New entrants
EconomicEconomic
Over capacityDownsizing
↓ Low profitability
SocialSocial
More wealthy peopleIncreased mobility
Increased demand for better services
TechnologyTechnology
Improved computing Automation
Personal computer Improved telecoms
1 2 3 4 5 6
Business modelDistance direct banking
Low costLow cost24/7 operation24/7 operation Staff &Staff &TechnologyTechnology
PersonalizedPersonalizedefficientefficient
friendly servicefriendly service
24/724/7remoteremote
convenienceconvenience
AttractiveAttractivebankingbankingproductsproducts
Cu
sto
mer
sC
ust
om
ers
Co
mp
any
Co
mp
any
1 2 3 4 5 6
Business modelSustainability
More customers
Investment in training
Commitment culture
Prominent reputation and brand Image
Revenuegrowth
Providing high quality service
1 2 3 4 5 6
1 2 3 4 5 6
Competitive advantages-> Value
Services: Availability (anywhere / anytime) Personalized, friendly, and high quality Responsiveness - Less interface
Products: Free or lower fees
for financial products
Customers
Valu
eVa
lue
Spee
d
ValueValue
Speed
Company CompetitorsCost
Speed
Competitive advantages-> Cost
By reducing process time New technology (ACD, Database) Competent staff (Training system)
By office Low rental office fee Smart use of office space Sharing infra with HSBC
1 2 3 4 5 6
Customers
Valu
eSp
eed
Value
Speed
Company CompetitorsCostCostSpeed
Competitive advantages-> Speed
First mover advantage Culture of
continuous improvement Short time marketing
of new products
1 2 3 4 5 6
Customers
Valu
eSp
eed
Spee
d Value
Speed
Speed
Company CompetitorsCost
SpeedSpeed
Current challenges (1996)5 forces analysis
Bargaining power of Bargaining power of buyersbuyers
+ Many banks offer remote services
Threat of new entrantsThreat of new entrants
+Low capital requirements+No legal or patent barriers
Threat of SubstitutesThreat of Substitutes
+ Internet Banking+ Increased experiences in remote services
Bargaining power of Bargaining power of supplierssuppliers
-Many IT providers-Market deregulation
Industry rivalryIndustry rivalry
+Many competing banks and other companies
1 2 3 4 5 61 2 3 4 5 6
Current challenges (1996)Segmentation analysis
AgeAge
So
cia
l S
oci
al
sta
tus
sta
tus
High
Low
45 65+25-
Big 4 Banks
First Direct
Potential Stretch AreaPotential Stretch Area
1 2 3 4 5 61 2 3 4 5 6
Potential Stretch AreaPotential Stretch Area
Current challenges (1996)SWOT analysis
StrengthsStrengths
•Brand image•Experience and know-how•Competent staff
-Prominent training program
WeaknessesWeaknesses
•Fast growth : Undermining company culture and consistency in services•No diversification in its
distribution channel
OpportunitiesOpportunities
•New remote technology – internet•Additional financial products•Improve advertising approach•Potential to expand customer base
ThreatsThreats
•Increased competition •New substitutes based on internet•Competitors’ use of technology•More sophisticated customers
1 2 3 4 5 61 2 3 4 5 6
Need for person to person communication remainsThere competitive advantage
– strong brand image in telephone banking(Base Analysis: SWOT, Value-Speed-Cost Analysis)
Maintain current business modelMaintain current business modeland its superior service leveland its superior service level
1 2 3 4 5 61 2 3 4 5 6
Strategic recommendations
Strategic recommendations
Increase service value for existing customers and attract new customers that use computers
(Base Analysis: SWOT, 5forces)
Introduce online banking Introduce online banking
1 2 3 4 5 61 2 3 4 5 6
Strategic recommendations
Potential 10 million customers in UKExisting infrastructure for economies of scaleProven services to attract conservative customers(Base Analysis: SWOT, Segmentation analysis, 5 forces)
Aggressive customer acquisition Aggressive customer acquisition in UKin UK
1 2 3 4 5 61 2 3 4 5 6
Strategic recommendations
For StudentsOffer student loans, health insurance, personal liability
For elder peopleSaving funds for grandchildren, life insurance
Expand range of financial products Expand range of financial products to attract new target customersto attract new target customers
1 2 3 4 5 61 2 3 4 5 6
19962004
0
500,000
1,000,000
Number of customers FirstDirect
Case update - 2004
FD todayFD today Grown by 56% to 1 Million of customers High customer satisfaction (85%) Additional channels
– internet and mobile phone Increasing range
of financial products 10,000 new customers
every month
1 2 3 4 5 61 2 3 4 5 6
the more of our services you use,the more sorted you are.
the more of our services you use,the more sorted you are.
Any questions ?Any questions ?