Transformation And Growth In The Uk Commerce Essay

Transformation And Growth In The Uk Commerce strainThe emergence of Santander into the UK commercialise with the acquisition of Abbey re reachs a big move crossways Europe in the lodgeing industry. This propound aims to evaluate the arrange of the move across b collection succession analysing various dodging and tools which were utilize in the process. This report states the structure and dynamics of the industry in which Santander competes and the effect it has on the industry. It too analyses the industry in which Santander competes in employ the Positioning school, Re writer found View and analytical tools such as the quin forces throw upwork, PEST, VRIN and Porters generic schema to analysing the transformation and growth of Santander in the UK since its acquisition of Abbey in 2004.Introduction to outlineStrategy is the direction and scope of an government activity over a coarse term, which achieves servicing in a changing environs through its frame of resources and competences with the aim of fulfilling stakeholder expectations (Gerry Johnson, Kevan Scholes and Richard Whittington, 2008). They in like manner explained that the word strategy is associated with different issues, 1 of which is the strategic fit with the business environment. Here, organisations need appropriate positioning in their environment i.e. the harvest-home or service should meet clearly identified foodstuff needs. While the Resource-Based View of strategy is just about effecting the strategic cap cogency of an organisation, in call of its resources and competences, to provide hawkish expediency and/or yield brand- impudently opportunities.Mintzbergs (1987) quite a little of strategy as a Plan, Ploy, Pattern, Position and Perspective covers the various ways which strategy is defined. He stated that strategy is a forge used to carry out an objective. It is a unified, comprehensive, and integrated plan knowing to ensure that the basic objective s of the enterprise atomic number 18 achieved (Glueck, 19809).As a plan, a strategy can be a ploy too, re all toldy yet a specific manoeuvre intended to outwit an opponent or competitor.Strategy is a pattern- specifi roary, a pattern in a flow 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 harping not respect suit able-bodied of a chosen position, but of an ingrained way of perceiving the world.Santander, the Spanish fiscal heavyweight in retail banking acquired Abbey, the British mortgage lender in late 2004. After stabilizing Abbey in 2005, it developed a leash (3) year ambitious plan with the purpose of maintaining the doance of products with already luxuriouslyschool significant commercialise place place observe and appoint position, increasing its presence in opposite banking parts such as consumer finance, insurance and SME and Commercial lending in order to tra nsform the institution into a full-service retail bank with a wide shed of product and service stomachings.Santander initially embarked on its strategy largely by exploiting its cozy resources through Integration of kind-hearted resources, design of its Technology, appraise revenue growth and efficiency, maintaining a heady approach to risk management. persistence and securities industry in which Santander competesThe industry consists of a group of firms producing products or function that ar essentially the same (Gerry Johnson, Richard Whittington and Kevan Scholes, Exploring Strategy, 2011).Santander competes in banking industry where it faces stiff disceptation from early(a) study players in the industry like Barclays, Lloyds TSB, HSBC, HBOS and Royal cant of Scotland (RBS) otherwise know as the big 5 and its major seam of business is the retail banking which accounts for over half of its net income.Its core grocery storeplace in the UK is nucleusd on Mortgage s, Savings and protection while it also competes in Brazil and other parts of Europeincluding Portugal where it is recognized as the ordinal largest retail bank with a customer base of 1.7 million, 670 branches, 6000 employees, a mortgage market contribution of 16% and over 18% in plebeian funds.Structure and dynamics of the market in which Santander competesAs explained by (Porter 1985), the specialty of each of the five matched forces is a function of industry structure, or the underlying stinting and technical characteristics of an industry ( hawkish Advantage Creating and Sustaining Superior public presentation by Michael Porter, 1985).To analyse the structure and dynamics of the market in which Santander operates, it is unequivocal to understand the major factors 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 rivalrous forces in the mar ket4.1 The threat of instaurationThese are the barriers that need to be overcome by new entrants if they are to compete achievementfully (Gerry Johnson, Kevan Scholes and Richard Whittington, 2008). access barrier for competing in this region is high because it is a capital intensifier industry.Achieving economies of scale is a factor for competing in the banking industry as it would exact new entrants to compete on the same train of the other major players in the industry if they are to survive.As seen from the case, Santander was able to hand enthral with a 9 billion acquisition of Abbey in 2004 which was at the time, Europes biggest cross-border banking exact 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 super contested market for customer base, the level of difficulty in entry is quite a high because the market is already controlled by the major banks wit h good brands like Barclays, LTSB, HSBC, HBOS and Royal Bank of Scotland and It would be quite difficult for beginners to influence customers to move from these already known and established brands.Santander was able to gain door into the market through the acquisition of Abbey which already had a watertight customer base of 18 million and a well-known brand name.It also had a warring edge. Santander enfoldd Partenon, its achieverful core banking platform and this technology enabled Santander to perform a seamless integration, launch new products with minimal address time. foundation barrier into the corporate and SME sector is also high. Although Abbey achieved significant growth in that commonwealth, it was unflurried largely controlled by the big(a) 5 banks.Abbeys plan to successfully enter and compete in that segment volition be babelike on the admission of its Partenon system.4.2. Bargaining force out of SupplierThe bargaining power of suppliers is high. The Big 5 banks (Barclays, HSBC, LTSB, RBS HBOS) control almost the same amount of persona in nigh areas like the Credit Card Market and SME Banking and offer similar services. A supplier 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 top executive of BuyersBuyers compete with the industry by forcing contention on prices, bargaining for higher(prenominal) tone of voice or more services, and playing competition against each other- all at the expense of industry profitability (Porter 1980). With this being a exceedingly 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 existin g competitors is high especially 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 numerous or are roughly equal in surface 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 essential(prenominal) 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 third 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 go acrossed for them to compete in the financial market with the other major banks. This new plan was nonplus in get in in order to achieve the Groups vision of get the best retail bank in the UK. To begin w ith, 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 play of products. The plan condenseed on increasing its revenue, efficiency and maintaining a prudent approach to risk management. To achieve this, it come on grouped its mathematical process 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 fool to achieve 75% in revenue and 70% of pre-tax profit would be through increased sales, customer and savings retention, cross sales and exploitation of new growth opportunities.The Insurance and addition management (IAM) section was to contribute 13% of its revenue before tax through its back book management. With a new regul ation which allowed an psyche 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 related products and advisory services and would lead to new opportunities for investment 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 stifle risks. another(prenominal) area which would contribute 10% of Abbeys revenue and 17% of profit after(prenominal) 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, unguaranteed personal loans (UPL), investment a nd 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 set sales capabilities and also creating new branch sales system with advance(a) pricing by customer segment and increased focus on existing clients and cross sales for the un batten downd 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 have 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 outdoor(a) competences to address rapidly changing environments. Thus, it reflect an organisations ability to achieve new a nd innovative form of competitive emolument 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, teamwork and meritocracy showed his brilliance as a strong force which reflected on the growth of Santander since its witch 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 court-to -income ratio while still maintaining physical interface with customers. With this resource, they were able to achieve economies of scale and offer fairly priced products and services which meant higher income and increased customer loyalty.The proper utilisation of these human and technological resources by its management team led Abbey to win the Euromoney mete out 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 greater than the cost of preparation 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 material is also used to determine if a resource is a source of sustainable competi tive 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 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 leadDifferentiation thinkThe differentiation strategy is one of differentiating the product or service pass 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 advanced business mode of surgical deed, 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 counterbalance mover advantage center 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 overhead 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 bring together with their experience in retail banking, they were able to introduce best practices into the UK ma rket at low cost and with an advantage in inputs in terms of its Partenon system, they were able to cut cost in trading operations while providing quality services for their customers.The major Macro/Micro environmental strategic marketing issues facing Santander, its view as an luck or threat, time frame for which each issue will be most applicable and the level of precession to be assigned to themThe Macro/Micro environment consist of broad environmental factors that impact to a greater or lesser conclusion on almost all organisation and the PEST framework identifies how future trends in political, economic, social, technological, environmental and legal environments might impinge on organisations (Gerry Johnson, Kevan Scholes and Richard Whittington, 2008). The analysis below shows the various environmental marketing issues face up by Santander.8.1 Political issuesThe new regulation in the UK which became effective as of sixth April, 2006 A Day afforded individuals conside rable freedom in their contributions to the pension schemes and other investment assets. This nurture 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 Economic issuesThe British market for motor finance which was still fragmented with the three trail providers holding a combined market share of 30% presents an opportunity for Santander to increase its activities in consumer finance in the UK as it is a tether car finance provider in Continental Europe, its expertise, product range and economies of scale coupled with a joint with a joint ship with Abbey would develop the British market.With the general business climate in the UK lodgment 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 well-timed and good decision made by Santander.A repeat of economic recession which happened in the past could be a threat to Santander.8.3 sociological issuesCultural differencesWith 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 running 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 make over time, but had weaknesses in customer relationship, forgetful sales productiveness and sales culture. This was a weakne ss for Abbey because customer relationship and loyalty is a key factor for success in the industry.In other words, they were poor in customer penchant. This issue should be apportioned top precedence considering that Santander had just gained entrance into the UK market by acquiring Abbey. Further operation under those poor customer relationship circumstances would most promising lead to loss in customer base and have a negative effect on Santanders total income.8.4 Technological issuesTechnology sweetener through Partenon be one of Santanders marketing assets which have helped to further chant 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 required a lot of time and inf ormation before it could be fully implemented but proper cultivation and gradual implementation, it turned into a major source of competitive advantage for Santander.The domination of the credit card section by the big clarification 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 ca pability customer needs is fundamental to providing superior customer value encouraged systematic gathering 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 integrated, 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 Corporate 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 instanc e, it acquired Abbey for its large customer base and geographical 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 strategic 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 assiduity 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 evaluation methods utilisedThe strategy evaluation metho d 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 virtually 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 se ek to exploit the organisations capabilities in other to achieve a sustainable competitive advantage. capture 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 revolve 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, dogging 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 call on one of the best banks in the UK since its entrance. However, for it to continue in its growth, high constriction 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.