Business Strategy in Financial Industry - Challenges, Differentiation, and Strategic Planning

This report covers strategic planning in context of financial industry, challenges of UK financial industry, strategic differentiation between wholesale banking and retail banking and also the effectiveness of strategic option model is determined.

Business strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
Define strategic planning in context of financial industry and also explain strategy fit of
organisation with various strategy definitions............................................................................3
Challenges of UK financial industry and recommend a justified solution.................................4
Evaluate the strategic differentiation between wholesale and retail financial activities in terms
of their infrastructure, operations and customer experience.......................................................5
Analyze the effectiveness and application of strategic option model through financial
organization.................................................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
The project is based on business strategy in which the scenario is given on the impact of
COVID 19 on individual and organisation. Pandemic has created a great impact on social and
economic disruption. Due to COVID 19, businesses are closed down and also the financial
organisation are reducing their branches in UK. But Amazon and Asda have earned huge profit
despite of pandemic. Amazon also decided to open a new bank which is known as I'm Bank. The
report covers strategic planning in context of financial industry, challenges of UK financial
industry, strategic differentiation between wholesale banking and retail banking and also the
effectiveness of strategic option model is determined.
Define strategic planning in context of financial industry and also explain strategy fit of
organisation with various strategy definitions
Strategic planning is an activity of determining how business should manage its financial
position in order to achieve the goals and objective of business. It is important for organisation as
it helps in identifying the strategies which helps in maximizing the market value of business.
Through strategic planning, company can ensure that their company must follow the plan in
effective and efficient manner to achieve long term and short term goals. Strategic planning
helps in creating sense of direction and also make business more durable (Anwar and Hasnu,
2016). The few components of strategic planning are mission, values, vision, SWOT, objective
and operational tactics. There are five steps of strategic planning in context of financial industry
they are defining and agreeing financial objectives and goals, gathering financial and personal
information, analysing financial and personal information, development and presentation of
financial plan and implementation and review of financial plan. Amazon have decided to open
I'm Bank in order to run financial activities and offer financial help to people. In order to run the
financial organisation, it is necessary for Amazon to focus on strategic planning as it helps in
promoting profitability, increasing presence of financial institution and improve the growth of
firm for long term and also helps in maximizing the shareholders wealth (Leischnig and et. al.,
2017). Strategic planning helps in analysing the factual information by using analytical financial
methods with qualitative and quantitative reasoning.
Strategy fit of Amazon I'm Bank
Vision:

Vision of Amazon is to be customer centric company and build a place where people can
find and discover anything what they want to buy. They focus on organisation's explosive growth
and e-commerce domination.
Mission:
The mission of company is to offer better experience to customer by using internet and
technology in order to help people to find, buy and discover anything.
Core values:
The core value of Amazon is to focus on customer experience, committed to operational
excellence, long term thinking and passion for invention.
Operational tactics:
The operational tactics of Amazon is to focus on investing in technologies, improving its
web services by fulfilment capacity, M&A strategy, securing its invention using patents and
investing in banking sector.
Challenges of UK financial industry and recommend a justified solution
One of the biggest challenge which UK financial industry is facing is Digital disruption.
The other challenge which is faced by UK financial industry are outdated technology, regulatory
compliance, exceeding customer expectation, surpassing the competition and incorporating AI
into firm.
Outdated technology:
Outdated technology is one of the challenge which is faced by UK financial industry as it
is important for I'm Bank to invest on updating technology in order to grow their business and
attract more and more people. The financial service firm must focus on investing in technology
such as workflow automation, robotics and AI technologies so that they can increase their
efficiency and decrease the cost which are associated with risk management, compliance and
operational activities (Hsieh, Ma and Novoselov, 2019). I'm Bank must focus on reducing
outdated technology as customers have new buying habits.
Regulatory compliance:
It is also a challenge which is associated with UK financial industry as there are various
regulation in financial service that increases on continue basis. Bank invest more and more
income in order to remain complaint. For running financial services in UK, one of the pressing
priority for financial firm is to compliance with UK's senior managers and certification regime.

The regulatory challenges which can be faced by I'm Bank in UK are geopolitical change,
divergent regulation, data protection and governance, operational resilience, compliance agility
and credit quality.
Exceeding consumer expectation:
Exceeding consumer expectation is another challenge in which customer expect a lot
from financial institution. Consumers generally want personalized services from their financial
institution so that they can manage their money in efficient manner (Quenum and et. al., 2021).
It is the responsibility of bank to provide advice on how to handle money as customers prefer an
analysis of their spending habits and some advice for financial issues.
Surpassing the competition:
It is other challenge which influences UK financial industry as there is robust competition
with financial service industry. Financial institution are focusing on attracting and retaining
customers so that they can compete in market for long run and gain competitive advantage.
Consumers prefer personalized services due to which it is necessary for financial firms to
provide services that improves their experience. They generally want automated services with
easier access. I'm Bank must focus on providing these services so that they can dominate their
share of market.
Incorporating AI into firms:
Incorporating AI into firms is also a challenge which is faced by UK financial industry.
By incorporating AI into organisation helps in increasing revenue and also improve the brand
image of bank. It also helps in improving customer experience, reducing cost and enhancing the
brand awareness of financial industry (Oldman and Tomkins, 2018). I'm Bank must focus on
incorporating AI into bank so that they can attract maximum customers and improve their
experiences.
Evaluate the strategic differentiation between wholesale and retail financial activities in terms of
their infrastructure, operations and customer experience
Wholesale financial activities:
Wholesale financial activities generally include the banking services which are sold to
large customer such as financial institutions, real estate developers, large corporation and
government agencies. It mainly include working capital financing, mergers and acquisitions,
currency conversion, large trade transactions, consultancy and other services. The standard bank

generally offer wholesale banking services as compare to traditional retail banking services. In
wholesale banking activities, the number of customer are few whereas the transactions are huge.
The interest rate of wholesale bank is large in order to attract funds and also the bank can
monitor and recover easily. Wholesale banking activities generally include higher risk and if
bank get dissolved its associate parties and workers also get failed. It mainly include low
operational cost as the interest cost of transaction that these financial institution carry out is low
as due to fewer transactions and customers (Baraibar‐Diez, Odriozola and Fernández Sánchez,
2017). Wholesale banking charges the transaction fees at discounted rate for consumers. It also
helps in supporting high value transactions of firms operating on large scale. The transaction in
wholesale banking are conducted with each other via inter bank markets which are separate from
consumers. The bank holders of wholesale banking generally pay whopping amount of interest.
Few examples of wholesale banking activities are loans taken to set up exporting, industry and
machinery.
Retail financial activities:
Retail financial activities mainly include the service related to consumers. Retail banking
is also known as consumer or personal banking. This type of financial institution mainly provide
services to common people rather than focusing on any industry or organization. The functions
which are provided by retail financial institutions are safety and security for general public's
money, fixed deposits, offer deposits in saving accounts, credit and loans. Bank generally offer
credit and loans on some interest value by mortgaging gold, house and property. Retail bank
stress upon small businesses and local people for earning. In order to run retail banking services,
it is necessary to focus on maintaining large network and also the amount of loan money in this
banking service is less. The customers of retail banking avail the loan at very low cost interest
rate. Few examples of retail banking activities are housing, car loans, education, etc. In retail
financial institutions, it is not easy to monitor and recover. The three important function of retail
banking are deposit, money management and deposit (Dalwai and Salehi, 2021). Retail deposits
are constitute and stable core deposit. In retail banking, there is less bargaining for additional
interest and also their interest is insensitive. The financial institution also constitute low cost
funds for banks. There are few factors which are responsible for the growth of retail banking
such as growth of middle class consumers, emerging rural market, entry of foreign retailers,

technological impact, rise in income, increase in number of working women and value for
money.
Differentiation between wholesale and retail financial activities
Basis of difference Wholesale financial activities Retail financial activities
Infrastructure The infrastructure in wholesale
financial sector is strong and
large as they offer wide variety
of services to industry and
organisation.
In retail banking sector, the
infrastructure is strong but not
as compare to wholesale
financial institution as they
only provide financial services
to consumers.
Operations The operation activities of
wholesale banking is to sold
services to large clients such as
government agencies,
corporations and other banks.
The services which are sold by
wholesale banking are
consulting, underwriting,
merger and acquisition,
currency conversion, etc. It
also conduct borrowing and
lending between institutional
banks.
The operation activities which
are included in retail banking
are offering financial services
to consumers rather than
offering to government or
organisation. Services which
are offered by retail banking
are mortgages, certificates of
deposit, credit cards, checking
and savings account.
Customer experience Customer experience in
wholesale banking have
collective experience while
interacting with various
touchpoints such as emails,
face to face interactions, social
media and online advertising.
In retail banking, the
customers are less loyal,
empowered and maintain
relations with various other
financial institutions.

Analyze the effectiveness and application of strategic option model through financial
organization
Ansoff matrix
It is also known as Product expansion grid which is used by organisation in order to
analyze and plan the strategies for growth. Ansoff matrix mainly include four strategies which
helps company to grow and analyses the risk associated with each strategy. The strategies are
market penetration, product development, market development and diversification. Through
Ansoff matrix, marketers can understand the risk which are associated while growing business.
Market penetration:
Market penetration is one of the strategy which can be used by bank as this strategy
mainly focus on selling existing services in existing market. Through this strategy, I'm Bank can
increase their sales in existing market by promoting existing products and services. They offer
banking services to its existing customer in order to motivate them (Teh and Corbitt, 2015).
Market penetration strategy helps in securing dominance in the market by increasing number of
branches in exiting market.
Market development:
It is another strategy which can be implemented by I'm Bank as it mainly focuses on
entering new market by using existing products. In order to establish the bank in new market, it
is necessary to focus on understanding the financial market of the region and then invest in
appropriately. Though implementing market development strategy, I'm Bank can gain new
customer, improve growth and also increases the revenue of bank. But it generally requires huge
investment in order to expand their business in new locations.
Product development:
Product development is also a strategy which can be used by bank as this strategy helps
in promoting new products and services in existing market. It include financial and banking
services at different rates (Ghosal, 2015). The improvement in existing services creates new
product. I'm Bank can use this strategy by offering new services to its existing customers. The
product development strategy helps in managing and measuring the success and also reduce the
cost to improve competitiveness. It also requires extra cost for bank to offer new services to
customers.

Diversification:
It is another strategy which can be used by I'm Bank in order to maximise profitability
and growth. Diversification strategy helps in promoting new services in new market. I'm Bank
can implement diversification strategy in which they have to establish their brand in new market
with new services so that they can create new customer base and gain competitive advantage in
new market (Ketels, 2015). The diversification strategy helps in minimising the risk of loss to
overall portfolio and also reduces volatility. But this strategy is complicated and also it reduces
the quality of services.
I'm Bank must focus on implementing product development strategy in which bank must
offer new services to its existing customer so that they can avail better services. Through this
strategy, bank can win business with improved performance and also improve their reputation in
market for offering high quality of services to its customers.
Rackoff
Rackoff, Ulrich and Wiseman has developed six phase planning process in order to
identify and evaluate strategic information system. It is a framework that views an enterprise's
customers, competitors and suppliers as the strategic targets of five strategic thrusts are
differentiation, cost, innovation, growth and alliance.
Supplier Customer Competitor
Differentiation Supplier generally
offer better services
and products to its
customer due to which
bank can provide
different product and
services to its
customers. It is
important for bank to
maintain healthy
relations with their
suppliers.
Customer generally
prefer different
services and products
which satisfy their
needs and expectation.
Competitor generally
bring new services and
products which attracts
people and make them
different from existing
players.

Cost Supplier generally
charges high cost for
rendering products and
services to bank.
It is the responsibility
of financial institution
to provide high quality
of services to its
customer with
reasonable rates and
charges.
In order to compete
with competitors, bank
requires huge
investment and focus
on investing in R&D
department.
Innovation Suppliers bring
innovation in their
products and services
so that they can attract
more and more
financial institutions.
Bank must implement
AI technology and
workflow automation
in order to attract more
and more customers
(Braun, Latham and
Cannatelli, 2019) .
Competitors generally
bring innovative
services for their
customer which
influence the
profitability and
performance of I'm
Bank.
Growth Suppliers helps in
increasing the growth
of organisation by
offering them high
quality services at
affordable price.
Customer play
important role in
improving the growth
of bank. It is important
to make them satisfied
with the services.
In financial industry,
the growth is high if
bank serves better
services to its
customer.
Alliance It is important for bank
to maintain alliance
with multiple suppliers
so that they can avail
products and services
from different
suppliers (Orr and
Pegram, 2017).
Bank must focus on
creating strong relation
with customer in order
to make them loyal.
Competitors forms
alliance with other
financial institution,
government and
customers.

CONCLUSION
It is being concluded from the above information that strategic planning helps in offering
solution by analysing the problem in business environment. It allows company to put challenges
into perspective. UK financial industry faces various challenges which influence the productivity
and performance of banking sector. It is necessary to overcome the challenges and run the
business in effective and smooth manner. There are two type of banking activities such as
wholesale banking and retail banking. Wholesale banking activities generally focus on
borrowing and lending between institutional banks. Retail banking helps public customers to
invest their money in different policies and insurance of bank. Further, the model is implemented
in order to enhance the growth and profitability of organization.

REFERENCES
Books and Journals
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