Download Case Analysis First Direct : Branchless Banking

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fd (First Direct) :
TM
Branchless Banking
Group 2B FT 2005
Simone Huijs / Suraj Basnet / Ken Kodaka
/ Eugene Kolesnikov / Joan Moreau / Piercarlo Oddone
Rotterdam School of Management
Erasmus Graduate School of Business
Agenda
1.
2.
3.
4.
5.
6.
1
Case summary
Business model
Competitive advantages
Current Challenge (1996)
Strategic Recommendations
Case update
2
3
4
5
6
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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 model
PEST Analysis
Political
Economic
Deregulation in banking
↓
Many New entrants
Over capacity
Downsizing
↓
Low profitability
Social
Technology
More wealthy people
Increased mobility
Increased demand for
better services
Improved computing
Automation
Personal computer
Improved telecoms
1 2 3 4 5 6
Business model
Customers
Company
Distance direct banking
24/7 operation
Low cost
Staff &
Technology
24/7
remote
convenience
Attractive
banking
products
Personalized
efficient
friendly service
1 2 3 4 5 6
Business model
Sustainability
Investment in training
Commitment culture
Providing high
quality service
Prominent
reputation and
brand Image
Revenue
growth
More customers
1 2 3 4 5 6
Competitive advantages
-> Value

Services:




Availability (anywhere / anytime)
Personalized, friendly, and high quality
Responsiveness - Less interface
Products:

Customers
Free or lower fees
for financial products
Company
Cost
Speed
Competitors
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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
Customers
Company
Cost
Speed
Competitors
1 2 3 4 5 6
Competitive advantages
-> Speed



First mover advantage
Culture of
continuous improvement
Short time marketing
of new products
Company
Customers
Cost
Speed
Competitors
1 2 3 4 5 6
Current challenges (1996)
5 forces analysis
Threat of new entrants
+Low capital requirements
+No legal or patent barriers
Bargaining power of
suppliers
-Many IT providers
-Market deregulation
Industry rivalry
Bargaining power of
buyers
+Many competing banks
and other companies
+ Many banks offer
remote services
Threat of Substitutes
+ Internet Banking
+ Increased experiences in remote services
1 2 3 4 5 6
Current challenges (1996)
Segmentation analysis
High
Potential Stretch Area
Potential Stretch Area
Social status
First Direct
Big 4 Banks
Low
25-
45
Age
65+
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Current challenges (1996)
SWOT analysis
Strengths
•Brand image
•Experience and know-how
•Competent staff
-Prominent training program
Weaknesses
•Fast growth :
Undermining company culture
and consistency in services
•No diversification in its
distribution channel
Opportunities
•New remote technology – internet
•Additional financial products
•Improve advertising approach
•Potential to expand customer base
Threats
•Increased competition
•New substitutes based on internet
•Competitors’ use of technology
•More sophisticated customers
1 2 3 4 5 6
Strategic
recommendations
Maintain current business model
and its superior service level
Need for person to person communication remains
There competitive advantage
– strong brand image in telephone banking
(Base Analysis: SWOT, Value-Speed-Cost Analysis)
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Strategic
recommendations
Introduce online banking
Increase service value for existing customers and attract
new customers that use computers
(Base Analysis: SWOT, 5forces)
1 2 3 4 5 6
Strategic
recommendations
Aggressive customer acquisition in
UK
Potential 10 million customers in UK
Existing infrastructure for economies of scale
Proven services to attract conservative customers
(Base Analysis: SWOT, Segmentation analysis, 5 forces)
1 2 3 4 5 6
Strategic
recommendations
Expand range of financial products
to attract new target customers
For Students
Offer student loans, health insurance, personal liability
For elder people
Saving funds for grandchildren, life insurance
1 2 3 4 5 6
Case update - 2004
FD today





Grown by 56% to 1 Million of customers
High customer satisfaction (85%)
Additional channels
Number of customers First
– internet and mobile phone
Direct
Increasing range
1,000,000
of financial products
500,000
10,000 new customers
every month
0
1996
2004
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