MANAGING STRATEGY OF ROYAL BANK OF SCOTLAND (RBS)

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2010Submitted by,

Course: MBAKCB ID: 5150877

ABSTRACT: 

In the year of 2004, RBS (Royal Bank of Scotland) was the 2nd largest bank in the United

Kingdom and in the Europe. And also ranked as the 5th largest in the whole world. RBS

strictly and aggressively followed the self extension policy to be diverted. In the latter half of

the 20th century it has ventured in the US and in the Hong Kong markets.

There are two confusing terms, Royal Bank of Scotland Group (RBS Group) and Royal Bank

of Scotland (RBS), while the first one is the parent of the second one.

RBS Group is the largest banking group of the Scotland and the earlier peak has seen by the

second largest in the UK and in the Europe and the fifth position in the globally by the market

capitalization. Forbes Global 2000 defined it as the 10 th largest company in the world. The

head offices of the group as well as the clearing bank are located at St Andrew square,

Edinburgh. Queen Elizabeth II has opened the banks new head office in Gogarbum,

Edinburgh.

Royal Bank of Scotland plc is comprises of the retail banking subsidiaries of the Royal Bank

of Scotland Group plc, Natwest and the Ulster bank. Equivalent society was set up the

investors in the failed company of the Scotland to get a protection of the compensation they

have received as part of the arrangements of the 1707 acts of the union. Equivalent society

then became the Equivalent Company in the 1724 and then the new company has wished to

move into the banking. The British government has received the request and the result is the

birth of Royal Bank of Scotland (RBS) in the year of 1727. Archibald Campbell, Lord llay

was the first governor.

RBS provides branch banking facilities throughout the England and Wales through the

branches in larger cities and towns. The Royal Bank of Scotland, Royal Bank of Scotland

Group is separated from the banks based in the Edinburgh, Bank of Scotland.

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DESCRIPTION OF BUSINESS

Markets & Global Banking

The major financial corporations and also the financial institutions throughout the world are a

leading partner of this. This also provides a great range of the debt and the equity financing

system, investment services and also the risk management to the customers. In the year of

2008 the division had been in four organizational principle business line; rates, currencies and

the commodities.

Global Transaction

It has been ranked among the top five for the service providers that offers the global

payments, the management of the cash and the liquidity and also the trade financing. It also

involves the including of the Group’s money transmission activities corporately in the United

Kingdom and also in the United States.

Retail and Commercial Banking (RBS UK)

The components are retail, corporate and the commercial banking and the wealth

management services. A number of channels it uses for its operation that includes online,

fixed and in mobile telephone service and also through the spread of networks of the ATM

booths and branches in the United Kingdom. More than 15 million personal customers of the

RBS, UK are being served through the RBS and NatWest brands. They serves a full length

range of bank related offers, products and it is related to the finance oriented services,

mortgages, Bank assured products, depository accounts, credit and debit cards etc. A market

shares that are in leading position across the Businesses, Commercial and Corporate sectors

are hold by the RBS UK. Full ranging of banking is distributed by it, risk management and

financial services etc are also distributed through the network of relationship managers.

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Retail Banking (Europe and Middle-East) and Banking (Commercial)

It composed of Ulster Bank and the combined groups are engaged in the retail banking and in

the commercial business in the Europe and in the Middle-East. Financial services in the

Ireland are provided by the Ulster bank. The retail banking of Ulster has networked branches

that operate the commercial, personal banking and also the sectors related to the wealth

management.

EXPANSION IN THE SCOTLAND

First branch of the bank has opened outside of the Edinburgh in the year of 1783 when at the

same time the first Glasgow branch has opened. Later branches have opened in the Dundee,

Rothesay, Greenock, Port Glasgow, Rothesay and in leith in the early 1800s. In 1821, this

bank had changed the head office from Edinburgh to the Dundee mansion. The banking hall

had been using it like a branch of the bank while the Dundee Mansion remains the bank’s

registered office.

Responding to failing institutions the bank pursuing mergers with the other Scottish banks

after the 19th centuries. By the 1910 the bank had raised its branches to 158 and at about 900

staffs. Merging with the NCBS (National Commercial Bank of Scotland) in 1969 had made it

as the largest clearing bank in Scotland.

EXPANSION INTO THE ENGLAND

In the latter half of the 19th century RBS has been expanded its growing business in the

greater England based in London, as the largest financial center of the world. 1874, when the

first branch of the RBS has opened in London but the English banks have prevented its

further expansion in England and the Scottish banks has also decided to stop their extension

in the England. An agreement was set up where the English banks can not expand their

business in the Scotland too. Although the agreements were remain in place until the 1960s

but cross border acquisitions in a various way were gotten permission.

After World War 1, the plans of expansion were resurrected by the RBS in the England after

acquiring various small English banks like Drummonds Bank -1924, William Deacons Bank-

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1930 and Glyn, Mills & Co in 1939. The latter two’s had merged in the 1970 and formed

Williams and Glyn’s Bank, after that it rebranded as the RBS in the 1985. The financial crisis

in the year of 2007-09 unveiled the plan of RBS retail business in the England and in

Scotland too.

BANKNOTES

Until the mid of the nineteenth century private banks were permitted their own notes in the

Great Britain and in the Ireland and the moneys issued by the Scottish, English and Welsh

respectively. But Bank of England was gained the monopoly status in issuing the bank notes

in the England and in the Wales while the Scottish banks retained their right to issue one

banknotes till today. RBS, Clydesdaly bank, Bank of Scotland are printing their own

banknotes still now.

Banknotes issued by the Banks of the Scotland circulated in a wider way and used in the

payment basis in the Scotland, also in the rest of the UK. It is mentioned that the note money

(printed in the paper) has no tender legally in the Scotland though it is issued by the Bank of

England.

BRANDING

As a means of branding development for the Bank the RBS had merged with the NCBS

(National Commercial Bank of Scotland) in the 1969 and the groups logo had taken the

symbol of 4 inward pointed arrows which were expressed as the ‘Daisy Wheel’ that’s basis

was on an agreement of Coins of 36 piles in a 6x6 square area that represents the

accumulation and also the concentration of wealth of the RBS (Royal Bank of Scotland)

group. The Daisy Wheel logo that was adopted later by the subsidiary banks of the RBS like

the Ulster Bank in the Ireland, Citizens Financial Group in the US.

The brand has moved later in the 2006 to refer the both group brand and also its Banking

brand associated with the retail sector as the RBS (Royal Bank of Scotland) in lieu of using

the initials RBS. This intention was adopted as to support the position of the banks as the

player of the global service as the opposite of its root as that of a national bank. However,

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alongside the RBS initial, Royal Bank of Scotland is still in use and are seen on the bank

signage.

OPERATIONS (MANAGEMENT)

Royal bank of Scotland continuously improve itself to remain the improved ranking status as

it can enhance the material-management in company and also to improve its human resources

too.

Manufacturing division: It deals with the routine banking functions e.g.; account opening,

cheques clearing; paper works etc and acts as the powerhouse of the company that provides

techniques, processing in high volume in the customer facing division. Thus it can be defined

as the basic means of transforming of resources to a quality outcome. Mechanistic nature and

predictable output of production process that is in high quantities produces the manufactures

with successive results in consummated employees that possesses a minimal set of perfect

skills.

Analysis-Pareto is applied to give priority and also to reduce the costs of office consumables.

Wealth management division: Royal bank of Scotland has seven customer facing divisions.

From them the wealth management division offers the specialized banking, security

brokerage, investment options, and financial advisory services to the clients who are wealthy

as the name lies in the name of the division. Private banking that is a specialized in a higher

way and also seeks for unique attention in personally as to meet growing demands of the

customers or the clients with their defined needs.

Job shop:

Of one kind, service oriented personalized, practice regarding the operating system can be

clarified in this category. Proficient human resources get ability to get a view of each of the

situations in direction of their self-requirements.

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RBS has a number of diverse ranges of functions as a financial group. The stated two,

Manufacturing management and the Wealth management has its own high standard and high

management skills that can easily meet the capacity of maximization. The high quality

assurance is mandatory to meet the growing customer expectation and the capacity planning

is also a pre-requisite to minimize the cost as well as to maximize the quality levels,

reliability etc.

We can show the service quality factors by the diagram below:

The RBS has adopted several occasions by estimating the capacity needed. The quantitative

theories that have been applied like the Optimization and the Forecasting.

Optimization theory: This is a technique to meet objectives according the limitations of

requisite or the existing resources. Royal Bank of Scotland has maximized its potential of its

staffs existed by the segmentation of them in the manufacturing division that deals with the

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account openings, cheque clearings etc. or in the branches that is based on the aptitude tests

that had drawn on them.

Forecasting theory: This is the part of the operations management that mainly relates with

the labor efficacy and with the requirement, its outcome, efficacy in process and the material

utilizing. Efficiency in forecasts depends on the research orientation market and the expert’s

advices. RBS (Royal bank of Scotland) is one of the prime banks to adopt the technical

power, growing popularity, online launching and telephony banking services.

MARKETING (MANAGEMENT):

RBS has understood the nature of diversification of the growing and competitive market by

using distinct techniques and fulfilled its requirements for the market segmentation.

In the period of 1992-1999 a term was used, ‘Project Columbus’ where management of the

Royal Bank of Scotland and this term brought a customer segmentation to the three main

classes, involves in:

1. Retail,

2. Commercial and

3. Corporate.

The intention was to find out the groups of the customers with their similarities need as they

can be served under the adjacent group in a more efficient way. RBS has also created eight

customer facing divisions under these segmentations. This sort of market segmentation as

well as the customer segmentation has brought the opportunity to determine the right

marketing mix, understanding the competitors in each of the sectors and also had provided

valuable guidelines for the future marketing strategy and allocating resources.

Brand loyalty - the term is used as the extension of the brands to target the customers to it.

The RBS when makes an acquisition, they maintain the original identity. This restrain the

customer from being to learn about the new bank rather then remember the previous than the

previous identical one. This sort of banking strategy doesn’t harm the smooth business

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system and the customers continue as they are and benefitted with the added facility and

maintenance of the world famous RBS. While the RBS acquire new branch or banks or even

merge with another one, they maintain the same identical website (www.rbsdigital.com) at all

times. So the acquisition, mergers or any other changes doesn’t reflect any of its banking k

policy and the customers are similarly benefitted. Other mentionable strategy is the

Innovation that has been a part of the RBS’s marketing design and this involves with the

telephony financial services. For this service they provide some hotlines (direct lines) and

banking are done by over the phone.

For better service and potentialities, the RBS has changed their strategic way from

mechanistic to the organic. This means that the services are broaden to the customers by their

live participation. In this way the bank has made it simple, easy and friendly with the

customers and tries to find out their needs. Banks also can easily motivate the customers to

their other products as in this policy customers is the main participant. The open

communication between the staffs and customers are established and to maintain a

satisfactory relationship between the staffs and to improve them, general meetings are held

regularly. In this meetings they are guided how to offer better services and how to inform

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them of the products of the banks etc. The relation between the staffs and the management

are kept in a better way.

The RBS emphasizes on marketing as its organizational orientation while views the

customers satisfaction as most effective way to achieve the objective objectives of that

organization.

ANALYTICAL STRATEGY OF THE RBS:

We can define the analytical strategies in the following sectors,

APPROACH (GLOBAL): RBS is trying to widen its network worldwide and therefore,

they are developing their framework. They are in the process of resolving the issues in

entering the saturated North American Market. The organizing structure that are changing

day by day making it suitable to enter the global with its new approaches and technology.

ADAPTATION TO THE NEW TECHNOLOGIES: internet, telephone are the most

appreciable approaches for any company and in its growing nature. Therefore, the adaptation

in it is mandatory. The RBS are therefore, are in a peak level of adaptation to the new and

modern technologies such as Internet banking, e-commerce, telephony service etc. They have

already developed these strategies in it and are in service for a long time. www.rbsdigital.com

is their best and applicable approach to the growing global market.

IMMACULATE REPUTATION: RBS that is furnished with its heritage, name and fame

and also with its recent success in banking industries. The RBS are therefore, enjoys the

status elevated in common public eyes of the European communities.

APPROACH (ORIENTED TO THE CUSTOMERS): It has been previously stated that

the RBS has changed its motive from mechanical to organic where customers are benefitted

in the branches over the counter by human being. So the customers can easily demonstrate

their problem in a easy way and can get a good advice and solution with ease. So these sort of

approach has brought fortune for the company in recent economy.

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OPERATING ENVIRONMENT:

This is the dealing with the competitors, the creditors, the labors and also with the suppliers.

Thus it can be defined as the competitive environment too. From the term name it can easily

be assumable that its dealing mainly with the competition in the socio-economic market. The

dealings include, market shares, products range, sales, competition in prices, promotions,

reputations, productiveness, positions in finances, qualities and the staff efficacy’s. all of

these can be easily explained with the help of PESTEL theory.

Thought the entry into the financial market is really competitive as it is high capital intensive,

the RBS has its customer oriented strategies and applied modern technologies that made it

successful and growing entrance in the global capital market and made it distinct from its

counterparts. They are highly respected in the European banking sector due to its heritage and

modern strategies. RBS is very much experienced with strong branched networks and

distributed channels and also a growing proportion of the acquisitions. All of these factors

stated above made it simpler to enter into the global market easily.

Though it seems that the RBS is emerging day by day, it should also be noted that it also

faces threat from the modern growing information technology as others also implementing

the same for their existence and therefore, it also facing threat from other financial investors

too. But in other sense, RBS is quicker in adopting with the new technologies and its quick

implementation brought its opportunity to enter the global financial market with winning

competition. The higher customer satisfactions, online services, are added extra.

Merging of the branches is the other factor that influences the competition in growing capital

market too. As because at an average, the merging is taking places in different places

everyday and after that new competitor is creating and becoming a challenging one for the

RBS. RBS is facing the challenges to a greatest extent from the Bank of England as London

stands as the largest capital market in the world and the main banking sector that controlling

this is the Bank of England. But the future of spreading market in the Asia and in South

America is relatively higher than that of Europe and in North America.

The RBS’s case regarding to the competitive advantage, resources both the tangible,

intangible that work towards the unique qualities of buildings, its efficacy, innovative

natures and responsibility to the customers etc. Acquiring of the Natwest, TPF (Tesco

personal finance) in collaborative way with the Virgin and also in alliance with the BSCH, all

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of these resembles the success rate of the RBS. To fulfill the goal of better customer service

as well as the customer responsiveness, they continuously training its human’s resources with

an effective system to ensure best but least cost efficiency.

Three factors control the durability of a firm’s competitive advantages. They are:

A. Barriers to limitation,

B. Competitors and their capability

C. Industry’s dynamism.

To remove the barriers in limitation RBS has to be ensuring its strategic competencies, it can

deliver customer’s values regarding to the products and the services. Core rigidity is one of

the main issues that are face by the most successful companies to date that have to be avoided

by the RBS for a successful integration. By joining in the growing customer orientation, it

can involve in the combined specialization with the customers for the capability of the

competitors. The feature of the review and improving resources of the RBS can make it

competent in the current dynamic and competitive economy.

CONCLUSION:

The RBS are changing their strategies day by day and adopting the new one for its better

operations in the field of capital market industry. The mergers and expansion of its branches

throughout the country as well as globally, indicates its developmental growing strategy day

by day.

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BIBLIOGRAPHY

Exploring Corporate Strategy, By: - Johnson, Scholes and Whitson.

Principles And Practices Of Marketing, By: - David Jobber

Management: An Introduction, By: - David Boddy.

Strategic Management: Creating Competitive Advantages, By:-Gregory. G. Dess.

Operation Management For Competitive Advantage, By: - Chase, Aquilano.

Lectures and Notes of: Geoff Souther

The Strategic Management Journal.

The Harvard Business Journal.

The Economist.

The Businessweek.

www.bizstrat.com

www.quickmba.com

www.starwoodhotels.com

www.business-intelligence.co.uk

www.utminers.utep.edu

www.bbc.co.uk

www.rbs.com

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