3. Recommended Alternatives
Out of the strategic alternatives presented in the previous section, the organization has to choose those that best fit its unique needs and features. They must also focus on the strategies that help the bank better adapt to the changes and requirements of the micro and macro environments. In order to make the best informed decision, the officials at Barclaycard should analyze each strategy proposed and identify its positive and negative implications. Based on the analysis, the final recommendation would be made.
The product diversification strategy implies additional expenditure and does not guarantee a positive return on investment, just like the expansion strategy for that matter. The first one however is necessary as it helps the company better identify itself with the new modifications in the market and it aims to better satisfy the needs and wants of customers. A new or improved product under the Barclaycard brand name stands increased chances of retrieving a positive outcome as the brand represents the guarantee of high quality and increased customer satisfaction. As such, the product diversification strategy should be further developed, improved and implemented, regardless of the additional costs it implies.
In terms of reducing costs then, in the particular case of Barclaycard, a wrongfully implemented strategy to reduce costs could represent the end of everything Barclaycard stands for. To better explain, the UK-based bank is a long standing organization, following and implementing old ways and traditions. And such a tradition to say is that of increased prices, a reputation of the highest quality and the benefits felt by customers when enjoying the services of such a powerful brand. This has been for decades the strategy that differentiated Barclaycard from its competition, mostly the new entrants in the industry.
But in the context of economic difficulties and a general instability throughout the globe, Barclaycard should have to adapt to the requirements of lowered prices and interest rates. As a result, they should indeed try to reduce costs, but their primary focus should remain the customer satisfaction. In other words, they need to find ways to reduce costs without generating negative impacts upon the Barclaycard brand, which should remain the element of differentiation.
A best way to achieve cost reduction and not jeopardize the well being of the organization is that of increasing customer loyalty. "In the current downturn, many companies are tightening belts. But too many are missing their biggest opportunity to keep costs down: building loyal relationships with customers and other stakeholders. How do loyal relationships translate into cost savings? Consider the cost of serving a long-standing customer vs. The cost of courting one. Across a wide range of businesses, customers generate increasing profits each year they stay with a company. In financial services, for example, a 5% increase in customer retention produces more than a 25% increase in profit. Why? Return customers tend to buy more from a company over time. As they do, your operating costs to serve them decline" (Reichheld). As a result, the second and third strategies...
Many organizations have sufficient control over their cost drivers, specifically those that work with activity-based costing; these companies can locate a sufficient amount of cost information within the company to accomplish these analyses in a timely fashion (Chatzkel, 2003). In reality, though, ABC systems are typically structurally complex and, in spite of the need for complete integration of such ABC systems, many such systems remain as stand-alone analysis tools
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now