Grupo Santander – a Strategic Analysis
The Banking Industry is widely seen as the bedrock of the economy because banks help transfer risk and provide liquidity within an economy. This is why the recent crisis in the banking industry has had a major impact in the global economy.
The industry as compared to other industries has the largest amount of Government involvement in terms of how much deposit the bank must keep and how much the ann. can lend. Firms would be deterred from entering into the banking industry because of Government regulations which has become stricter and also the huge capital investment requirements would not be easy to come by in the present economic situation. The 620 summit has outlined the future regulatory structure designed to reduce the risk of another crisis in the industry (Norma Cohen 2009 Financial Times 2009). Non-banking financial services company are the biggest threat to the banking industry. Services offered by the banks are being provided by other financial institutions.
Zap which is an internet base outfit for lending and borrowing money, has recorded significant increase to their customer base since the beginning of the crisis in the Banking Industry. Despite the economic recession, the banking industry has been really competitive. Mergers and acquisitions have made the market fiercer. Every bank is attracting customers from competitors by improving the speed and quality of their services, lowering their rates charged for their services, which has a great impact on their Return on Assets and customers are getting better s much threat as compared to large corporate customers. This is because people prefer to stick to their current banks as most people are tied up with mortgage loans, car loans or credit card.
These thereby make switching cost high for the customers. However, the corporate customers have high volume of business which generates profit for the banks thereby making the banks work harder to get corporate clients. One of the main driving forces in the banking industry is its technology. The power exhibited by the suppliers might be weak because there are many suppliers of genealogy in a banking industry; For E. G. Informs, Wiper, Accentuate, etc. However, they could be strong if the technology provided by individual supplier has minimal or no market competition. In recent times Banks have been entering into contracts with the providers to improve their technology. For E. G.
The two-year Loom contract between Accentuate and Banc Suntanned to support the operation of the bank globally by providing systems integration, consulting, business process management, information technology outsourcing and business process outsourcing 1 . In recent mimes, Banks are undertaking more Corporate Social responsibility Projects to enable them capture more investors and seen as good corporate citizen. This will impact positively on their customer base and in the long run, their profitability. Group Suntanned is investing Euro millions per annum, HASH $81. Million and Citreous more than $millions. Despite the recession in the economy and the industry being at its maturity stage in its life cycle, the competition in the industry is still fierce. There are lot other factors influencing the banking industry but due to word imitation we were not able to include in this report.
Appraisal of Group Sander’s Strategies From the analysis of the Industry, we can say the current trends in the banking industry are – Mergers and Acquisition – Product Differentiation – Improvement in Technology – Corporate Social Responsibility (CARS) Group Suntanned major strategy is to gain market shares through mergers and acquisitions. These activities have proved successful. (See Appendix 2). With the success of their acquisitions in the past, they intend to do the same with the acquisition of Sovereign Bank in U. SO and others firms. These acquisitions might not be the right step as a lot of banks are low in capital but it will increase their market share and with economies of scale, impact positively on their profitability.
Although Group Sander’s net profit dropped by Just 2%, they were able to maintain a steady growth in their net income as compared to some of its competitors – HASH and Citreous (Figurer-3) This is because their low risk appetite helped them to minimize losses from prime lending which was the major cause of the crisis in the financial industry. HASH is in the process of closing some of its US retail banking operations, which have been hit by unpaid mortgages. Success factor required in the banking industry includes product differentiation, quality, diversification and involvement in CARS. Group Suntanned is improving its technology to be more competitive in the market (Accentuate contract, Banking technology Mar 2009). They have invested million Euros in CARS which is huge as compared to their competitors’ investments (HASH: $81. Million, Citreous: $million).