Introduction
Barclays is one of the primary international providers of financial services. It operates in most parts of the world, including the Middle East, Australia, Asia, and Africa. The Barclays group comprises
“Barclays bank PLC, Mercers debt collection agency, Barclays Bank Delaware, Barclays Retail Bank, Barclays Commercial Bank, Barclays Wealth bank, Barclays Private Clients International Ltd., Barclays Private Equity, Barclaycard, Barclaycard US, Barclays Capital, Barclays Global Investors, Woolwich PLC, Barclays Africa, Barclays Spain, Barclays Portugal, Barclays France, Absa Group Limited, FIRSTPLUS Financial Group PLC and Barclays Partner Finance” (Aldrich & von Geibler 2003, p. 13).
Background
Barclays is a global banking organization that is based in the United Kingdom. It has numerous branches around the world, including Europe, South America, and Asia-pacific. The primary operations of Barclays include banking, investment banking, credit cards, and wealth management. Besides retail and business banking, Barclays also provides synchronized international services to transnational companies and financial organizations globally. The total consolidated assets of Barclays are valued at about $901 billion, which makes it the 11th largest banking organization in the world. Barclays has a staff of over 75,000 employees in more than 60 countries, which enables it to provide its services to over 18 million clients (Aldrich & von Giebler 2003, p. 18).
Business environment
The economic environment for financial organizations is dependent on various aspects. The business environment for Barclays has been fairly stable, in the last decade, due to the use of two notable systems: the cash budgeting fiscal system and the multicurrency system. In 2010, annual inflation was observed to be 3.2%. Primary industries that showed improvement in 2010 include the manufacturing sector, the agricultural sector, and mining. The financial crisis in 2008 posed considerable concerns to the banking sector, as its effect was still evident in 2010, due to the slow process of economic recovery. Basically, the economy was unable to draw in the required amounts of inflows through both portfolio and foreign direct investment (Zimnat 2011, p. 2).
In 2010, there were many inquiries on investment projects, though foreign investors were reluctant to invest because of their uncertainty on the stability of economic policies. Zimnat (2011, p.3) stated that economic policies are a key determinant in ensuring sustainable returns on investments. Economists suggest that proper assessment of the level of risk is determined by the state of foreign currency reserves, which are currently under development. As such, the process of boosting investor confidence requires a proper structure of government debt by policymakers (Zimnat 2011, p. 3).
The state of the economy affected Barclays bank in that deposits and loans had to be short term, which was necessary in order to evade the possibility of unfavorable effects resulting from mismatches. The Barclays bank in Zimbabwe, for instance, was faced with structural problems in the local banking and finance sector. These challenges included the lack of a feasible interbank market and the absence of self-regulating credit rating arrangements. The role of an interbank market is to accommodate more liability and asset products provided in the industry. Independent credit rating agencies, on the other hand, provide serenity on the status of borrowings by clients (Zimnat 2011, p.3).
Governance
Barclays bank has released its strategic plan to become one of the top five banks in the world. It seeks to reach the top by revitalizing its internet-based operations. This process involves using state-of-the-art technology that is capable of enhancing cross-channel collaboration, consumer fulfillment, and sales volumes. One of the internet technologies in use is the comprehensive ROI model. The model has enhanced the commercial view of the market, leading to optimization of the decision-making process, as well as reduced threats in IT-related investments (Barclays 2012, p. 3).
In terms of capital assets, Barclay’s bank is the seventh-largest bank in Europe. Barclays intends to advance its position by a program named T5. The implementation of this program is dependent on the 2,100 Barclays bank branches situated in the United Kingdom. The program will then seek to expand globally through investments in banking, capital, and operations. According to Barclays (2012), the program will be implemented by its workforce of over 115,000 people in more than 60 nations.
Barclays bank is proud to have a flawless record of introducing innovative services to the market. For instance, Barclay’s bank was the first financial institution in Europe to provide ATM services and credit cards, going by the brand name Barclaycard. In addition to this, Barclays was among the first organizations to extend internet banking services. This development was aimed at providing its customers with a convenient channel to conduct various operations (Barclays 2012, p. 4).
Barclays is motivated to continue expanding its e-banking services and enhancing its competitive position. The company conducts numerous researches to identify the most effective ways of advancing the opportunities presented by emerging technologies into its developing multichannel scheme that involves local branches, online banking services and call centers.
Barclays bank uses multiple next-generation web technologies to update their customers on new developments in their business operations. These technologies include podcasts, wikis, blogs, RSS feeds and social applications among others digital channels (Barclays 2012, p. 4).
Strategy
There are two kinds of activities in the value chain for Barclays: primary and secondary activities. One of the primary activities is inbound logistics. This involves the dealers who finance the operations of Barclays, such as investors in their shares. Other suppliers are the foreign investors and commercial papers. Barclays keeps its medium, and high risk suppliers close, in order to recognize any possible concerns and prepare their solutions. Barclays carries out this process by issuing questionnaires to its suppliers. The high risk and medium risk suppliers are then asked to fill the corporate responsibility survey questions, as a way to maintain relevant suppliers. The questionnaires are a significant determiner of the suitability of a supplier. As a result, information provided via the questionnaires assists in ensuring that Barclays is involved with the most appropriate suppliers and that their corporate responsibility policies are appropriate and relevant to the objectives and standards of the company (Barclays 2012, p. 5).
The second primary activity involves outbound logistics, which explore the various means that Barclays uses to reach out to the clients. The conventional ways used by Barclays include consumer loans, cards, mortgages, personal loans, branch banking and e-banking. As a way to remain relevant to the market, Barclays has sought new banking services like the Mobile banking service implemented in India.
Like other financial services providers, Barclays bank obtains its margins from various charges including interest, brokerage and fees for services offered. Despite the global financial crisis, whereby most markets are in recession, Barclays has managed to remain profitable. This has allowed it to maintain its growth rate, according to the company goals and vision. Barclays bank has various supporting activities, including firm infrastructure and human resource management. Firm infrastructure is aimed at providing clients with better service and accessibility. The installation of suitable infrastructure requires high capital, which explains the high operating costs incurred by Barclays bank (Barclays 2012, p. 6).
Trends in Microfinance
One of the developments of Barclays bank in the emerging markets is aimed at providing microfinance services to entrepreneurs in both small and medium enterprises. An estimate of the size of this market in 2004 showed that there are over 600 million potential clients who seek financial services from other financial institutions besides banks. These institutions include “postal savings banks, agricultural and development banks, financial cooperatives and credit unions and specialized rural banks” (Barclays 2012, p. 7). With the aid of its supplementary financial institutions, Barclays intends to capture these markets in its global growth strategy (Barclays 2012, p. 7).
The commercialization of Microfinance, combined with support from the World Bank and United Nations, has managed to extend their services to the masses as agents for both banks and insurers. The microfinance group focuses on the sale of financial packages to diverse markets including urban and rural populations, which allows financial institutes to serve as aggregators through the provision of securities. The challenges faced by MFIs include redundancy of tasks, expensive operations and problems in the transfer of functions from the institution to the bank employee on the ground. Consequently, MFIs need to focus on capacity building, credit rating and access to wholesale financing in order to be profitable and sustainable (Aldrich & von Geibler 2003, p. 26).
Barclays has a good association with microfinance institutions, investors and other networks, that work together as either partners or clients. The Barclays microfinance group, for instance, operates various businesses on behalf of Barclays bank. It handles product groups that provide leading MFIs and their customers with multiple services including “financing, capital markets, transaction services, hedging, saving, remittances and insurance products” (Aldrich & von Geibler 2003). Through the provision of financial services, Barclays bank has managed to develop domestic markets in developing nations at an affordable cost. The bank also intends to increase its activities through more collaboration with rural banks and SMEs by extending its direct investment in MFIs (Aldrich & von Geibler 2003, p. 27).
Organization and business performance
Financial profits
Barclays bank made the decision to enhance its global performance in 2003 in order to accelerate the growth in shareholder value. The decision was also aimed at improving the bank’s capacity to serve consumers in various types of markets around the world. Barclays, which has been in operation for over 300 years, recorded its best performance in 2006. The bank’s net profits were at 35%, causing the earnings to increase by 35%, and dividends per share to increase by 17%. These gains were mainly as a result of improved performance in retail banking business, investment banking business and commercial banking activities. In 2003, 75% of the bank’s profits came from the UK alone, but in 2006, its international operations contributed over 50% of its profits. This increase is due to its aggression in capturing emerging markets, as seen in the acquisition of South African bank Absa, in its pursuit of the African market. In 2003, Barclays bank made the decision to assess all possible mergers, whether big or small, in order to transform the company into a unified global enterprise, irrespective of the diverse operations from one country to the other (Varley 2007). Some of the principles that guided the decision to accelerate global operations are discussed below.
Setting a vision
While Barclays was well recognized as a global financial services provider, its portfolio was excessively rigorous in the UK, causing the customers to be weary of doing business in other countries. Consequently, Barclays decided to earn, invest and grow, by diversifying their business operations base and intensifying the retail and commercial banking operations in other countries. Barclays also decided to increase its international businesses such as “Barclays Capital, Barclays Global Investors, Barclays Wealth and Barclaycard” (Varley 2007). Barclays Capital is involved in investment banking, while Barclays Global Investor handles asset management. Barclays Wealth, on the other hand, deals with private banking, while Barclaycard handles credit cards, insurance products and loans. The process of development has been a challenge, due to the need to maintain profitability, to ensure confidence of its shareholders, while investing for future growth. As a result, Barclays bank implemented its strategy by ensuring a balance between the requirements and needs of the employees, the communities it serves, and its clients (Varley 2007).
Using a global banking model
Barclays bank has a diverse set of customers, ranging from individuals with mortgages to corporations operating in dissimilar tax systems. This led to the need to enhance the delivery of services across internal boundaries by enhancing synergies between and within its divisions. Four divisions were merged to form two units. The first unit comprised the global retail and commercial banking divisions, while the second unit comprised the investment banking and investment management divisions. Adopting a global model allowed more customers to conduct more businesses with Barclays. For instance, the investment of Barclays bank in one online interface allowed consumers to watch over their investments, mortgages, credit card accounts and bank accounts collectively. In addition to this, Barclays bank reorganized its management structure by reducing its executive committee to five people, which previously comprised ten members, and distributing operations, in order to allow decision making at the local level (Varley 2007).
Development of focused points
This allowed for the combination of various divisions to form strategic control and direction in meeting the collective needs of consumers. IBIM is one example of such arrangements. IBIM is a combination of investment banking, asset management and wealth management. With such combinations, it was easy to use the know-how from one division to boost developments in another division. For instance, the first two divisions were found to be vital in optimizing wealth management. Another cluster in Barclays is GRCB, which combines global retail and commercial banking divisions (Varley 2007).
Implementation of a community-based agenda
Barclays identified their ability to add value to their customers through the provision of quality advice and innovation. This was achieved through the development of balance between the advancement of skill within the company and careful recruitment from outside the organization, by advancing talent through empowering the human resource processes.
Prioritizing customer relationships
Barclays has revisited its relation with customers in order to ensure that they are a valuable and dependable financial service provider. Through the evaluation of the bank’s association with its clients, Barclay was able to know the ease with which customers access their services. Barclays measures its customer service by issuing surveys to clients and employees. Other techniques to investigate customer service include “mystery shopper visits to retail banks, complaint volume and market share metrics, league table standings, and tracking of community engagement programs” (Varley 2007).
The decisions of Barclays bank are based on the results obtained from the stated evaluations. Consequently, the actions taken by the bank lead to various behavior patterns by the employees. As such, employees are required to be in touch with the clients, both directly and indirectly, in order to foster a customer-focused ethic in the organization (Varley 2007).
Case of Barclays Capital
The best illustration of improved performance due to strong leadership and proper organizational structure is in the case of Barclays Capital, which was named by IFR as the Bank of the Year in 2011. This title was awarded due to its rapid growth amidst the European sovereign debt crisis, under the leadership of group CEO, Bob Diamond. Barclays Capital was able to maintain its performance in global debt underwriting, while competing for business in new territories. The success of Barclays Capital is attributed to various factors including a transition in its management through the appointment of Bob as the group CEO, which was a significant contribution in the successful integration of Lehman Brothers’ US operation in 2008. The success of the operation was due to tough decisions like the staff selection process that resulted in a headcount cut by 4,000 employees (Mullin 2011).
After the integration process and staff section process, it was time for Barclays Capital to implements its international growth strategy. This process involved hiring playmakers and getting the right people to lead various products and regions, with emphasis on international M&A and equities (ECM) (Mullin, 2011). Through its thoughtful leadership, Barclays Capital was able to handle massive deals that involved multiproduct skills and collaboration across the borders. This process involved careful evaluation of risk mitigation processes and management of the balance sheet. With its fast pace in the establishment of international ECM and equity sales and focus on DCM, Barclays Capital was able to advance its global capabilities, allowing it to profit from various kinds of businesses, internationally (Mullin 2011).
Conclusion
As one of the leading financial services provider in the word, Barclays plays a crucial part in providing is services to a variety of parties, including collaborating with governments on big projects, and providing banking services to clients in developing markets. By merging its business divisions to form two primary business activities, IBIM and GRCB, Barclays has managed to increase its growth through diversification of its profit base. As a global corporation, Barclays has also set high standards with respect to the environment by setting targets on carbon emissions and recycling of waste. The company also has a strong emphasis on upholding values pertaining to human rights in the financing of projects and provision of service to various communities. Barclays is also concerned with promoting their profile through association with other parties, like the English Primer League (Mullin 2011).
Barclays is likely to encounter some problems in the future due to the impact of the current economic situation on retail consumers and access to credit in the European and American markets. In order to remain profitable, Barclays has intensified its activities in emerging markets to balance the short falls in the UK and US markets. Barclays is also revisiting its global operations, to reduce costs where possible, and improve its competitiveness in the provision of financial services on the high street by sustaining confidence of its stock markets (Mullin 2011).
Reference list
Aldrich, T, & von Geibler, J 2003, The environmental and social impacts of ebanking: A case study with Barclays PLC Final Report, Digital Europe: e-business and sustainable development, pp. 13-41.
Barclays. 2012. Section 1: US Public Section, Resolution Plan, pp. 2-11.
Mullin, K. 2011. Bank of the Year. Web.
Varley, J. 2007. Barclays’ Global Acceleration: How one global bank successfully transformed itself. Web.
Zimnat. 2011. Audited Financial Statements for the year ended 31 December 2010, Barclays Bank of Zimbabwe Limited, pp. 1-7.