The northern bank of ireland
Introduction Of bank:
The Northern Bank is one of the most established providers of financial services within the island of Ireland, with origins dating back as far as 1809.
It is currently the largest provider of retail finance within Northern Ireland boasting a current physical establishment of some 95 branches and 13 financial centres, geographically dispersed throughout the province.
The current staffing establishment consists of some 2300 employees who are required to facilitate and manage an expanding customer base totalling some 415,000 personal and corporate accounts. Northern Bank is one of the leading financial solutions provider in Northern Ireland.
Ownerships And Structure:
The Northern started life as a small independent banking company in 1809 and developed its network through Ireland, becoming part of the UK based Midland Bank in 1970. Ownership then moved to the multi-national National Australia Bank.
This ownership continued until 2005, when strategic planners within the NB had identified that the NAB were reluctant to invest capital of the scale required to facilitate business improvement initiatives, staff development programmes and to alleviate the technological stagnation that had permeated the organisation.
In 2005 ownership was again transferred, this time to the Danish Danske Bank Group, who are the principal provider of banking related services within the Scandinavian markets
Danskes CEO Peter Straarup explained to his investors that the main stimuli for the acquisition are the elevated level of economic growth in Ireland when compared to neighbouring EU member states, together with the current growth trends within the Irish banking sector.
Values: The Danske Bank Group is based on five core values: expertise, integrity, value creation, commitment and accessibility. Northern Bank applies these same values to how we do business.
We constantly want to improve what we offer our customers. We believe our core values will help us to become our customers preferred local financial partner both ethically and professionally.
Core values from words to action
Our core values are more than just words to us. We believe that this is the right way for us to do business and to be involved in our communities.
Growth and development
The Group continues to expand its activities to take advantage of promising business opportunities that also offer a satisfactory return. The Group's considerable capital strength enables it to both expand its business universe and adapt existing activities in a competitive market environment.
Products offered by NORTHERN BANK :
Personal banking: banking services offered to common man, it is also known as retail banking, it carry out transaction with consumers rather than business customers .services comes under this type of banking includes Mortgages ,personal loans ,credit cards ,debit card & savings.
Business Banking: this type of banking is same as personal banking, the only difference lies in Personal banking and business banking is that in business banking the transaction, deposit and loans are only offered to large corporation and large business not to normal individual public, business banking is also known as commercial banking.
STRATEGIC POSITION OF Northern bank:
Major competitors in Northern Ireland:
Bank of Ireland
The markets in Northern Ireland are characterised by high growth and fundamentally strong because of three important factors:
?positive economic outlook
low corporation tax rates
favourable demographic trends
Northern Ireland was the fastest-growing economy in the EU between 1994 and 2002
(Measured in real GDP growth), and the outlook is healthy. The economy is expected to grow at a higher rate than the EU average in the next few years. Some 38% of the population (3.9 million) is under 25, and the population is expected to increase to 4.0-4.3 million by 2011.
Northern Ireland, which is a part of the UK, is the fastest-growing regional economy in the UK, and it has benefited from structural funding and substantial support from the EU over a number of years. The region has also received government support, and this has fuelled the
economic growth. Northern Ireland has become increasingly successful in attracting foreign
investors and foreign direct investment (FDI) has increased by 45% over the past six years.
Investment from the information and communication technology, service and technology sectors accounted for 90% of all FDI into Northern Ireland in 2002/3. The Northern Irish economy has been stable in recent years,despite both adverse global conditions and outstanding political issues.
Here are some statistics relating to banking in northern Ireland researched by MORI.
The population in Northern Ireland is currently 1.7million and traditionally 35% rural based, the basis for the extensive branch network.
It has the youngest population under 16 so a real growth potential with the majority of the adult population having a bank account.
Unemployment is low and the political future more stable.
Population trends are strategically important for the banking industry.
This is a comparison of the population breakdown in 2004 and the predicted future breakdown for 2009.
Of particular significance is the growth in the 25-34 age group which will impact on the mortgage market and the 55+ group.
There will be fewer opportunities for banks in terms of the younger debt accumulating population which will decrease by 2009.
The market of northern Ireland is the fastest growing in the UK, thats why in 2005 DANSKEs acquired northern bank .
This is an overview of the Porter 5 forces model which examines the market in terms of new entrants, suppliers, substitutes, Buyers and rivals. So for the banking scene in Northern Ireland this matrix highlights the following
Threat of new entrants i have found no evidence of new entry to the market in Northern Ireland on any significant scale, and that expansion in the market took many years. While the non-clearers collectively have achieved a significant market share, they have been providing Personel Current Account s in Northern Ireland for nearly 20 years
Less than ROI with duopoly still enough to prompt the following Bargaining power of suppliers
Competitive rivalry within industry Big Four around . Combined with big 4 non clearing e.g. HBOS
Bargaining power of customers
Threat of substitutes Telephone M Commerce but Mintel report highlights Pure-play banks, new entrants and the relatively smaller banks seeking to establish themselves in NI will be dealt a significant blow by the results in see Figure 44 in handouts, which show that three quarters of NI online banking users prefer to use well-known banks, with trust being the key reason for this !!
Penetration in 2004 10.1 % (11.8. And 8.6 for women)
Barriers to entry - We found that the complexity in Personal Current Account charging structures and practices and lack of clarity of information would be likely to make it difficult for customers to search and switch. a distrust of unfamiliar banks, and a competitive advantage from an extensive branch network.
This is the Gross share matrix or BCG (BOSTON CONSULTING MATRIX) In relation to a number of market products from the banks in Northern Ireland. For banks it is important as it assists in strategic positioning and target marketing. It is fairly obvious why the Northern Bank for example has launched a new innovative mortgage product and why it invests so heavily in its IT platform bearing in mind both areas are growth orientated. The mortgage market has also been a success story for the building societies and it is an area where they are increasing their market share. Pensions and insurance are somewhat of a poison chalice and it seems that brick and mortar is seen as the way forward for the Northern Ireland investors rather than the pension scene. There is a relatively high growth in E banking particularly with younger customers so surely over time this will lead to a reduction in branch network requirements reducing bank overheads and hopefully enabling better economic packages for customers.
Resource and capabilities
Market share :
This data illustrates the breakdown of the market in more detail looking at current accounts, savings accounts, mortgages, personal loans and credit cards..
This slide presents an overview of the breakdown of market share in relation to Current accounts of clearing banks and building societies in Northern Ireland.
As you can see the big 4 which are Ulster bank, northern bank, First Trust and Bank Of Ireland dominate the Northern Ireland banking scene.
This translates into an 86% domination of branches across the province, with Northern Bank having the most with 95% and the Ulster bank a close second with 90.
A Mintel report has highlighted a general low level of customer satisfaction with banking in Northern Ireland compared with the mainland.
For example, the highest rated bank is the northern bank with 31%, which is 4% lower than any of the mainland banks.
So a big 4 domination and unhappy customers
This slide illustrates the Northern Ireland consumer segmentation matrix. I will quickly take you through an explanation of these groups and you can see if they relate to you.
Financially footloose- This is 25% of the Ni banking population mainly the 15-24 age group. Little financial responsibility, are unlikely to have a mortgage and are prone to large amounts of debt.
Prudent Customers-Financially responsible consumers with mortgages and pension ownership. The majority are over 65 so everyone in this room is exempt I think.
Constrained customers-This covers 24% of the banking population. Characteristics are parenthood and a host of financial responsibilities. These customers are generally shrewd.
Financial Traditionalists- 16% of the banking population, characterised by a poor economic status, less financially active.
Serious Spenders-17% of banking population, characterised by full time employment with money to spend. Age group 25-34 who are prepared to live in debt.
So do these groups ring any bells. I seem to fall between, supposed to be a prudent customer with a large mortgage and a serious spender of the banks money.
Certainly the above information is crucial in segmenting the market and target selling for the banking industry in Northern Ireland
Consumer Confindence survey:
Northern Bank Carrys out consumer confindence survey on quarterly basis , this shows that northern bank make assessment to check how satisfy their current customer are
12th June 2006
Northern Bank today announced new partnership deals with Norwich Union for the provision of insurance and AXA for the provision of pensions and investment bonds.
Under the terms of the partnership agreement with Norwich Union, Northern Bank will offer a comprehensive range of insurance products including various types of life and critical illness cover as well as income protection. The general insurance products include buildings and contents, payment protection and accident, sickness and unemployment insurances.
Norwich Union is the UK's largest insurance group, while AXA is a worldwide leader in financial protection and wealth management.
Financial Result of First Half 2009 : (Source :Company website)
Danske Bank Group financial results
Income up 48% in Danish kroner, to 3.7bn
Profit before impairment charges was 1.9bn (H1 2008: 0.9bn)
Loan impairments charges amounted to 1.7bn
Net profit was 0.1bn
Core (Tier1) capital and Solvency ratios were 12.2% and 16.1%
Overall, the result for Danske Bank was down on the same period last
year, but better than expected.
Northern Bank financial results
Operating profit before impairment charges and FSCS levy* is 35m,
level with 2008
Total income is 100m for first half of 2009, down by 9% on the same
period last year due to lower UK base rate and lower activity in the
Costs down 5% despite additional payments for the FSCS levy of approximately
Total lending, excluding public sector , up by 4% year-on-year, including
mortgage growth of 15%.
Impairment charges of 104m of which 3.1m actual losses
Deposits remained stable
Tier 1 capital ratio of 10.6% and solvency ratio of 15.5%
(*) Northern Bank, like all other Financial institutions, is required to pay a levy to participate in the UK Financial Services Compensation Scheme
For the first half of 2009 Northern Bank has reported an underlying profit
of 35m, level with the same period in 2008.
Lower interest rates and reduced activity in the market have resulted in a
total income of 100m, down 9% on 2008. Operating expenses fell by 5%
despite the 6 million levy to the Financial Services Compensation Scheme
STRATEGIC CHOICE :
STRATEGIC OPTION FOR Northern Bank
After a deep research of northern bank i have noticed that northern bank is not providing Mobile banking thou it provides internet banking.
The UK's mobile banking market is growing at over 30 per cent a year, according to new figures showing the sector gaining real momentum. A survey of 1,000 adults revealed 5.6 per cent used their mobile phone to access their bank accounts and manage their finances in november 2009, up from 4.3 per cent a year earlier. (Source: http://www.cellular-news.com/)
Paavilainen (2002) stresses two main reasons for the strong expected growth of mobile banking; namely fast penetration rates for handsets and the emerging use of banking services via the fixed internet
Mobile commerce (m-commerce) is a new way of doing business which is adopted by many organisations including financial service organisation, & we have seen that many banks in Uk now offered mobile banking .mobile commerce business is mainly conducted through mobile device using wireless telecommunication network and other wireless e-commerce technology.
According to lim, 2003:2,The essence of mobile commerce revolves around the idea of reaching customers, suppliers and employees regardless of where they are located. Mobile commerce is about delivering the right information to the right place at the right time. It gives users the ability to access the internet from any location at any time, the capability to pinpoint an individual mobile terminal users location, the functionality to access information at the point of need and a need-based data/information update capability
To work out in this section I have to used Different Theoretical models:
? Ansoff 4 grid product / market matrix:
The Ansoff Growth matrix is a strategic marketing tool that can help any organisation to decide their product and market growth strategy. Ansoffs matrix has two axis on vertical you can put existing product or new product and on horizontal axis you can put existing product or exiting market. Ansoffs four grid growth matrix suggests that a business attempts to grow depend on whether it markets new or existing products in new or existing markets. Grid has four dimensions:
Market Development: according to ansoffs matrix market development means an organisation using its existing product in new market
Product development: means an organisation using new product in existing market.
Marketing penetration: means an organisation using its existing product in its existing market.
Diversification: its involves an organisation develops new product and going in a new market.
According to ansoffs matrix If northern bank launches mobile banking then it is a product development.
Appropriateness of product development strategy to Northern Bank:
It holds a high relative market share of the in UK financial sector, has a robust brand presence and this mobile banking product development strategy would give lloydstsb a distinctive competitive advantage in the market.
It needs to react to technological development and innovation in the market i.e. 3g mobile handset.
The company is particularly strong in R&D
The company has a strong organisation structure based on its product it offers.
The changing needs of its customers demand new product.
Problems with product development strategy.
Product development strategy is a very expensive strategy as it involves in dept R&D.
After the product is launched there is a high chance that the new product would fail.
After the product is launched ,competitor will prototype/imitate the product concept as we have seen after lloydtsb introduced mobile banking most of the banks in UK launched mobile banking .
? Porters Generic Strategies:
Porter devised Generic strategies for organisation in order to gain competitive edge over other organisation .these strategies are discussed below
COST leadership: it aims to be the lowest cost producer in the industry; this strategy is necessary where organisations are competing on price.
Cost leadership enable companies to:
? Reduce cost of capital
? Increased new market
? Increased market share
? Builds entry barriers
? Weaken threats of substitute
Differentiation : this includes non prices factors to show that a product is better in some ways in other words creates product that is perceived by the customers to be unique in the market
Differentiation includes products:
? Brand image
Focus :its mean focus product on a particular buyer group, segment or Geographically .focus can include both features of cost leader ship and differentiation
According to Porters generic strategic, cost leadership is suitable for companies where competition is very fierce and differentiation is suitable who the product is new and this could help the organisation to charge high price .from this we can conclude that northern bank can use cost leadership strategy to introduce mobile banking services because most of the banks in northern Ireland are offering mobile banking .Ulster bank was the first bank to launch mobile banking in northern Ireland .
Method for Strategy Development for Northern bank :
(because of limitation of words i am only describing the best option for strategy development)
Northern Bank can create PARTNERSHIP WITH Monilink:
According to Paavilainen, 2002, when it comes to co-operation, they can give the acquired knowledge and benefit to reach other goals. When considering partnerships, financial institution should aim to deploy one of the following three strategies:
Synergy strategies ,companies co-operates with companies that have similar objectives and view of the the future .Core competencies and expertise are brought together which enables them to learn from each other .an example is mobile operators that co-operate with financial institutions.
Control strategies develop concepts and procedures to ensure the companys position in the value chain of mobile commerce. In co-operation with device manufactures or mobile operators payment and security, solutions can be developed to provide services in the future.
Technology co-operation provides the developers with the skills and knowledge that are required to develop technical solutions in the mobile commerce framework .this can be co-operation with system integrators, software developers and platform providers.
Northern bank can use the third strategy (according to Paavilainen) with monilink, it is UK mobile banking network formed in 2003, providing LLoydstsb, NatWest and other banking customers mobile banking services on their mobile handset, monilink act as a interface between banks and customer to receives their financial information on their mobile .Montise (the global mobile money specialist) is the parental company of monilink.
Strategy Evaluation :
Johnson & schools devised a evaluation criteria to evaluate strartegic options available, this evaluation criteria has three category:
SUITABILITY , FEASIBILITY & ACCEPTABILTY .
Suitability :This category also referred as first round look at strategy ,suitability crieteria is to check whether the proposed strategy fits the organisation & that strategy would sustain or improve the competitive position of the organisation therefore suitability is a useful criteria for screening purpose.
The following question and their answer about mobile banking need to be asked:
Q:Does this mobile banking strategic fits with the northern bank objective?
A:Every bank have a primary objective to maximise their share holders wealth by increasing profits ,this mobile banking strategy would certainly help northern bank to maximise their shareholders wealth by attracting new customers and to satisfy their existing customers by offering them their bank account information on their mobile handset.
Q:How far this mobile banking strategy overcome threats from competitor ?
A:As we know most banks in northern Ireland i.e Ulster ,first bank etc offers mobile banking so if northern bank does not develops this mobile banking strategy then it will stay behind from competitors and northern bank might loose their exiting customers. This mobile banking strategy is likely to improve northern bank competitive standing.
Feasibility : This category involves weather the choosen strategy can be implemented successfully .Every strategy needs to be achievable in resource terms. The following questions need to be asked in feasibility category:
Q:How will the organisation ensure that required skills are available ?
A:As i have discussed in strategic development that the best option for northern bank to create a partnership with monilink act as a interface between banks and their customers and most banks in UK have partnership with monilink when it comes to mobile banking,.
Q:How this strategy be funded?
A:Northern bank is a subsidiary of Danish Danske Bank, northern bank can forward this proposed strategy Danske bank for funds required with the benefit of this proposed strategy .
Acceptabilty: This criteria can be a difficult one as compare to suitability and feasibility since acceptability is strongly related to people's expectations, and therefore the issue of acceptable to whom? requires the analysis to be thought through carefully. The following Question need to be asked :
Q:How this mobile banking strategy will benefit northern bank from financial perspective?
A:When ever a strategy is proposed the management of that organisation do cost benefit analysis ,if it creates positive NPV then it is good from financial perspective. On the other hand if the financial data is not available easily then i would check other organisation who have implement this strategy.
Q:Will this mobile banking strategy be acceptable in the organisation environment?
A:Certainly yes because of the availibilty of mobile internet , latest development is mobile handset and at last people dont have time to come into branch for their banking information.
Experience shows that Stategic implementation is often a consequence of good process management. Thus, the implementation itself has to be organized as a business
transformation program covering all relevant aspects of an organizations development.
. These are the recommendation which would help Northern bank to improve their implementation process
If the project is not planned sufficiently well then problems will inevitably ensue.
Management Organization: Establish management roles & bodies according to organisation Hierarchy and assign the responsibilities
The deadlines may be accepted at too early stage in the planning process. It may be too early to early to appreciate the realism or otherwise the time scale .
Documentation & Standardization: Develop consistent and organization-wide valid
Process. Drive the standardization and alignment of business processes and the management and support processes.
Performance Controlling: Define key performance indicators (KPI) and metrics for the Implementation processes derived from business goals and strategies. Introduce a continuous KPI-based performance measurement and assessment for the implementation processes
Process Management Maturity Assessment: Conduct process management maturity assessments of the organization. Derive & implement improvement measures. Repeat process management maturity the objectives assessments periodically.
Methods & Tools: Provide standard methods and tools required for the operation of process management.
Communication: Provide target group specific information about objectives, content, roles & responsibilities, and progress of process management to create awareness and support the implementation.
Qualification & Training: Derive competency development measures for the persons involved in process implementation management. Define and conduct target group specific qualification programs. Verify the success.
Target Setting & Incentives: Check and amend target setting and incentive systems. Define Process harmonization/ standardization and process performance goals. Implement process target agreements, define related incentives
Only if each of these topics are planned and implemented to a certain degree and in a coordinated way, the effects necessary for overall success are achieved. Ofcourse, the business situation, the cultural environment, and the readiness of an organization are additional boundary conditions which have to be considered in the setup of the contents and the timeframe of the implementation program.