Santander United Kingdom, a subsidiary of Banco Santander has become a key solution provider and continues to evolve in line with UK clients. Banco Santander is a commercial and retail bank, based in Spain, having presence in ten markets. It is among the fifteen in the international market by capitalization and one of the largest, powerful banks in the euro zone. Founded in 1857, Santander has EUR 1.384 trillion managed funds, more than 103 million customers, 14,765 branches worldwide, which no other bank has, and 193,100 workforce at the end of 2011. Santander has a powerful presence in the Germany, Portugal and United Kingdom, U.S northeast and Poland and is the largest financial group in Latin America and Spain. Its consumer financing operates in the core markets and also the Nordic region. In 2011, Santander group registered EUR 7,022 million recurring net profit. The group is the leading lenders of financial service and products in United Kingdom and offers a large range of commercial and personal, financial services and products. The group has 1,360 branches, 30 regional centers and 26,000 employees across UK and serves more than 26 million clients at March 31, 2012. Banco Santander lists its ordinary shares on the London Stock Exchange, while Santander –United Kingdom preference shares lists on the London Stock Exchange.
1. Overview of the Santander and its Strategies
Santander has always been a prominent player in the banking industry. With is exceptional operational strategies, it has become a significant player in supply chain financing and a solution provider in the banking industry. Santander organizes its activities in three prime units such as global businesses, support and primary segment.
1.1 Santander Operation Strategy
The operation strategy of Santander underlines differentiated services, which focus on the segmentation of its business and client bases. Its business activities divide into four key areas that are companies, wholesale, retail and asset management. Santander reinforce its operations by integrating the teams, which allow the innovation of better services and products, sustained by processes and tools that are agile and efficient. For strengthening these processes, a new operation strategy for review and approval of services and products began in 2009, under the two bank’s integration processes and management of the compliance area under the global guidelines of the Banco Santander. The strategy assures that no new service or product and also any prominent change in the existing products to be market without evaluating its general features and approval by the competent jurisdictions. Among the innovations in this strategy, is a necessity of documentation for the periodic processing of approval of products that incorporate a complete description of the service or product, a sustainability checklist, and a risk matrix. The latter is a tool, which helps managers understand the dimensions and the effect of their products and service on society. This operation strategy built on sustainability criteria has all essential features such as accessibility, energy efficiency, renewable energy and cleaner production.
Santander United Kingdom strategy remains unchanged that presented at Santander Investor Day on September 29, 2011. The strategy aims to meet the challenge of the commercial turnaround of business, changing Santander into a leading retail market and corporate banking in the UK. The prominent features of operational strategy are:
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1. Changing the focus of the retail banking to customers from service and products;
2. Assist in the growth of the SME through the additions of their business to be acquired from RBS. The aim is building the strength of the existing products to make Santander the SME bank of choice. This will enable Santander to diversify its overall business mix and continue its focus on efficiency and IT investments. This strategy includes planned investment of £490m over three years for improvement in customer service.
3. Santander financial and risk strategy focuses on increasing balance sheet strength and stability, with regard to capital risk, capital, liquidity and funding by tightening risks in the retail mortgage to originate few returns in higher loan to value and an interest only mortgages.
4. Competing vigorously for saving balances in the tax year season while reducing reliance on volatile short term deposits, reliance on short term funding and highly priced private banking deposits. A significant feature of operation strategy is to build and develop a deeper relationship with customers through customer segmentation and increased current account primacy. Santander strategy rewards customer loyalty through a range of its financial products supported by a marketing campaign that features high profile brand ambassadors.
1.2 Business Strategy
The continuous development and implementing innovative management tools is part of Santander business strategy. The strategy assures the improvement of financial resources and minimization of risks by providing its teams the best assistance for carrying out their operations, and alignment among its business areas. Some of the prominent tools are: Super Base, Super Ranking, Promias, Panfi, Sala Gol and ARTE, all focus on the continuous improvement in the processes.
Santander is the best example of how to be successful in international expansion and that too in a record time by its powerful business strategy. Santander globalization process followed the same three principles in each region it entered: creating options; developing capabilities; and entry in large scale and rapid integration. The process of Santander expansion is possible to divide in three areas, first Latin America, second Europe and then Asia, where the internationalization took place. Acquisitions always have a significant role in Santander’s business strategy. In 2000, Santander formed an alliance with French bank, Societe Generale by exchanging shares, and a combined venture for buying pension fund in those countries where it does not have significant presence such as USA. In the year 2004, Banco Santander took over Abbey National, which was the second largest mortgage company and sixth largest bank in the United Kingdom.
In the year 2007, in collaboration with Fortis of the Netherlands and Royal Bank of Scotland it succeeded in biggest banking take over with the acquisition of ABN Amro in the Netherlands thereby dividing its operations across the world. In 2008, the group completed the takeover of Alliance & Leicester British by exchanging one share of Santander share with three shares of A &L. In the year 2010, it reached an agreement whereby Santander successfully acquired the branches of the Royal Bank of Scotland outside Scotland and in 2011 Santander took over the retail banking of SEB group in Germany. All these acquisitions show the strength of Santander business strategy and its anticipation of demand of better financial products in the world market.
1.3 The Impact of Business Strategy
The impact of business strategy made Santander one of the most effective expansions in the banking history. As a key feature of its business strategy, Santander was successful in developing a group of specialists in sales of its products and to deal directly with customers that require differentiated services in international trade, cash management, rural credit, civil construction and structured assets. With a strategy designed to fulfill its target market, in the year 2008, the companies unit, impacted by the aftermath of the international financial crisis, were successful in increasing its credit volume by 34% and its revenues through providing services by 26% over the preceding year. For achieving this performance, there was a necessity to have the gains from complementarily and synergies, which resulted from the merger with Banco Real, and also the sales campaigns and services introduced over the year.
For complementing its development strategy while adopting motivational factors to increase market share and growth with the SGB&M and retail segments throughout 2010, the units designed three incentive campaigns for the sale of SGC products, cash management and payroll. These campaigns ultimately resulted addition of 180,000 current accounts, besides significant growth in sale of products and services for dealing with collections, derivatives and payment to suppliers.
2. Main Processes of the organization
The significance in Santander processes is the effective implementation of innovation and technology relying on small innovation teams with individuals representing different countries, the integration of IT systems and the constant creation of innovative services and products.
The application of service innovation has key contribution to the smart growth of Santander. Their operating process system is modern and constantly improved. The electronic use of fund transfers and ATM’s is widespread. To sustain its innovative edge, Santander has made substantial investments in its IT capabilities, amounting to 3.4 billion Euros in 2010. The bank has its own telecommunications system connecting administration, training, product units and ATMs.
Santander has a unique IT system called Process Partenon. It provides a “single customer view” by integrating all information in a unique database. This process automatically connects the customer relationships with the bank that are assessable to bank employees. Staff in any division can easily access customer data from another division, so the bank can assess credit risks more efficiently. Santander decided to implement Partenon in the whole group. In 2006, the Banco Santander granted the Banking Systems Innovation award for Partenon system. Now Santander’s branches adapt to the local environment and employ similar information technology and banking systems throughout the group. Hence all European branches employ a single IT system (Partenon), and Latin America uses a comparable system called Altair. In 2004, Banco Santander acquired the United Kingdom’s sixth largest bank, Abbey National. A challenge posed by Abbey’s collection of 30-year old IT systems was it was incapable of providing global customer information files.
Santander’s solution has been to replace it with Partenon, which was their one of the first efforts to export a system of complete retail banking across borders. By the end of 2007, Santander completed the conversion satisfactorily. In 2010, Santander integrated the IT systems of Abbey, Alliance & Leicester and Bradford & Bingley. The process encountered small problems, but by the end of 2010 the integration was complete. During 2012, data of the sovereign affiliate in the USA will also be integrated into Partenon.
Santander regularly develops innovative campaigns in order to attract and keep clients. The first one, Super Account “Supercuenta”, introduced in 1989 gained massive publicity. It paid 11% interest, more than double the interest rate of competitors. Other banks could only slowly follow this strategy, and by then Santander had gained considerable market share in only a few months time. Other campaigns of this kind "superlibreta" and "superhipoteca" launched later were also successful. In Spain, the “Queremos ser tu Banco” (We would like to be your Bank) plan has lasted for five years. Charging no commissions and other advantages has attracted 4 million clients. In the UK, a similar project is the “Santander Zero Account” which eliminates commissions and gives free access to ATMs across the world subject on certain conditions. Another innovative service is “Santander Secure”, certified by both Visa International and Master Card International, offering secure Internet credit card shopping. It lets customers add a personal password to the existing Santander client card.
2.1. Technology and Operations
Technology is the foundation for improving commercial and operational efficiency. Santander has distinguished itself from its rivals through the development and application of a unique technological platform and an operational and organizational model. The operational model of the Santander developed through the takeover of Banesto, provides an advantage of technological platform, which Banesto was using prior to the takeover. The basis referring to Partenon in Banesto is a unusual transactional system that is modular, expandable and flexible. This unified platform not only allow for rationalizing the operations but also generates cross selling opportunities, operational performance and improves customers’ satisfaction. This platform employs a single database thus connects client’s relationships automatically through a single view. It provides a structural, competitive advantage to Santander group, since it is much advanced system than practiced by other banks.
Temporarily the system Partenon incorporates with Altair, which is the transactional system in the Latin American Banks, but the convergence between two systems, is already in planning for the near future. In the transactional system the middleware layer functions as the base line for the multi channel services, such as internet banking, integrating ATM’s and offices. Finally, a user’s layer Known as Alhambra executes functions typical for a customer service, information integration and CMS platform. Santander determines to unify all the practiced IT systems into one technological platform for providing high efficiency across all levels of services.
2.2. The Analysis of Processes
Isban, Geoban, and Produban are the three specialized and centralized factories (units)
that works in the area of software banking engineering and process outsourcing and infrastructure, have already implemented the model of specialization. The model permits solving the dilemma between in sourcing and outsourcing like this:
1. These centralized factories offer value to all units at a local level;
2. The factories permit to simplify the governance;
3. The factories permit to share best practices among the Banco group;
4. Synergies obtained from economies of scale.
These three organizations function as external supplier to Banco Santander, working with market parameters and also prices defined by the market.
Banco Santander Cost and Operations model consist of four building blocks:
1. Effective cost management discipline with minimal operational risk;
2. Integrated management of efficacy:
3. Global factories;
4. OP & IT model.
In order to achieve the maximum efficiency, it has a processing strategy that aims to reduce costs, by adopting a strong cost discipline, and enhance the efficacy through standardization and unification of both processes and technology. The adopted efficacy model stresses on the significance of three clear dimensions – reduction are costs, continuous improvement in the service quality, and control of operational risks. These three dimensions incorporate all three levels of the technological system that are organizational, operational and technological, thus making the system technological advance and also an irreplaceable in the entire business model.
3. Value Chain and Quality Level
Santander’s value chain consists of a unique combination of global and local solutions, enabling it the provider of cash management services for corporate in both Europe and America. Santander innovative products and solutions are an adaptation to change and provide competitive services in each country. Santander invests heavily in its products and services through an ongoing development process to offer corporate customers flexible connectivity platforms, capability to handle customers’ cash management requirements with whatever extent of operational centralization they may require. In its value chain, Santander incorporates model of culture and desire to serve customers to the best of their capability and offers a unique value proposition for the corporate world. The value chain of Santander focuses on integrating multiple cash management services with its global products and services, to leverage the group broad marketing experience for the benefit of the clients.
The supply chain being a crucial tool of its value chain, the group invests heavily invests in supply chain financing business and in emerging markets Santander has a steady relationship with suppliers and buyers, and understand their needs. Santander also emphasizes on small and medium suppliers that contribute the bulk of its supply chain. This understanding helps Santander in developing a wide range of financing solutions that covers pre and post shipment and also the credit quality of suppliers and buyers. The bank emphasizes on the strength of commercial relationship between the buyer and its supplier instead of focusing on the balance sheet.
3.1 Value Chain Analysis
The satisfaction of clients with the products and services of the banks shows the strength of Santander Value chain. The surveys conducted periodically. The most recent results show the growth in the indices of satisfaction both for Santander, from 67% (2007) to 71% (2008), while, for Real, the index rose from 74% (October/2007) to 77% (October/2008). However, because they use different methodologies, the results for Santander and Banco Real are still not comparable. The focus on dissemination of this sustainability throughout the value chain also represents the client satisfaction with regard to its products and services. In 2008, the Organization dedicated itself in selecting the most relevant issues by designing a single model for the integration of sustainability in its daily activities. The Bank’s relationships with customers and partners intensified by using the Espaço Real de Práticas em Sustentabilidade, a program that makes available the lessons learned about the insertion of sustainability into business to companies, customers and suppliers. Respect, ethics and transparency characterize the relationship between the Grupo Santander and its suppliers.
In 2008, there were 3,228 suppliers registered, which together represented investments of some R$ 7.3 billion in products and services. With the integration of the Real and Santander Banks, the group prepared areas responsible for managing suppliers for evaluation of procedures and practices and identifying opportunities for synergies and maximization of results. Among the initiatives adopted in 2008 and scheduled to be concluded by the end of 2009 are the tools for performance qualification and evaluation, which includes technical, administrative, financial, social and environmental criteria, as well as governance for the preparation of Indices of Qualification, (IQF) and Performance (IDF) for suppliers, along with regular monitoring of these companies. Santander considers these initiatives are most valuable to strengthen its value chain. In addition to the continuation of socio- environmental criteria as elements for the selection of suppliers, in 2008 the Group extended its commitment to this public and, based on the experience at Banco Real, began to be active as well in the dissemination of the concepts and practices of sustainability throughout its value chain. In 2008 among the participants in the course of sustainability in practice, pathways and challenges, there were almost 80 were supplying companies. For 2012, the organization is expecting to complete the total integration of processes by holding a suppliers forum for the Santander UK, and preparing a new version of Parceira de Valor. This is a document that provides guidelines for relationships with suppliers and shares the organization’s positions on social, environmental and governance questions.
In the Government area, there was consolidation of partnerships with municipal agencies, mainly because of elections, leading to the establishment of strong relationships with new managers based on the Santander Brasil’s experience and distinguishing characteristics. In Institutions, it reinforced the partnerships with federations and associations and the most influential sectors of the domestic economy – especially health. One of the important differentials of this activity is that it includes the entire value chain, comprising the supply of financial products and services to companies, directed both to businesses – such as hospitals and healthcare providers – as well as individuals, such as doctors, employees and suppliers of these entities.
The business model of Banco Santander relies on its customer focus, efficiency, geographical diversification, risk-averse prudence and financial strength. Three main factors have helped Banco Santander transform to become the number one bank of the Euro zone with around 180,000 employees. The first is the human factor. The history of Santander relates to the Botin family whose members played a determinant role, guiding the bank through its 154 years. Santander is among the top ten banks across the world in which three generations of a family contributed a powerful influence over decisions regarding overall strategy, and corporate governance. All this has happened despite the fact that members of the family own only 2.5 percent of the equity. The second factor is internationalization. Well-formulated strategic alliances, mergers, acquisitions and the establishment of affiliates opened the way for Santander to enter the countries of Latin America and Europe. The business model of Santander based on its customer focus, efficacy, geographical diversification, risk-averse prudence and financial strength. The third factor is the effective implementation of technology and innovation, relying on small innovation teams with individuals representing different countries, the integration of IT systems and the constant creation of innovative services and products. The application of service innovation has contributed to the smart growth of Banco Santander.
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