Business Analysis of Royal Bank of Scotland

This assignment delves into a business analysis of the Royal Bank of Scotland (RBS) utilizing Porter's Five Forces model. The analysis examines the competitive landscape within which RBS operates, considering factors such as the threat of new entrants, the bargaining power of buyers and suppliers, the intensity of competitive rivalry, and the threat of substitute products or services. The assignment leverages academic sources and online resources to provide a comprehensive understanding of the forces shaping RBS's strategic environment.

Management Report

TABLE OF CONTENTS
INTRODUCTION...............................................................................................................3
P1 Examining macro and micro environment influences on Royal Bank of Scotland.. .3
P2 Examining the capabilities of Royal Bank of Scotland..............................................5
P3 Evaluating Royal Bank of Scotland through Porter's Five Forces model..................5
P4 Evaluating the strengths and weaknesses of Royal Bank of Scotland.......................7
P5 Evaluating the opportunities and threats of Royal Bank of Scotland.........................7
CONCLUSIONS.................................................................................................................8
REFERENCES.....................................................................................................................8

INTRODUCTION
The present report is based on Royal Bank of Scotland which is one of the retail
bank of Scotland with around 700+ branches in the country and also in England and
Wales. Royal Bank of Scotland provide a wide range of banking ad insurance service in
Scotland to all whether personal, corporate and commercial customers. This include both
the traditional and modern branches which are operating on vans and having 19 mobile
branches across the country. This is one of the best banks with offering all the services in
the country and operating in all the field of bank including banking and insurance both.
As in the country it is having no direct substitute so there is very less chance of
competition to it. The report will further study the strengths, weaknesses, opportunities
and threats of the bank in the industry and conducting the PESTLE analysis of the bank.
Will also be evaluating the tough competition of the bank in the country.
P1 Examining macro and micro environment influences on Royal Bank of Scotland.
The environment generally consist of micro and macro factors' where the major
impact will be on the operations of Royal Bank of Scotland. The bank in UK is one of the
strongest financial system in the country at present and the micro environment is always
favourable for the organisation. But the financial crises of 2008 of USA has created a
major problem for Royal Bank of Scotland and there was a liquidity problem. There has
been a rapid expansion of Royal Bank of Scotland in the global market after in the
country itself (Dwyer, Čorak and Tomljenović, 2017). The government of Scotland is
owing about 70% of the total property and the business of the bank. Both the micro and
the macro factors have a large effect on Royal Bank of Scotland over the past few years
globally. The development of Royal Bank of Scotland has been mostly depended upon
the aggressive expansion strategy of bank over the past few years. Both the micro and the
macro factors always effect the growth and development of Royal Bank of Scotland.
Micro factors include: employees, management, policy, products and service provided by
the Royal Bank of Scotland. Whereas, macro factors include: customers, government,
economy, technology and the society.

PESTLE analysis:
 Political- the Brexit uncertainty is one of the political factor which will influence
the growth of Royal Bank of Scotland (Shen Zhang and Zhang, 2017) applied on
the profits.
 Economical- because of Brexit the Bank of England forced Royal Bank of
Scotland to lower its interest rates by 0.5% which effect the profitability.
 Social- as major part of the UK's population is above 60 who majorly prefer
saving then investment which will hamper the bank's wealth management.
 Technological- the use of biometrics, technological advancements and robotic
automation is rising Royal Bank of Scotland.
 Legal- in 2008 there was mis-selling of the mortgage bonds which cause financial
crisis cost to Royal Bank of Scotland which was about $4.5 billion. And in the
year 2016 it further paid $1.1 billion to US National Credit Union Administration
Board.
 Environmental- the use of low carbon and resource efficient in the future is very
important in the banking reformation.
P2 Examining the capabilities of Royal Bank of Scotland.
 The Royal Bank of Scotland is having the capabilities to grow in the market as it is
expanding the operations to other countries as well.
 The use of technology is very well seen in the bank (Larivière and De Keyser,
2017). E banking and mobile banking is growing in the banking sector and this is
also used by Royal Bank of Scotland.
 The revenue earned by Royal Bank of Scotland in the year 2016 was about
£12.590 billion which is also one of the major capabilities.

 Royal Bank of Scotland is one of the largest commercial bank in UK and is still
growing with diversified business profile
P3 Evaluating Royal Bank of Scotland through Porter's Five Forces model.
Porter Five Force Model
This model is applied in order to assess the banking industry so that driving factor
for RBS can be identified.
1. Threat of Substitute (Low): It is evident that there is no direct substitute to a
banking product and the only option left with individual is either to save or invest.
For the same, it can opt for National Saving centre or related which can affect the
sale of banking sector (Leonidou and Palihawadana, 2017). This signifies that
RBS has low threat from substitute product.
2. Extent of Rivalry (High): There is high rivalry among existing banks and each are
striving to attract more of customers towards it. Banks like Barclays, Lloyds,
HSBC, Standard Chartered and others are competing by offering similar products
at competitive rates.

Illustration 1: Porter's Five Force Model
[Source: Porter's Five Force Model, 2017]
3. Threat of New Entrant (Low): Since, entering into banking sector requires huge
capital and infrastructure. Also, company prefers less to enter into developed
country like UK and therefore this force has low impact on the banking sector
(Thirumalai and Senthilkumar, 2017). Also, due to recent financial crises, no big
brands are planning to entering into this volatile market.
4. Bargaining Power of Supplier (Low): It is evident that there is no direct supplier
to RBS bank as they run the business by converting saving of customers into
investment. Due to this factor, it can be state that there is low bargaining power of
supplier.
5. Bargaining Power of Buyer (High): Since, there are large number of competitors
available in banking sector which makes wide range of options available for the
buyers. Also, banks cannot force the individuals to buy particular set of products
and therefore this leads to high bargaining power of buyer. It is evident that buyer

can shift to another bank if they find better options and benefits (Shmueli and
Lichtendahl, 2017). Due to this factor, it is required that RBS must formulate wide
range of products and services in order to meet the needs of diverse customers.
P4 Evaluating the strengths and weaknesses of Royal Bank of Scotland.
Strengths:
 Digitisation is the main strength as the use of mobile banking system i.e. bank on
wheels is the famous one.
 The high growth in mortgages and reduced in balance sheet.
 Royal Bank of Scotland is the part of UK's largest banking group including HSBC,
Lloyd's and Barclays.
Weaknesses:
 Since the financial crises of 2008 Royal Bank of Scotland was not able to grow or
make profits and contributed to a loss of £7 billion.
 Royal Bank of Scotland is still needs to resolve the issue of European Commission
state aid and the sell off Williams & Glyn (Chan, Ngai and Moon, 2017).
P5 Evaluating the opportunities and threats of Royal Bank of Scotland.
Opportunities:
 In improving the growth and customer service quality digitisation is the best
opportunity which can lead to growth.
 The increasing demand of housing finance in UK has increased the growth of
mortgage lending to expansion of market share.
Threats:
 Britain's exit from the European union is the major threat to Royal Bank of
Scotland as the whole strategic need to formulated which can hamper the working.

 There are also legal penalties by the US department of Justice on the Royal Bank
of Scotland and the regulatory pressure which also include the new capital
requirements (Kasemsap, 2017).
CONCLUSIONS
It has been concluded from the above report that Royal Bank of Scotland is the
largest bank of UK with the largest number of market share in the banking and insurance
sector. The major strength of Royal Bank of Scotland is the diversified business profile of
the bank as is dealing with almost all the personal and commercial products. Royal Bank
of Scotland is also the digitally leading bank of UK with all its banking facilities through
the online banking channels. But after Britain announced its exit from European Union
till 2019 Royal Bank of Scotland is not able to grow at a faster pace and there are also
many future challenges for it.

REFERENCES
Books and Journals:
Chan, A. T., Ngai, E. W. and Moon, K. K., 2017. The effects of strategic and
manufacturing flexibilities and supply chain agility on firm performance in the
fashion industry. European Journal of Operational Research, 259(2), pp.486-
499.
Dwyer, L., Čorak, S. and Tomljenović, R., 2017. Introduction. In Evolution of
Destination Planning and Strategy (pp. 1-14). Springer International Publishing.
Kasemsap, K., 2017. Mastering business process management and business
intelligence in global business. In Organizational productivity and performance
measurements using predictive modeling and analytics (pp. 192-212). IGI
Global.
Larivière, B., Bowen, D., Andreassen, T.W., Kunz, W., Sirianni, N.J., Voss, C.,
Wünderlich, N.V. and De Keyser, A., 2017. “Service Encounter 2.0”: an
investigation into the roles of technology, employees and customers. Journal of
Business Research.
Leonidou, L.C., Christodoulides, P., Kyrgidou, L.P. and Palihawadana, D., 2017.
Internal drivers and performance consequences of small firm green business
strategy: the moderating role of external forces. Journal of Business Ethics,
140(3), pp.585-606.
Shen, L., Zhang, Z. and Zhang, X., 2017. Key factors affecting green procurement in
real estate development: a China study. Journal of Cleaner Production, 153,
pp.372-383.
Shmueli, G., Bruce, P.C., Yahav, I., Patel, N.R. and Lichtendahl Jr, K.C., 2017. Data
Mining for Business Analytics: Concepts, Techniques, and Applications in R.
John Wiley & Sons.
Thirumalai, C. and Senthilkumar, M., 2017, February. An Assessment Framework of
Intuitionistic Fuzzy Network for C2B Decision Making. In Electronics and
Communication Systems (ICECS), 2017 4th International Conference on (pp.
164-167). IEEE.

Online
Porter's Five Force Model, 2017 [Online] Accessed through
<https://www.google.co.uk/search?q=Porter
%27s+Five+Force+Model+of+Royal+Bank+of+Scotland&source=lnms&tbm=isch&sa=
X&ved=0ahUKEwio_rWA_bPXAhUiTY8KHaYFAp0Q_AUICigB&biw=736&bih=777
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