Strategic Management Barclaycard Strategic Alternatives

Strategic Management Barclaycard Strategic Alternatives - Case Study Barclaycard is a UK-based credit card giant. They were the first to introduce the credit card in Great Britain in 1966 and after four decades of existence, they came to be present in more than 60 countries. The institution offers a multitude of solutions for their individual and organizational customers, be them large of small entities.

Barclaycard is primarily centred on registering high incomes and achieving and maintaining international success, but in their path to reaching these desiderates, they place an increased emphasis on the full satisfaction of the customers' needs and wants, creating a pleasant and dynamic work environment and sustaining the development of the communities in which they operate (Official Website of Barclaycard, 2008) Today, Barclaycard serves over 10 million customers in the UK alone; they also provide services for 85,000 retailers and 5,000 staff.

However they are extremely successful, the general status of an unstable global economy, in which borrowing becomes more expensive than ever, is likely to pose some threats. The threats are even more real when Barclaycard is already offering credit cards at prices among the highest ones in the region. "Managing over 10m UK customers, 85,000 retailers, 5,000 staff and offering one of the highest-priced card products, it was not surprising that Barclaycard was under close scrutiny as the inquiry into the credit card industry evolved" (case).

Barclaycard remains a leader in its industry, but to consolidate and maintain its position, they have to develop and implement a wide set of strategies, adapted to the unique requirements of the market and the core competencies of the UK bank. 2. Alternative Strategic Directions In their four decades of existence, Barclaycard has continually struggled to further develop their operations and implemented strategies such as increasing the customer loyalty or offering a better diversified product palette.

"Developments in the 40 years that followed the launch of credit cards in the UK by Barclaycard were marked by the continuing improvement of the industry standards, interconnecting and interoperating hardware and software, and overlapping membership of the two technology platforms for payment systems (Visa International and MasterCard) as well as by almost identical functionality between cards" (case). The current purpose of Barclaycard is to further consolidate their leading position and they aim to do this by offering a highly diversified product range.

The bank has numerous strategic alternatives from which to choose the best course of action. The most viable ones refer to: further diversifying the product offering increasing the loyalty of customers reducing costs, and further expanding 2.1 Product Diversification In 2003, Barclaycard offered a total of 12 products and services, organized under 4 categories.

They were as follows: Credit cards: Standard Credit Cards, Special Privilege Cards and Company Cards Free user benefits: Barclaycard Purchase Protection, Barclaycard Extended Warranty, Travel Accident Insurance, Nectar Points, Barclaycard Price Promise, Internet Delivery Protection, Online Fraud Guarantee Advice: International Resource Online Services: Online Account Manager (case) The product offering of Barclaycard is already quite complex and trying to come up with new products and services might prove quite a challenge. However, in the context of mutating market needs, features and requirements, it is not impossible.

"Product diversification tends to invigorate organizations, because it increases opportunities to use a variety of capabilities, increases posts for promotion and tends to stimulate growth. To be successful, the products should be in the early stage of their product life cycle, or have a strategically appropriate mix" (Kono and Clegg, 1998).

As a result of this statement, one can conclude then that Barclaycard has two opportunities: they could choose to develop new products and services or, the second one, they could choose to further develop and improve their already existent palette of products and services. A a) Developing new products Barclaycard could for instance issue a new credit card based on the requirements of the customers. After researching the market, they could identify that the audience desires a credit card that recognizes the owner.

It could contain a chip that recognizes the fingerprint of the original owner and only works based on it. If the card gets in the possession of a tertiary party, when introduced in the ATM, it would notify the bank that it is not being used by the owner. This would limit the credit cards frauds and it would also ensure a better sense of safety for the owner of the card. As a result, customers would register increased satisfaction and sales of Barclaycard would increase.

A b) Improving the already existent products Such a strategy would require reduced investments, as the customer base and the demand for the particular product already exists. For instance, the finger print recognition feature could be included on Special Privilege Cards. Costs would as such be significantly reduced as the development of the new item would not be necessary. 2.2 Customer Loyalty Increasing the loyalty of the already existent customers is yet another effective manner of increasing sales, revenues, profits and as such gaining increased chances of maintaining a leading position.

The basic rationale behind this statement is that satisfied customers tend to return for the services of the provider over and over again. This will eventually lead to sustained revenues and consequently sustained growth possibilities for Barclaycard. "Customer loyalty can be defined as: the long-term business relationship customers have with your business because they benefit from the good service that you give them. Customer loyalty does not happen overnight: rather, it is built by a lot of repeat business and repeat sales from the services you provide them.

The more customers come back to you and patronize your business regularly on a long-term basis, the more customer loyalty is built in the business relationship" (P-Central) The process of building and increasing customer loyalty is as such an ongoing one, a process which must be integrated within the corporate culture and on which all operations must be based. In this order of ideas, the Barclaycard employees have to be offered training programs that teach them how to treat the customer.

They must be aware that the customer is the center of their operations and his satisfaction is the ultimate purpose of their job.

To ensure that customer loyalty is achieved, increased and continually sustained, the officials and employees of Barclaycard have to constantly behave according to the following ten principles: honesty promptness mutual trust generosity good will patience The customer is always right" More than just the money" Giving the benefit of the doubt" and Walking an extra mile" (P-Central) 2.3 Reduced Costs Reducing costs strategies are quite a generic concept, all with the ultimate purpose of spending less to earn more.

Cost reduction actions can refer to downsizing the employees, lowering their salaries or cutting the benefits to reduce employee expenditures. On the long run however, this particular course of action may bring more damages than benefits. Reducing costs can also materialize in purchasing poorer pieces of equipment, but this too is not beneficial on the long-term. Strategies to reducing costs are generally risky and must be well developed and implemented by specialized professionals. "On one hand, your company seeks growth.

On the other, the demand to reduce costs never goes away. You had better find a way to do both, simultaneously. Of course, developing a cost-reduction strategy that maximizes efficiency without compromising growth potential is a tricky proposition. You have to resist pressure to make indiscriminate cuts or slash headcount across the board. Your job is to trim the fat -- not cut into the bone. You need to identify core competencies where efficiency can be improved, trim and consolidate non-core functions, and reinvest the savings in critical business assets.

And even before you start, you need buy-in from your company employees" (Official Website of PriceWaterHouse Coopers, 2008). There are several alternatives which could be implemented by Barclaycard in order to reduce costs.

These include: reducing the employee training programs reducing the premiums, bonuses and other benefits downsizing outsourcing reducing the investments in technology cutting marketing costs and so on 2.4 Expansion The expansion strategy can be divided into two possibilities: launching Barclaycard products onto new or underserved markets or, the second one, territorially expanding the operations to other regions of the globe. Each has its particular features. A a) Expanding to other regions Barclaycard already operates in over 60 countries and going to more would imply increased costs.

First of all, the bank would have to identify the regions where the competition is rather low and the demand is high. Also, the living standards of the population and the buying power would have to be increased. A b) Expanding to underserved markets Barclaycard would have to invest in market research in order to identify the underserved markets and the needs and wants of these customers.

New staff members would have to be hired and more efforts would have to be made, as a result, the costs would increase significantly and the outcome could not guarantee a beneficial return on investment. 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,.