The purpose of the paper is to provide a critical analysis of the Barclays Bank strategy using the 5 Ps framework developed by Mintzberg in 1987. Barclays Bank is a leading British bank with the head office in London. Its history began at 1690, when the banks name was Freame & Gould. Since that time, Barclays Bank has exceeded its operations in about 50 countries. Its business is divided into two parts: Barclays UK and Barclays International (Barclays PLC. 2016a). According to the Barclays PLC (2016a), its UK division focuses on personal banking and provides banking services related with the wealth, business banking, and entrepreneur services. Further, its international division focuses on transatlantic wholesales and consumer banking.
Rationale for Choosing the Company
This company was chosen for the reporting because it is a big international company; and during its long history, it has developed strong strategic position and vision. Moreover, its strong place of the one of the leading companies on the UK banking services market is a good argument for studying its strategic view as an example for other companies, which are intended to become successful market players.
The Argument of the Report
Every business requires a successful strategy, which will help to achieve excellent business performance. However, not all companies managers are able to formulate appropriate strategic vision and conduct necessary strategic analysis. Significant mistakes in building a companys strategic view and positioning on the market may even cause issues in achieving necessary performance results. Thereby, the purpose of this report is to provide analysis of the Barclays Banks strategy using the 5 Ps approach developed by Mintzberg (1987). Next, on the basis of it, the banks strategy which covers all used approaches will be formulated.
Data Used for the Analysis
For the purpose of this paper, various data sources were used. First of all, companys financial reports and strategic updates were analysed. Secondly, the analysis of the news related to the companys strategic vision and business development was conducted. Finally, the financial reports and companys CEOs interviews were also analysed, which allowed not only formulating the current strategic view of the company but also providing its critical evaluation.
Analysis of the Barclays Bank Strategy Using the 5 Ps Framework
1.1 Strategy as a Plan
According to Mintzberg (1987), strategy as a plan can be defined as a course of action and guidelines which describes steps necessary to deal with the current situation. Thereby, the analysis of the Barclays Bank open official documents allowed formulating its operation strategy as a course of action. The basic document used for this purpose was the report about full year results in 2015 and strategy update provided by the firms new CEO Jes Staley in 2016 after coming aboard at the end of 2015 (Moshinsky 2016).
According to the Barclays Bank CEO, the companys top managers are planning to run down non-core operations, which have brought significant financial loses during last years. Moreover, they are going to focus on elimination of significant legacy conduct issues that caused billions of pounds paid as regulatory fines in 2012-2015 (Moshinsky 2016). On the contrary, the firms managers are going to focus at developing strong values-driven culture across the bank based on the work with regulators and increasing the level of internal control, which will help to avoid future mistakes and financial issues.
For example, the key structure change that the company is planning to implement in the next two or three years is related to the Barclays Africa. The companys leaders are going to decrease its interests in this division to a non-controlling and non-consolidated position. Such decision is based on the fact that Barclays, as a British bank, has faced significant challenges as the Barclays Africa shareholder during the last years. Additionally, the companys head office is planning to sell unprofitable businesses, which include Asian wealth business, Southern European cards business, and Egyptian and Zimbabwean businesses. Companys managers believe that as a strategic decision, this step is necessary for protecting Barclays interests as a group.
Additionally, Barclays Group constantly publishes a list of strategic indicators that should help companys managers understand the required results of their activity. For instance, in 2016, the company has stated that its digit core was returned at 21.1% for Barclays UK and 10.0% for Barclays International (Barclays PLC 2016 b). Furthermore, the company planned robust capital ratios and reduced required costs (Barclays PLC 2016 b). Thus, the firms managers are able to see the required performance indicators. They will understand how necessary it is to construct their work and business operations and, thereby, to achieve the appropriate business results.
1.2. Strategy as a Ploy
The next type of strategy definition is strategy as a ploy. According to Mintzberg, (1987) strategy as a ploy can be defined as specific actions intended to outwit the competitor. The analysis of this type of strategy was related to several issues since official companys documents do not include such strategic steps that directly describe the entitys actions aimed at outwitting its competitors.
However, the analysis of current publications related to the Barclays activity in the United Kingdom allowed discovering several features of the firms operation focused on its young employees. In this case, the company was competing with other banks in the area of employing higher qualified young staff (Butcher 2015a). The concern was based on the fact that British banks offer significant benefits for their employee.
According to the recent trend in the banking sphere, the US ans European human resources banks become focused on attracting more young employees (Butcher 2015b). In order to do this, many banks have started increasing their salaries for the graduates. For example, the most valuated junior employees are in the investment banking sector with the median starting salary of ?45,000 (Butcher 2015b). The salaries in the law sector (?40,000) and in the banking and finance sector (?36,500) are on the second place (Butcher 2015b).
Similarly, Barclays Bank developed a strategy that is based on attracting graduates, especially into investment banking positions (Butcher 2015b). Thus, in order to beat its competitors while hiring young workforce, Barclays Bank increased their salaries by 2040%, comparing with the previous ones (Butcher 2015a). Such strategy allows the company to avoid young workforce outflow to its competitors. On the contrary, the company started to defer bonuses for its senior employees (Butcher 2015a). Such step shows a low companys interest in holding senior staff. Thus, Barclays Bank is trying to reallocate its financial resources from the salaries for senior employees to the salaries for the graduates. This strategy is aimed at allowing the company to attract more young employees and provide them with better working conditions. Thereby, this should help the firm to deal with high competition within the banking sector, especially in the investment banking. Companys managers believe that such strategy should help the bank to enhance its market position in the long run.
1.3 Strategy as a Pattern
Mintzberg (1987) defined strategy as a pattern to be a stream of actions used by the company in order to keep its successful performance trend. The analysis of the companys annual reports on its strategy proves that in the future financial periods, Barclays Banks managers are going to continue applying its previous successful practices related to the core business sectors. For instance, the 2015 companys financial results showed that its core businesses are still strong today and generate significant earnings (Barclays PLC 2015). Moreover, companys experts forecast excellent prospects for growth for these core businesses (Barclays PLC 2015).
Thereby, for the future practice, the firm is going to operate only in two core divisions, namely Barclays UK and Barclays Corporate and International. According to the companys strategy, these two divisions had clearly defined that businesses are important to the Barclays Group (Barclays PLC. 2015). This decision can be proved by the calculations provided in the table 1. According to them, the following business segments has been showing significant decline in the income values during the last three financial periods: Africa Banking sector (-13.01%), Head Office (-232.71%), and Barclays Non-Core sector (-1498.17%). Thus, the decision to abandon the losing positions was justified by the companys financial results.
Thereby, the firm is planning to use the pattern of its previous experience related to its operating as the integrated international consumer payments business by developing these two new business units. Barclays managers believe that these divisions have equal importance to the Group. Consequently, they are going to focus on developing exactly these successful areas instead of paying attention to business units with low investment opportunities, just like in the case of African division.
According to the firms pattern, its UK division will continue to focus on its best investment areas: consumer credit cards business and wealth business (Moshinsky 2016). Moreover, Barclays UK will continue to play a key role as a committed provider of offering financial services for small businesses (Barclays PLC 2015). Banks leaders believe that this division will continue to play the role of a ring-fenced bank, which will have strong position in terms of the regulatory requirements. Additionally, Barclays Corporate and International division will include the companys core business directions: corporate banking business, international wealth business, and Barclaycard operations in Europe and the US.
Besides, Barclays Group is going to exempt from those businesses that are pulling down the whole company. According to the Barclays Group annual report (2015), the first of these businesses includes Non-Core Unit. This division provides legacy products and businesses that are neither sufficiently profitable nor strategic for the firm. The second one includes significant litigation and conducts expenses related to the failures in the past companys culture priorities.
1.4. Strategy as a Position
Strategy as a position was defined by Mintzberg (1987) as a way to locate an organisation within its environment. Thus, according to the Barclays Groups annual report, (2015) its strategy will be focused on building the companys position as a transatlantic consumer, corporate and investment bank. This position will be anchored to the firms business provided in the two financial centres of the world, London and New York. Thereby, the company is going to become a commercially successful business that generates sustainable long-term returns (Barclays PLC 2015).
Additionally, in order to achieve this aim, Barclays is going to become origination-focused company instead of being trading-focused one. This aim can be achieved by providing its customers with a well-rounded value proposition and focusing on the companys core markets in the US and the United Kingdom. Next, this strategy will allow the company to ensure collecting sustainable long-term returns and diversify its income stream.
In this case, the company is planning to position itself as a partner of choice for its customers (Barclays PLC 2015). First of all, it pays attention that Barclays is a safe place to invest, manage, and save cash. Secondly, it says that its institutions provide significant funds for purchases and growth. Thirdly, Barclays positions itself as a company which provides professional services for managing business and financial risks. Finally, in its annual report and strategic positioning, Barclays pays attention to the fact that it provides excellent financial and business support to all individuals, small and medium businesses, corporates, and financial institutions.
Thereby, Barclays is trying to develop an image of the bank which provides relevant support to its clients due to the diverse business model and professional expertise. For instance, in order to add value and provide benefits to its customers, Barclays focuses on developing digital technologies, which should provide better automation of simple banking services, thus deepening the relationships with clients.
1.5. Strategy as a Perspective
The fifth definition of strategy provided by Mintzberg (1987) states it to be a perspective, which characterises strategy as an ingrained way of perceiving the world that is shared throughout the organisation. According to this vision, the Barclays strategy can be characterised as its internal culture which focuses on special values of its employees and managers. As reported by the firms CEO Jes Staley, Barclays Bank highly encourage its employees to believe in the institution and its values. According to him, the banks employees promote their profession and believe that their work plays highly valuable role in society (Moshinsky 2016). Thereby, Barclays strategy as a perspective is based on its purpose to help people achieve their ambitions in the right way.
Critical Evaluation of the Barclays Bank Strategy
A previous section was focused on providing an overview of the Barclays Bank strategy using the 5 Ps framework. According to the provided overview, the company has established all five types of the strategy definitions. The analysis of the Barclays official documents and press releases proves that the company uses all five directions of formulation strategy: plan, ploy, pattern, perspective, and position.
These 5 Ps are significantly related and intertwined with each other. Thus, according to the strategy as a plan approach, the bank is planning to change its structure and focusing on several performance indicators. These indicators need to be achieved by eliminating several issues such as non-profitable business units and poorly developed internal culture, which caused significant expenses concerning regulation requirements. On the contrary, strategy as pattern provides a wider outlook for the required structural change based on excluding African business segment and focusing on two profitable business units Barclays UK and Barclays Corporate and International. Indeed, financial analysis of the business units performance provided in the paragraph 1.3 proves that the decision to focus on business units with the currently strong financial position is a necessary step for Barclays in case the company is going to quickly improve its business performance.
Additionally, companys strategic views as position and perspective are also related since they describe company as institution that provides best possibilities for the growth and development of its clients. Indeed, these two strategic views are also inseparable. This can be explained by the fact that in order to become a transatlantic consumer and corporate and investment bank (as it was stated in its positioning), Barclays need to focus on its perspective direction to help people achieve their ambitions in the right way.
Acting the same way as other banks all over the world do, the Barclays Bank joined the competitive struggle for the young minds. Making a decision to increase salaries and provide additional bonuses for the graduates, the Barclays Bank used its ploy strategy, which allowed retaining more young talents and ensure that they will not depart for private equity firms, rivals, hedge funds, or other competing banks. The researchers believe that this step should help the company to develop its banking operation among younger generation to the next generation of superstars in the banking sector (Butcher 2015b). Thereby, its ploy strategy of attracting more young employees, especially in the investment banking sector, also explains the strategic focus on becoming more origination-focused company and provides the most innovative solutions for its customers.
The analysis of the current literature related to the strategic development proves that the Barclays Bank has chosen the right strategic direction. For instance, in their book, Johnson et al. (2014) recommend to choose perspective business units for further development as one of the possible competitive strategies. Thus, making the decision to identify strategic business units, namely Barclays UK and Barclays Corporate and International, the firm becomes able to achieve its competitive advantage. According to the Mintzbergs and Waters approach (1985) the core Barclays strategy can be defined as a planned strategy. Such characteristic of the companys strategy is based on the fact that its leaders are placed at a centre of authority while formulating the strategic vision. Since the Barclays Bank is a huge transnational company formulating its strategy, the plan is necessary for ensuring that all companys divisions are able to know, understand, and implement the companys strategic directions. However, the analysis showed that core strategic changes developed by the banks managers this year are based on restructuring the company and providing free directions for the development among departments at lower levels.
Nonetheless, the provided Barclays Bank strategy lacks the analysis of the potential degree of risk, as the Retail Banking Academy states (2014). According to it, in order to become successful especially on the retail banking services market, Barclays Bank needs to develop its growth strategy while setting out the actions to control and mitigate the potential risks. Thereby, the company has developed a good working strategy which can be displayed by various types. However, the core type, used for formulating companys strategic directions is based on planning. This type of strategic formulation is useful for such huge financial institution as Barclays Bank since its performance is especially focused on achieving certain financial indicators.
Consequently, the entitys strategy can be expressed by the following sentences. According to the provided analysis, it could be concluded that the Barclays Banks strategic aim is to become an internationally recognized bank both for individual and corporate customers, especially at the US and United Kingdom markets. This goal should be achieved by refusing non-core operations and non-profitable divisions and exerting every effort to improve its core operations results, which are showing significant performance outcomes. Additionally, the key resource for providing the best value for its customers and achieving the strategic aim is the companys young workforce with the open-minded vision, which will allow implementing innovative solutions within banking operations.