Strategic Analysis of Barclays plc.

<University>

Strategic Analysis of Barclays plc.

By

<Your Name>

<Date>

<Lecturer’s Name and Course Number>

 Strategic Analysis of Barclays plc. 2

Abstract

The banking sector is among the world’s riskiest and competitive industries. Barclays is the

prominent player in the banking sector. According to Financial Times Stock Exchange 100 Index,

it is ranked at 20th position dated 28 September 2016. This research paper analyzes the company’s

competitiveness through various analytical frameworks, mainly including Porters five forces and

SWOT analysis. Barclays has demonstrated above average performance. However, its

insufficiency is apparent amongst low-income earners. If the Barclay focused on these two areas,

the bank would explore new avenues of success.

 Strategic Analysis of Barclays plc. 3

Strategic Analysis of Barclays plc

Introduction

Barclays Plc ranks amongst the largest retail banking and international investment institutions at

the global stage. It is one of the leading bank in the United Kingdom and currently operates in fifty

states with assets of over U.S $2 trillion worth. Whereas in the Financial Times Stock Exchange

100 Index, Barclays stands at 20th position with a market capitalization of 28,089.2. Barclays’

primary operating regions are Africa, USA, and the UK, where a broad range of financial services

and cards are offered. This report will conduct the strategic and fiscal analysis of Barclays’s

integrated banking model to serve clients and customers besides optimizing risk adjusted returns.

Barclay’s Strategic positioning in contemporary era

Strategic factors enhancing the Barclay’s positioning

Internal analysis of Barclays has highlighted various strengths and opportunities for the

organization in the upcoming era, however, due to a few weaknesses prevailing in the business

model, some forces may emerge as a threat to the bank’s existing structure. The bank’s major

strength is its efficient multi-channeled distribution network that comprises online services, ATMs,

and phone banking facility. More importantly, its competitive edge lies in the passionate and

innovative human resource. Diversification of financial and physical resources has been made

strategically. Being the 1st credit card issuer in the UK, firm’s strong brand name is itself a valuable

asset. Integration of financial technology has strengthened its overall financial performance

(Greenwood, 2014). Geographic diversification and increased focus on CRM has enabled the bank

to preserve its position as a leading bank at the global stage. Barclay’s global presence can open

new opportunities in increasingly globalized era. The bank can expand its operations in emerging
 Strategic Analysis of Barclays plc. 4

economies and issue more loans to the corporate sector. Moreover, as the investment banking

industry is growing, Barclays can make acquisitions increase operating cash flows. Offshoring

could also increase return and profit margins. It can cross-sell its products in the Asian region and

integrate high-tech technology to build communication channels. Barclays can achieve cost

efficiencies by shifting towards low-cost Asian regions (Salz & Collins , 2013)

Strategic factors requiring serious consideration

Analysis has also revealed that Barclays’ impairment charges are too high due to inefficient efforts

for loan recovery. According to the latest report, the bank has further raised the charges by 15

percent with 40bps LLR that mostly relates to oil and gas sector (PLC, 2016). Its marketing

strategy also needs to be revised as inappropriate and unethical advertisements have severely

affected the brand image recently. Whereas, modern investors place central importance on the

ethical issues. Additionally, when compared with other banks, its cost income ratio is also higher,

highlighting the operational inefficiency. Hefty bonuses given to management has also drawn

negative publicity at the global stage. The bank is also facing difficulties in expanding its

operations to Asian regions (Onyango, 2014). Latest reports suggest that as per September 2016,

Barclays has underperformed by declaring 0.0105/share, whereas, the analysts forecasted it to be

0.03 for 2016. The reasons put forward for such abrupt cut was that it was vital to ensure that the

bank was unbound in getting a non-core trade down in 2016 (Tutt & Ellayat, 2016). Unstable

marker behavior and financial market volatility are a significant threat for the bank. Moreover,

Barclays’ credit card sales derive direct influence from interest rate fluctuations. Increasing

competition, in particular from foreign banks is pressurizing the bank for more innovations.

Barclay’s bitter experience of RBS possibly resists the acquisition and integration process. Its

diminishing returns from $631.4 million to £433 million in only one year has also been reported
 Strategic Analysis of Barclays plc. 5

that could further erode the situation (Colchester, 2016). Lastly, the bank’s investment decisions

have never been wise and any future wrong decision can seriously harm the bank’s reputation

(Investor, 2014)

Barclay’s external strategic analysis

Strategic analysis has also revealed that Barclays’ supplier bargaining power is high as they have

a strong influence on interest rates, no matter the bank has a strong global presence and there are

numerous suppliers as depositors. On the other side, bargaining power of buyers is also high due

to knowledge availability and increased concentration along with various alternate options.

Industry analysis revealed that financial capital requirement is the main hurdle for entering into

the industry. Barclay’s enormous financial base as a result of globalization gives the bank an edge

over new entrants how are not able to fulfill the capital standards. Anyhow, competition from

micro-finance institutes is more threatening as it is targeting the market’s lower end. Similarly,

complex financial environment promoting non-banking institutions like p2p finance are imposing

significant substitute threat to Barclays and other major banking institutions (Schaeck & Cihák,

2014). Overall, there is a high competitive rivalry, and Barclays needs to offer innovative products

to retain its customers.

Conclusion

Although, the bank is facing various challenges, still, it has the capability to maintain and retain

the market leadership. Barclay is showing above average position. However, it hasn’t exploited

its potential fully.

Recommendations
 Strategic Analysis of Barclays plc. 6

Based on the above analysis, Barclay needs to revise its dividend policy on an immediate basis.

Moreover, the bank should focus on after sales services and product differentiation. It can increase

its market share by increasing the significance in low-income zones. Integration of latest

technology, increased focus on CRM and improved loan recovery process would assist the bank

in tackling various challenges. Cost efficiencies could be achieved by focusing on low cost

developing areas. Finally, the bank should enhance the strategic decision-making process as the

bank is well-known for wrong investment decisions.

 Strategic Analysis of Barclays plc. 7

References

Colchester, M., 2016. The Wall Street Journal. [Online]

Available at: http://www.wsj.com/articles/barclays-posts-drop-in-profit-on-falling-returns-at-

investment-bank-1461739037

[Accessed 7 10 2016].

Greenwood, N., 2014. Barclays Bank PLC, London: McGrew Hill Financial.

Investor, I., 2014. Barclays Plc’s Greatest Weaknesses. [Online]

Available at: http://www.iii.co.uk/articles/153835/barclays-plc%E2%80%99s-greatest-

weaknesses

[Accessed 7 10 2016].

PLC, B., 2016. Q1 2016 Financial Results, s.l.: s.n.

Salz, A. & Collins , . R., 2013. Salz Review, London: s.n.

Tutt, P. & Ellayat, H., 2016. Barclays shares down 8% as profits slump. [Online]

Available at: http://www.cnbc.com/2016/03/01/barclays-2015-pre-tax-profits-up-3-to-96b.html

[Accessed 7 October 2016].

Onyango, V.A., 2014. The challenges of complaints handling in the banking industry: the case of

Barclays bank of Kenya (Doctoral dissertation).

Schaeck, K., & Cihák, M. (2014). Competition, efficiency, and stability in banking. Financial

Management, 43(1), 215-241.

 Strategic Analysis of Barclays plc. 8

Important URLs

https://www.home.barclays/content/dam/barclayspublic/docs/InvestorRelations/ResultAnnounce

ments/2016Q1/20160427_Q116_Results_Presentation.pdf.

http://www.cnbc.com/2016/03/01/barclays-2015-pre-tax-profits-up-3-to-96b.html