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fd (First Direct) :
TM
Branchless Banking
Group 2B FT 2005
Simone Huijs / Suraj Basnet / Ken Kodaka
/ Eugene Kolesnikov / Joan Moreau / Piercarlo Oddone
Rotterdam School of Management
Erasmus Graduate School of Business
Agenda
1. Case summary
2. Business model
3. Competitive advantages
4. Current Challenge (1996)
5. Strategic Recommendations
6. Case update
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Case summary
1988 : Market trend : Downsizing and cost reduction
Midland Bank was the 4th largest bank in UK
A significant proportion of customers were reluctant to visit
branch offices, dissatisfied with banking hours
1989 : Starting of First Direct , using Midland network
Telephone banking, opened 7/7, 24/24, Branchless
Characteristics :
No differentiation in products, but only in service
Rivalry in B2C banking market
1989 – 1996 : Fast growth
Fast consistent growth
Trained experienced employees in telephone services
High Quality and Reliable image
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Business model
PEST Analysis
Political Economic
Deregulation in banking Over capacity
↓ Downsizing
Many New entrants ↓
Low profitability
Social Technology
More wealthy people Improved computing
Increased mobility Automation
Increased demand for Personal computer
better services Improved telecoms
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Business model
Company Distance direct banking
24/7 operation Low cost Staff &
Technology
Customers
24/7 Attractive Personalized
remote banking efficient
convenience products friendly service
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Business model
Sustainability
Investment in training Providing high
Commitment culture quality service
Revenue Prominent
growth reputation and
brand Image
More customers
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Competitive advantages
-> Value
Services:
Availability (anywhere / anytime)
Personalized, friendly, and high quality
Responsiveness - Less interface
Products:
Customers
Free or lower fees
for financial products
Company Cost
Speed Competitors
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Competitive advantages
-> Cost
By reducing process time
New technology (ACD, Database)
Competent staff (Training system)
By office
Low rental office fee Customers
Smart use of office space
Sharing infra with HSBC
Company Cost
Speed Competitors
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Competitive advantages
-> Speed
First mover advantage
Culture of
continuous improvement
Short time marketing
of new products
Customers
Company Cost
Speed Competitors
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Current challenges (1996)
5 forces analysis
Threat of new entrants
+Low capital requirements
+No legal or patent barriers
Bargaining power of Bargaining power of
Industry rivalry buyers
suppliers
+Many competing banks + Many banks offer
-Many IT providers
and other companies remote services
-Market deregulation
Threat of Substitutes
+ Internet Banking
+ Increased experiences in remote services
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Current challenges (1996)
Segmentation analysis
High
Potential Stretch Area Potential Stretch Area
First Direct
Social status
Big 4 Banks
Low
25- 45 65+
Age
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Current challenges (1996)
SWOT analysis
Strengths Opportunities
•Brand image •New remote technology – internet
•Experience and know-how •Additional financial products
•Competent staff •Improve advertising approach
-Prominent training program •Potential to expand customer base
Weaknesses Threats
•Fast growth : •Increased competition
Undermining company culture •New substitutes based on internet
and consistency in services •Competitors’ use of technology
•No diversification in its •More sophisticated customers
distribution channel
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Strategic
recommendations
Maintain current business model
and its superior service level
Need for person to person communication remains
There competitive advantage
– strong brand image in telephone banking
(Base Analysis: SWOT, Value-Speed-Cost Analysis)
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Strategic
recommendations
Introduce online banking
Increase service value for existing customers and attract
new customers that use computers
(Base Analysis: SWOT, 5forces)
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Strategic
recommendations
Aggressive customer acquisition in
UK
Potential 10 million customers in UK
Existing infrastructure for economies of scale
Proven services to attract conservative customers
(Base Analysis: SWOT, Segmentation analysis, 5 forces)
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Strategic
recommendations
Expand range of financial products
to attract new target customers
For Students
Offer student loans, health insurance, personal liability
For elder people
Saving funds for grandchildren, life insurance
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Case update - 2004
FD today
Grown by 56% to 1 Million of customers
High customer satisfaction (85%)
Additional channels
Number of customers First
– internet and mobile phone Direct
Increasing range 1,000,000
of financial products
10,000 new customers 500,000
every month 0
1996
2004
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