Performance Of Barclays Bank In The Financial Market
In the 17th century, the company had created about 182 branches. Today, the bank has over4750 branches in 55 countries by 2017. Since the year 2008, the company has also gone ahead to acquire corporate properties. They bought a reputed credit company called Goldfish at $70 million and also acquired shares worth $745 million in Expobank (Staff, 2011), a major Russian retail bank. Barclays CEO, Lesley in 2014 claimed the profit Barclays had attained before tax for the third quarter was worth 1.1 billion pounds (White and Rumney, 2017). Barclays Public Limited reported a steep rise in pre-tax profit to 3.2 billion euros from 1.1 billion Euros in 2015. The company has since then liquidated many assets across the seas such as in East Africa to focus on the United Kingdom and the United States markets. It aims to consolidate its base as a bank of choice in New York and London cities respectively.
The company has also been involved in several sponsorship programmes such as English Premier League from 2001 to 2017 and the 2008 Dubai Tennis championships (Chapman, 2016). These sponsorships have given the company an edge for instance of 5 billion viewers from television audience and 212 territories of coverage around the world. This serves to create goodwill and awareness of Barclays bank among youngsters who make up a large potential market base.
The bank has also delved into social media activity to advertise itself. Keeping in mind the delicate nature of a brand name, there is a need for the company to sustain an interactive social platform in which they can also communicate with customers and receive feedback (Charnley, 2014). For instance, through an official Twitter account.
Macro Environmental Issues
These include all uncontrollable external factors that influence the decision-making patterns of an enterprise while also affecting its performance and strategies. In this instance, PEST analysis tool on Barclays is used.
This describes a structure of macro environmental factors that should be considered when conducting market research. It is a vital component of strategic management. It is a tool that helps one understand market growth.It entails Political, Economic, Social and Technological factors (Perera, 2017, p. 1).
Politics involves all the given activities associated with governance, affairs of state, and party politics. Politics affects areas of the economy such as labour laws, tariffs, tax policy, trade restrictions, and environmental laws. Political stability is essential to promulgate economic development. Governments have a say on which goods or services can be provided in the market or not. The acts of parliament may foresee regulations, local government by-laws, international and national standard compliance of services and goods. For instance, new political leaders may be inclined to change some economic policies of the government that may affect banking. For example, the election of Donald Trump under a Republican ticket has negatively affected Barclays’ performance. Barclays had made a loss of 1.9 Billion Euros amid hefty Trump corporate tax changes (Dawkins, 2018) as well as a £900m charge for litigation bills, court battles, cost of exiting Africa and Carillion collapse that the company had already suffered.
A second example of the impact of politics is the possible future implication of the Brexit; after the election of Theresa May, a former member of parliament of Maidenhead, as the prime minister of the United Kingdom in 2016. There have been considerable changes in the political arena. Under her governance, Brexit was successfully pioneered by majorly Boris Johnson and Dominic Cummings. Dominic spent weeks doing detailed research on the public’s opinion about the European Union. The referendum caused a political shock that impacted the currency of UK. The exit has been gradual since then yet affecting many companies and British agencies. For instance, since international banking business within the EU is made possible by only EU-level legislation. For example, investment, deposit taking and payment services, a possible risk may arise in the future due to complexities that arise from intercountry relations (Hunt and Wheeler, 2018).
Economic considerations majorly focus on global economic growth rate, inflation rates, exchange rates in the currency market, and interest rates. The various factors have a potential effect on Barclays revolve around changes undergoing in the currency, the pound for instance or the dollar. Interest rates can affect an industry’s cost of capital. The Barclays bank keenly focuses on the fluctuations of currency and the respective exchange rates to perform well.
Trends in social factors affect the demand for products and services of a company. This strategy focuses on the need to improve on the objectives of the business putting into consideration the social needs of the clients. Barclays bank takes into consideration factors such as client’s career attitudes, population growth rate, the age distribution of population, and cultural aspects. It aims to satisfactorily meet the demands of many customers through the use of innovative devices, acquiring and retaining a talented workforce. The company also has to adjust its management strategy to adapt to social needs in different seasons. For instance, providing loans for customers intending to go for a holiday vacation at the end of year festivities.
Modern technology is so essential in banking systems. This includes the use of automated devices, CCTV cameras, ATMs, the internet, updated security scanning devices and a digital market system. Application of these devices enables Barclays to have a competitive advantage. Using the latest device, inventing new ideas, and applying most efficient technology has been the principle of the bank for many years. This helps the company to serve many clients with satisfactory at short time periods. The only demerit is that they are costly and require skilled labour to operate.
Porter’s 5 Forces
This is an instrument for analysing competition intensity drawing from an industry’s organisation economics. They are the microenvironment forces. It analyses an industry’s level of attractiveness that is responsible the level of profits it can generate and its market performance (Isc.hbs.edu, 2018).
The very existence of barriers to market entry such as rights and patents affects Barclay’s market performance. Usually, the entry barriers are high, and barriers to exit are low. There is also a high level of entry emerging within financial markets across the globe like the HSBC in India due to soft barriers. These markets are highly legislated and regulated by the governments in their respective countries. Control is exercised by central banks to monitor the interests on deposits and loans and control the flow of money in the economy. Consequently, in emerging markets of India and Africa, Barclays is unpopular. This can be owed to the fact that people have invested in private sector banks. It is therefore an advantage for Barclays to construct and implement strategies that adjust to entry barriers to attract potential clients.
Rivalry Among Competitors
Businesses thrive on competition. The difference between strategies, intentions, and profit motivation among public and microfinance institutions is prevalent. Barclays changes its interest rates and charges to attract customers. Due to the large financial base of Barclays, it has great ease in terms of penetrating markets and establishing itself in new ground territories. Banks use different tactics to gain paces like advertising battles and product introductions. For example, Barclays spent 1.9 billion euros on advertising in 2001.
Bargaining Power of Suppliers
Banks mainly generate money from customer deposits and debtors who pay the loans on interest rates. Barclays bank is no exception. These depositors are transformed into their suppliers eventually. A medium of power exists amongst suppliers of a respective bank who are the individuals who raise money for the bank. These suppliers can put pressure on a bank. An affluent supplier can make the bank more competitive. There is, therefore, need for innovation in service delivery in Barclays.
Bargaining Power of the customers
Failure by banks to offer alternative services such as consultancy can bring the clients’ bargaining power low. This is because many banks are providing the same service. Barclays has edged itself out through affordable insurance covers and e-banking services.
Threat from Substitutes
The existence of financial institutions with meagre interest rates is a threat to multinational banks such as Barclays. The rate of their growth is very high. In countries such as India, there is a high propensity for people to switch to private banking. Barclays has positioned itself to compete with unconventional banking systems.
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