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5.3.3 Company Analysis

Company analysis places the focus on the internal life of a bank—what are the bank's strengths, where is there improvement potential? The main goal here, too, is the permanent economic success position—from this perspective, from the ability of a bank to concentrate a unique and inimitable combination of resources into defensible core competences (Ru¨hli 1994). Future-viable core competences are those that are anchored in the company culture and developed from the inside through organisational learning. They cannot be easily acquired by competitors, but instead must be developed independently by means of an organisational learning process. Due to their uniqueness they are very difficult to imitate and help the bank to gain a noticeable competitive advantage, as customers recognise the benefits and therefore avail of the service (Prahalad and Hamel 1990).

5.3.4 Strategically Relevant Key Elements for Banks' Business Models Key Trends

In recent years, pressure has grown from the EU and the OECD for greater transparency in designing business models. The reason for this is the combating of tax evasion, in order to improve the financial situation of all states, which has become more precarious as a result of the various financial and debt crises since 2008, by raising the tax base. One element in this is the ever more rigorous regulation of banks at European and gradually also international level, as the digital age has also substantially increased transparency—even in totalitarian states like China (see Tagesanzeiger 23.01.2014). The growing regulation costs are increasing the cost structure of the banks to a very large degree.

Globalisation also influences banking: financial markets are facing rapidly growing competition. National financial system have become global financial systems to an extent, which leads to easier comparability between bank services and the competitive dissolution of regional monopoly positions. Structural differences between national systems are balanced out. Furthermore, the individual lifestyles of many wealthy private persons have changed, resulting in greater international mobility and international diversification in property and company holdings. This increases the need for international tax advice and special services, which are being included more intensively in international legislation.

Finally, the technological developments and the informed customers of the digital age, also known as “digital natives” or “Generation Y”, form the core of the pressure of change generated from the environment. The point in time of convergence can be anticipated from the developments observed—as soon as the “digital natives” form the largest customer group, traditional business models will become obsolete. A gradual and yet rigorous reorientation is absolutely necessary.

Until now, financial institutes gathered information into knowledge, which then informed the financial services and thus created additional benefits for all parties. The price of this service was justified by the more efficient allocation of means and the lower transaction costs for the customer in acquiring and processing information, thanks to the support of the intermediary. In the past there were information asymmetries in the retail banking sector, both between the provider and the customer and between different customer groups with regard to the quality of information on investment opportunities and risks.

With the reduction in search and information costs, accompanied by an increase in the availability of information, the bank has lost its information advantage. Customer are less and less willing to pay for this kind of intermediation. The physical distance between provider and customer is also being overcome technologically. The cost to a customer of switching banks is sinking, which leads to diminished customer loyalty. New providers can operate on the market with lower costs and more efficient processes thanks to slimmer structures and thus exert pressure on the classic providers of financial services. The previous strategic positioning of each banking provider erodes successively. These days, customers are very well informed—increasingly, previous price/performance configurations are no longer competitive enough, and margins are sinking. Environmental Analysis

The negotiating and market power of customers has grown in the digital age. There is increasing threat from potential substitute products, and new competitors are entering the banking sector, thus intensifying competition between current rival companies. Competition is being led increasingly by price, which has triggered a downward price spiral. It is becoming ever more difficult to protect unique offers; average profits are declining. The greatest advantages of the internet—comfortable access to information and easier interaction—make it difficult, at the same time, to convert them into profit. Porter (2001, p. 69) thus speaks of the paradox of the internet. Company Analysis

The central objects of examination in company analyses are core competences. Scha¨li (1998) studied core competences in banking and discovered that they arise from a value-creating combination of knowledge, human, technological and material resources. Image focussing, customer care, the customer loyalty structure, information transfer and the use of technology fulfil all core competence requirements (Koye 2005).

• The image of a bank is determined by the combination of its market presence and its corporate culture. Thanks to constant discretion and reliability, banks have created institutions with a positive image for customers. The image has become the expression of the corporate culture as a result of company-specific processes, some of which have lasted for centuries. To maintain this image, employees in customer care must constantly exceed the expectations. Added value can be generated from the image factor through good advice, because this increases the credibility of the bank in the eyes of the customer. Image is also of key importance for competitive advantage, as the basic products and services of asset management are in principle interchangeable. The subjectively perceived customer benefit and the resulting willingness to pay a higher price are often based on the image of the bank.

• The customer care approach chosen by the bank consists of focussed customer segments, determining customer needs, coordinating marketing instruments (service, pricing, products, distribution) and deriving a clearly defined consultation and product package. Implementing such a customer support approach requires analytical, segmenting and differentiation skills, so that the selected customer segments can be served with differentiated offers. As each institution has an individual customer and employee base, the competitive starting position of each market participant is different. Value creation can be improved by the targeted use of company resources, because customers then receive services that meet their needs and the intensity of support is adapted to the customer potential and profitability. Ideally, customers will believe that the services and conditions offered have been tailored precisely to their expectations and needs, leading to high satisfaction.

• Customer loyalty structure, or relationship management, is the ability to build

customer loyalty by means of providing support in a service-oriented corporate culture. On the one hand this reduces customer losses, and on the other hand a good service improves internal cooperation and resource usage. Both activities have a positive effect on value creation. While measures such as the poaching of advisors or the adaptation by competitors of customer loyalty strategies might be conceivable, the implementation of an excellent relationship management system requires a lot of time and management effort, which makes it almost impossible to imitate comprehensively. The competitive advantages that arise from the recommendations of satisfied customer is the basis for market success.

• Information transfer is also a core competence of the bank. Added value arises from the professional exchange of information and the transfer of information across all adequate channels. The knowledge of specialist departments (portfolio management, law, taxation, pensions, insurance solutions, etc.) is pooled and passed on to the customer advisor or PFM, who then passes it on to the customer in a tailored package. A contribution can be made to value creation by choosing the most efficient organisation of the information chain. The efficiency assessment also encompasses a review of the cost-oriented outsourcing of individual parts of the information chain.

• The use of information technology plays a decisive role in the structural development of banking. Early assessment of the potential of new technologies and their rapid integration must occur in parallel with the willingness to adapt or redefine existing business processes. Prior to the digital age, technology was a merely supporting element in customer communication, decision-making and process optimisation. The digital age has opened up new forms of market processing for banks; it includes semi-independent transaction processing by the customer and allows the provision of costand needs-oriented offers as well as an optimised use of resources.

Competences that do not fulfil all requirements are not core competences. For example, a conditions policy might be related to value creation and it may contribute to a consulting concept by being directed towards a certain target group, however it can be imitated very quickly and therefore cannot achieve a competitive advantage in the long term. Equally, the product range can also be copied quickly. Management systems, promotion systems and organisational structure are basic operative prerequisites for a successful business. Employee training is an operative measure to anchor the core competence of information transfer. Performance and existing customer base are the results of the core competences customer care and information transfer.

In the digital age, core competences arise from collective organisational learning as an optimum combination of different resources and the integration of different technologies (Prahalad and Hamel 1990). In the future, knowledge, brand and image will be the decisive competences; IT competence will once again return to being a mere “enabler”. This can—and must—be used profitably in combination with the other core competences by developing problem-solving expertise, for example along the configuration of online and offline sales channels, as demanded by the customer, and also with regard to the perfect analysis of existing data on customer needs, as well as the provision of the optimum information portfolio for customers.

Due to the rapid rate of change, knowledge-based resources would appear to be best suited to adapting dynamically to the challenges of the digital age, as they can learn from and react to environmental changes (Miller and Shamsie 1996). Employees' educational levels therefore offer the best chances, while the brand and the image are also rare resources in the digital age, which are difficult to imitate (Hall 1992). The core competences of customer care and loyalty need to adapt to the new regulations and to changed customer needs. For this reason, the highest priority should be given to identifying future customer needs and attaining the best position in the value chain (Geiger 2000). It is essential to utilise segment-specific knowledge when using various different sales channels for the purpose of establishing contact. To maintain customer relationships, or to build new ones, the brand and the image of the company are very important. If established providers miss important developments and no longer meet image expectations, opportunities arise for competitors. However, if a company manages to harmonise the component of trust with the need for modernisation in the digital age, it supports its image and brand and therefore continues to have future-viable and difficult-to-imitate successful resources at its command. In terms of image, the long-established attributes of trust, security and reliability continue to play an important role in the digital age— however under new conditions in the “critical mass systems”. These attributes are supplemented by the imperative competence of adding partial performances to networks in the digital age.

The use of technology as the foundation of the information transfer from the bank to the customer is a central prerequisite of success. While information cannot be equated with knowledge, technology is changing both the economic basis and the production and distribution foundations of banking, therefore either questioning the previous core competences of information transfer or dismissing them completely. The physical distance between providers and demanders is being overcome technologically, so that it no longer seems necessary to maintain a branch-office structure, which in turn leads to reduced customer loyalty (Llewellyn 1999).

Due to the possibility to rapidly imitate innovative technological systems, the use of ICT (information and communication technologies) is a necessary, but not entirely sufficient condition of long-term success. Thus the combination of resources into a customer-centred approach, which is also optimised for Web 2.0 or 3.0, is probably the most decisive core competence.

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