In both cases, Barclaycard should expand with the aid of its already existent products. Were the new markets or territories to retrieve the desired outcomes, the bank could develop and launch new products and services.
3. Recommended Alternatives
Out of the strategic alternatives presented in the previous section, the organization has to choose those that best fit its unique needs and features. They must also focus on the strategies that help the bank better adapt to the changes and requirements of the micro and macro environments. In order to make the best informed decision, the officials at Barclaycard should analyze each strategy proposed and identify its positive and negative implications. Based on the analysis, the final recommendation would be made.
The product diversification strategy implies additional expenditure and does not guarantee a positive return on investment, just like the expansion strategy for that matter. The first one however is necessary as it helps the company better identify itself with the new modifications in the market and it aims to better satisfy the needs and wants of customers. A new or improved product under the Barclaycard brand name stands increased chances of retrieving a positive outcome as the brand represents the guarantee of high quality and increased customer satisfaction. As such, the product diversification strategy should be further developed, improved and implemented, regardless of the additional costs it implies.
In terms of reducing costs then, in the particular case of Barclaycard, a wrongfully implemented strategy to reduce costs could represent the end of everything Barclaycard stands for. To better explain, the UK-based bank is a long standing organization, following and implementing old ways and traditions. And such a tradition to say is that of increased prices, a reputation of the highest quality and the benefits felt by customers when enjoying the services of such a powerful brand. This has been for decades the strategy that differentiated Barclaycard from its competition, mostly the new entrants in the industry.
But in the context of economic difficulties and a general instability throughout the globe, Barclaycard should have to adapt to the requirements of lowered prices and interest rates. As a result, they should indeed try to reduce costs, but their primary focus should remain the customer satisfaction. In other words, they need to find ways to reduce costs without generating negative impacts upon the Barclaycard brand, which should remain the element of differentiation.
A best way to achieve cost reduction and not jeopardize the well being of the organization is that of increasing customer loyalty. "In the current downturn, many companies are tightening belts. But too many are missing their biggest opportunity to keep costs down: building loyal relationships with customers and other stakeholders. How do loyal relationships translate into cost savings? Consider the cost of serving a long-standing customer vs. The cost of courting one. Across a wide range of businesses, customers generate increasing profits each year they stay with a company. In financial services, for example, a 5% increase in customer retention produces more than a 25% increase in profit. Why? Return customers tend to buy more from a company over time. As they do, your operating costs to serve them decline" (Reichheld). As a result, the second and third strategies should be combined and implemented in a uniform manner by the officials at Barclaycard.
The final strategy is that of expanding into new markets and territories. The opportunity could be quite tricky as in the unstable economic background, the company could either make significant profits, based on the population's need for more debt, or they could register failure, as the population is generally prudent. For now however, they should consolidate their position and observe the global market with an objective eye to identify future growth possibilities.
Barclaycard is the ultimate epitome of corporate success and most of their achievements have been based on their capability to identify changes in the micro and macro environments and adapt to them. The most relevant example in this sense is given by their skills to implement innovation, materialized in that Barclaycard was the first bank to issue credit cards, the first credit card institution to have websites, the first to implement marketing schemes to increase the loyalty of customers and the first bank to allow credit card payments online (case).
However they remain among the largest banking institutions in the world, Barclaycard is currently faced with the treat of loosing their supremacy. Numerous smaller players have advanced in the industry and they attract customers by offering similar products and services at lower prices. Trying to reduce costs in an attempt to offer their customers the same products and services (meeting the highest standards of quality) could be a viable strategy. However, the Barclaycard products are based on long standing tradition, strong brand and as such prices above the average and a reduction in price could damage the current reputation. Even so, if the competition continues to differentiate itself through lower prices, Barclaycard would only lose in the long-term. The best course of action for the situation being is for the costs to be reduced by increasing the customer loyalty.
Batlz-Lazo, B., Hacialloglu, N., Barclaycard: Still the King of Plastic?, Case Study
Dorf, R.C., Byers, T.H., 2004, Technology Ventures: From Idea to Enterprise, the McGraw Hill Companies
Hoskisson, R.E., Hitt, M.A., 1994, Downscoping: How to Tame the Diversified Firm, Oxford University Press
Kono, T., Clegg, S.R., 1998, Transformation of Corporate Culture: Experiences of Japanese Enterprises, Walter de Gruyter Inc.
Reichheld, F., Prescription for Cutting Costs, Official Website of Bain & Company, Retrieved at http://search.bain.com/search?q=annual+report&site=bainweb&client=bainweb&proxystylesheet=bainweb&output=xml_no_dtd&btnG.x=0&btnG.y=0on August 5, 2008
2008, Official Website of Barclaycard, http://www.barclaycard.co.uklast accessed on August 5, 2008
2008, Reducing Costs, Official Website of PriceWaterHouse Coopers, http://www.pwc.com/extweb/challenges.nsf/docid/f59fae022fd9f1c18525701300588b80last accessed on August 5, 2008
Ways to Increase Customer Loyalty, P-Central, http://www.pcentral-online.net/template/customer-loyalty.htmllast accessed on August 5, 2008