Executive summary:
Banking has never been so good since `Lloyds TSB` bank came with their superior service. On August 1 1995 Cheltenham & Gloucester (C&G) merged with Lloyds bank group. Same year on 28 December Lloyds bank merged with TSB bank. . In UK market Lloyds TSB registrar is the no 1 in provision of Employee Share Plan (ESP) administration and Share registration. Among many commercial banks Lloyds bank is serving the UK community with superior banking service. Lloyds bank credit card was the second largest in the UK market. Many aspects of the `Lloyds TSB` bank has been discussed in this assignment and thus the bank can keep its market leader position by creating values in the mind of it’s customers.
Introduction:
UK Commercial Banking Industry is serving UK economy significantly. John Taylor and Sampson Lloyd created Lloyds bank in 1765 in England. With time Lloyds bank has merged with different companies. Lloyds bank has taken fifty take-over. Lloyds Bank acquired Armstrong and Co. in 1911. In 1955 Lloyds bank bought full of it. In 1971 Lloyds bank bought controlling in BOLSA and later the bank’s name became Lloyds and Bolsa International Bank. In early 1990’s Lloyds bank had offices in different countries. On August 1 1995 Cheltenham & Gloucester (C&G) merged with Lloyds bank group. Same year on 28 December Lloyds bank merged with TSB bank. From the beginning of its existence it is the market leader of UK commercial banking industry. Its website has been in peak from July to September 2006 according to hit wise.
1) How `Lloyds TSB` bank is the market leader in the UK commercial banking industry:
Among many commercial banks Lloyds bank is serving the UK community with superior banking service. Lloyds bank credit card was the second largest in the UK market. In UK market Lloyds TSB registrar is the no 1 in provision of Employee Share Plan (ESP) administration and Share registration. Lloyds TSB bank enables all business firms to boost their cash flows. Lloyds helps to use the available assets in a flexible way. ABL from Lloyds TSB offers the most suitable funding solution for suiting your business. Lloyds TSB currently providing funding to over 1400 UK businesses of all sizes. `Lloyds TSB` bank is not the market leader because of only its huge capital; it has developed many systems to boost its performance. It has many services, it cam give loan easily and it can give superior service compared to other bank, that’s why it is the market leader and many banks follow it’s activities to achieve superior position. The bank is now at it’s best and its ability to provide service in increasing day by day. That why it has been in acme position for a long time since it’s birth. Each and every bank wants to simulate the service of the `Lloyds TSB` bank. Market leader is the position where each and every organization tries to go but only one can go to that place and the `Lloyds TSB` bank has been able to keep this position by it’s service, superior customer value, online help, and many more services that is going to secure even a better position that from today. It is very best because its slogan is you first.
2) PESTEL analysis:
It refers to a way of looking at the external factors, which may potentially affect the organization. PESTEL means political, economic, socio- cultural, technological, environmental and legal conditions.
Political condition
Political condition hugely affects a bank such as `Lloyds TSB` bank. Political condition in UK is quite stable. The political factors of `Lloyds TSB` bank are,
Global, national and regional political development, tax policies, labour market policies, public interference etc. Because of stable political condition, `Lloyds TSB` bank can promote their policies, which might not be possible if the political condition of UK were volatile. So it is very important for `Lloyds TSB` bank.
Economic condition
The economic conditions of `Lloyds TSB` bank are Gross national product (GNP) and GNP/capital, Inflation rate, salary rate, different other costs, Private consumption and available income, Development of the rate.
Of exchange, Public finances, Interest level, unemployment etc. GDP and GNP affect the bank and inflation rate is a vital key element for `Lloyds TSB` bank. The company has to evaluate its salary rate from time to time since it is related with inflation rate. And the bank has also different other cost’s which is potential factor of the bank. Interest rate is very important for any bank because if central bank increases the interest rate then the bank has to give loan at a higher rate and if central bank decreases the interest rate then `Lloyds TSB` bank should decrease the interest rate. Money supply also affects `Lloyds TSB` bank because if there is a lack of money supply then the bank can charge a higher rate and if the money market does not have a shortage of money supply then `Lloyds TSB` bank must keep its interest rate competitive.
The central bank can control money supply by purchasing and selling securities to open market. If there is a lack of money supply in the money market then central bank can sell securities to public and other companies and thus it can normalize the money supply of an economy and if there is plenty of money in money market which is hampering the economy then central bank can purchase the securities to decrease the money supply of the money market. If GDP is high then the bank can charge higher interest rate. Higher Private consumption and available income leads to a higher interest rate. During unemployment the bank can charge a lower interest to reduce unemployment and there is no or very few amount of unemployment then the bank can charge high interest rate.
Socio-cultural conditions
Next comes socio cultural condition, which includes demographic conditions. Demographic condition means the size, growth, and density of the population. The UK has a moderate level of population compare to its geographical area. If there are a huge number of people then the `Lloyds TSB` bank can charge comparatively lower interest rate. Changes in values and lifestyle are also an important factor of the bank. Because if general people think that they can be better off without keeping money in the bank then it becomes a major problem for the bank. And general people think that investing money in bank that would be better then anything else then it is turn on for `Lloyds TSB` bank. Changes in life style are also important because if people become fond of spending money massively then the bank would not get so much money for investment purpose.
Some countries bank may experience shortage of cash because some countries people like to spend a lot and some countries people are not at all. Attitude toward work/ spare time is also important. Education condition is important if people are educated then they understand what is the result of keeping money in the bank instead of keeping money at their home. Health condition and changes in income distribution is also important because there is a relation among income, consumption and saving. If someone’s income increases then he consumes more and saves more. That leads to a higher deposit for the `Lloyds TSB` bank.
Technological conditions:
Technology and `Lloyds TSB` bank is going at a same speed because `Lloyds TSB` bank often introduces new technologies which are giving very congenial experience to it’s customers. `Lloyds TSB` bank is spreading of and giving breakthrough in new technology. Through its research and development it is bringing new technologies. In this age of Internet banking `Lloyds TSB` bank boosts it’s banking at a high pace. Now people can do everything from home by use of Internet at UK. `Lloyds TSB` bank has been so much technologically advanced that its website got an award for being the first position from July to September 2006. `Lloyds TSB` bank spends a lot of money for research and development. Thus interested parties can get all the information from the website of the bank. `Lloyds TSB` bank also can use its website to display its key success in the banking industry. When `Lloyds bank was formed then there was no computer let alone internet but `Lloyds TSB` bank has managed it so easily that it has become the market leader.
Environmental conditions
Environmental conditions are getting important day-by-day and world want to see a greener world and so is ‘Lloyds TSB` bank. The bank is environment friendly and has taken preparations for a congenial environment. The bank tries to maintain ecological balance of the country and it abides the rules for preventing pollution. It also tries to conserve the energy and it handles waste efficiently.
Legal conditions
Legal conditions include development in interest rate and competitive legislation, labour market legislation, deposit safety and taxes, European Working Time Directive etc. ‘Lloyds TSB` bank strictly abides labour laws and Provision and use of work equipment regulations and European Working Time Directive. Many governments are not interested to enforce patent and trademark protection but UK government has not been so far.
3) Porter 5 Forces analysis for the `UK Commercial Banking Industry:
Michael Porter has developed a framework that models and industry as being influenced by five forces .The strategic business manager who want to get advantage over their competitors can use this model to better understand the industry context.
Supplier power:
Each and every industry needs supplier thus UK Commercial Banking Industry requires raw materials such as labour, components and other supplies. This requirement leads to a relationship between buyer and supplier. Powerful supplier can influence buyer and if there is a monopoly market of supplier then buyer tries hard to get advantage from supplier and if there is a perfect market then buyer can choose any supplier according to the buyer’s choice. If suppliers are concentrated then suppliers are powerful and if they are not concentrated they are much likely to weak. And if customers are weak then suppliers become weak. When the switching cost to other suppliers is high then supplier are powerful. If the brand is high then the supplier is also powerful. If a banks supplier is an organization like as central bank then the supplier is very powerful since the central bank can control money supply, interest rate etc. if central bank wishes then it can raise the interest rate which leads to a reduction in loan giving of commercial banks. Central bank can also control money supply by buying and selling securities. If consumers are scattered then the supplier is also powerful because consumers don’t have much bargaining power. But since each and every banking industry’s supplier is central bank there is no question of supplier power because the money market is in hand of central bank.
Competitive Rivalry:
If we look up the traditional economic model then we see that competition among rival firms drives profit to zero but competition is not perfect so firms tries hard to gain a competitive advantage. The intensity among rival firms varies across industry. Industry concentration is the indicator of rivalry measured by economists. A high concentration ratio indicates a high concentration of market share. If rivalry among the firms is low the industry is to be said disciplined. To gain an advantage over the competitors a firm can choose several competitive moves such as changing prices, improving product differentiation, exploiting relationship with suppliers. The intensity of the rivalry is can be understood by following characteristics
A large number of firms: large number of firms creates rivalry because each competitor tries to get market share, and each competitor wants to be the market leader.
Slow market growth: slow market growth increases rivalry because it enforces firm’s fight for market share.
High fixed costs: it results economies of scale effect because when total cost are mostly fixed cost then the firms produce near capacity to attain lowest cost units.
Low switching cost: it increases rivalry because customers can switch to another supplier easily.
There are many banks in UK, which has made this industry very competitive. But though the entire barriers ‘Lloyds TSB` bank has become the market leader.
Threat of substitutes:
A threat of substitute exists when a product demand is affected by the price change. Substitute products affect products price elasticity; price elasticity means how much quantity may change due to one unit change in the price. The more the substitutes are available the more is the price elasticity. The demand of a product depends on some factors. One of them is price of substitute products and other is the price of complementary products.
Here in this industry if the interest of the other bank increase then ‘Lloyds TSB` bank can gain advantage over it’s competitors by not increasing the interest rate. And if ‘Lloyds TSB` bank only increases interest and other competitors do not then ‘Lloyds TSB` bank faces some competition problems. Business is affected by the ability of customers to find a different way of doing what to do. If substitution is easy and viable then it hampers organization. In case of generic substitution the concerning company also suffers. Many things could be done without using a media; it is a threat.
Buyer’s power:
Since the organization aim is to sell a product or service to the buyer’s, buyer’s power is a definite concerning force. Buyer’s power is weak when a market is monopoly and the power is strong when the market has a perfect competition. In reality there are a few monopoly businesses. Buyers are powerful when the buyers are concentrated and they are not when they are not concentrated. If buyers purchase a significant number of outputs then the buyers are powerful and if buyers possess a credible backward integration threat then buyers are also powerful. Buyers are weak if the producers threaten forward integration. If producers supply critical portions of buyers input then buyer’s power is weak.
In case of this industry the buyer’s power is powerful because there are many sellers who want to sell the service of banking. Buyer’s power is high when there are few players in the market. If there are large numbers of undifferentiated, small suppliers then buyers power is also high. In this industry the competitors have to drive customers to the competitors. Under the following conditions the buyers have the strong bargaining power few buyers , large buyers , many companies sell the same services, it is possible to substitute the product/service, buyers knowledge of the industry is great.
The threat of entry
The threat of entry is very important in the industry. If new competitors enter into the industry then industry becomes saturated and thus competition rises, which leads to loss in profit. One of the threats of entry is economy of scale. Others are the high and low cost of entry, ease of access to distribution channel, cost advantage not related to the size of the company, competitors retaliation, government action. Differentiation is also important. Power is also affected by the ability of people to enter into the market. If it costs little in time or money to enter into market and if you have little protection for your key technologies then new competitors can easily enter into the market and ruin the concerning company business. So each and every company has to be proactive; means that companies have to think advance for the new entries. The following factors make it difficult for new competitors to enter into the market. High capital requirements for example to establish a bank one have to invest a lot of money. Economies of scale, product differentiation, access to distribution, product adjustment and patent are also important factors. There is much competition in this already and new entries may hamper the competitors.
It is not the rivals who are threats to an organization; possible rivals are also threat to an organization. Organizations must consider these threats for survival. And one thing should keep in mind that only the fittest can survive. So look into the possible new threats is very important. When industry profits rise then new competitors are interested to enter into the profitable market. So one should not satisfy if the profits are increased it might be disastrous for the company. Often we can see that the newest company offers the best services because the company knows what the weak point of the industry is. Falling prices of the product of service deters the possible threats to enter into the market. Entry deterring pricing is one of the barriers to the industry. Barriers to industry are unique characteristics that help concerning company. Although the responsibility of the government is to make competition in an industry the government may also do the inverse function. Government role may be also to increase the number of competitors in the industry. Sometimes government creates a monopoly such as central bank, which controls the money market.
4) Lloyds TSB` bank displaying aspects of superior (i) innovation, (ii) quality, (iii) cost-effectiveness and (iv) customer-responsiveness:
Innovation:
‘Lloyds TSB` bank has been always innovative so that it has gained an award of most innovative working practices. This bank is always tried to find out something new in the banking sector of UK. ‘Lloyds TSB` bank has merged with other companies several times. It has taken also fifty hands over. This is an example of `Lloyds TSB` banks innovation. It is very keen to serve its customers by narrowing the gap between a bank and customers by bringing different account types. The bank has created an Islamic account for specific type of customers. `Lloyds TSB` bank has invented new thing time by time. One of them is factoring which means improving business cash flow by releasing money against unpaid sales invoices. `Lloyds TSB` bank has been very helpful for providing service to newly formed organizations. It provides the loan very easily and with a different service. `Lloyds TSB` bank was nominated for most impressive deployment of security. It has won an award of most innovative use of document management system. `Lloyds TSB` bank was also nominated for most innovative use of payment and exchange system. This bank often brings new account types, different loan schemes, finance solutions, foreign investment advantages etc. it is innovative in this way they have almost hundreds of loan schemes. Classic and classic plus and added value account and many more. It lets instant transfer of money between online saver and `Lloyds TSB` bank account. Their most competitive interest rate comes from their innovative ideas. They also provide online tax advice and information and budget planning and many more services. They provide phone-banking services for 24 hours a day, 7 days in a week.
Quality:
`Lloyds TSB` bank is one of the best quality service providers of the industry. It gives highest interest rates and through other facilities it has become the market leader. It processes loan very quickly. Asset based lending is another quality service of the `Lloyds TSB` bank. The bank has used all its available assets in a flexible and imaginative way to fund its ambitions and finance its business objective. Lloyds TSB Commercial Finance offered businesses asset based financing for over 40 years. Lloyds TSB Commercial Finance is currently funding over 14000 UK businesses of all sizes. Invoicing discount is a quality service of the bank, which enables providing funds to ones business by providing money against unpaid sales invoices. This is a service unlike factoring which keeps ones business secrets. There is a service of the `Lloyds TSB` bank, which can be used to fund new and used cars, coaches, buses and other this type of vehicles. Lloyds TSB Commercial Finance funds the capital investment programs as diverse as road freight, construction, printing and engineering service. Anyone can use his credit card at many places for shopping and other transaction. They provide car insurance, home insurance, travel insurance, pet insurance, and many more insurance services.
Cost-Effectiveness:
`Lloyds TSB` bank has been so much cost effective. It utilizes its assets and other equipments in such a way that it can minimize cost. Accentor and SAP think that they can help `Lloyds TSB` bank to minimize its cost. SAP an organization, which helps other organizations to reduce cost and improve their organization by superior cost effectiveness. SAP is a leading software solution company, which is helping `Lloyds TSB` bank. This bank has also been able to reduce printing and distribution cost. The company now saves several tons of paper and thus reduces it’s cost. By using Internet and computer it has been able to decrease high costs, which was not possible before invention of the computer and the Internet. `Lloyds TSB` bank has been able to reduce its cost by its call centre. After research and development the bank has taken a strategy for a monthly door drop campaign. The bank has been able to reduce cost of liabilities from the purchase of goods and services massively. Cost is also very low for it’s customers to open an account and maintain that account. It is very helpful if someone wants to take loan from the bank and if someone else wants to deposit money in the bank then the customer also finds very easy steps to do that. `Lloyds TSB` bank works so efficiently that its client’s also feel the power of the bank in case of reducing the cost. The `Lloyds TSB` bank has many brunches but its cost has not been so much huge since it operates it work so efficiently. Its revenue has been increasing year to year because of its extreme power of cost effectiveness. It is very important for a bank to minimize cost effectiveness.
Customer-Responsiveness
Via superior customer-responsiveness `Lloyds TSB` bank has gained customers trust and made the customers loyal to them. It is very much customer responsiveness we can understand from their website because their website is very popular and has been awarded. `Lloyds TSB` bank offers four types of basic services in their website; for example personal, business, private and corporate. The main slogan of the `Lloyds TSB` bank is you first. From this slogan we can understand how much customer responsive if `Lloyds TSB` bank. It provides instant support for its present and potential customers. Mainly shorter services, administration, and distribution cycles are essential for ongoing customer satisfaction. By using their website customers can know their balances and their status in the bank very quickly. Its website instantly lets its customer’s statements by date, amount and payment type. Its customers can pay bills like credit cards and utility bills and it also offers cut down of papers. It gives its customers free mobile alert and transfer money of the accounts easily and it allows phone-banking service. They have four current accounts offering they offer student account, Islamic student account and graduate account and under 19’s account. Its platinum credit card is very popular indeed. `Lloyds TSB` bank claims that they are UK’s no 1 lender. Internet banking personal loan is there service which let’s its customers to banking very easily in Internet.
Conclusion:
‘Lloyds TSB` bank has come in this position focusing on some attributes, but innovation makes this bank different from others. Since its creation, it has been trying it’s best to deliver superior service through its innovative ideas. This bank’s innovative ideas have not only led this bank to merge with other banks but also create numerous loan schemes and other services to meet the needs of UK people. Its many excellent awards gained for innovation depict the distinction among this bank and other banks in the market.
The `Lloyds TSB` bank is serving the UK banking industry very efficiently. And it is giving a new value to the UK economy. Now it is at its best. It can definitely deserve the market leader position.
Reference:
1. http://www.lloydstsb.com/
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