Based on the above, it is my recommendation that FIH should make a strategy shift.
In relation to the three defined possible strategies, it is my suggestion that FIH should aim at a growth-strategy where both diversification and market development are the basis.
The reason is that the analysis showed that diversification is becoming unavoidable whilst market development is really where FIH can increase its potential – thus, it is beneficial to adapt a strategy which takes both aspect into account.
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A very vital point of reflection is the customer segmentation. Currently, the customers are corporations, property investors and so on. If looked through the glasses of both strategies, FIH should renew its market position – that being with or without the existing products.
In relation to market growth, one weakness is persisting - the brand. FIH’s image – both in name as well as in reputation belongs to Denmark and companies and it is very limiting for strategy development because it limits both the customer profile and market existence.
Consequently, a main objective is to develop the bank’s image – it has already successfully been done with FIH Partners, but in order to grow new markets, new sub-brands should be created.
This move is supported by Aaker, who points out that “brands are the face of a business strategy”. (Aaker, 2008, p. 251)
Overall, it is my recommendation, that FIH should not imitate banks like Nordea and Danske Bank with the whole wide product portfolios – instead, it should focus on its core competencies and chose its strategic platforms with great care. Diversification is necessary due to the competitive state, but it does not mean going all the way.
Firstly, FIH’s business segmentation has shown to be problematic – a way to attack this problem is to improve them through the chosen strategy alternative.
Secondly, increasing volume in deposits - based on a wider customer foundation - meets the decision criteria of partly solving the funding issue.
Thirdly, the e-bank should be set up so customers get linked to capital markets –this move would aim for coherence between wealthy customers, increased trading and new product extensions.
Due to the fact that FIH has advisory competencies, it should also re-enter wealth management in order to set up the foundation for future competitive advantages.
This further puts up the suggestion for expanding the capital market division geographically as well as in the product line. Setting up branch offices in world-wide financial centers would infer that FIH’s trading services could be offered all over the day and re-entry into equity-trading could strengthen the image of the bank in the way that it would contribute to a more differentiated investment product portfolio.
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Further market development by entering new markets should be done by strategic alliances or acquisitions. However, due to the capital factor, a strategic alliance is the best alternative in the very short period – later on, FIH can take full control of foreign companies if it has enough cash. Right now, when the market is down, it could be a perfect opportunity to buy another company, but it would require a change in the funding situation.
Based on the strategic analysis, I do not think FIH should go out of any areas, except the one it is already closing down (mortgage-credit). The reason is that FIH still has valuable competencies within the different business fields, but that it has been hit so hard by the many challenges that its market position has become so heavily impacted and resulted in the very poor bottom line.
FIH should not enter completely new products and markets like for example insurances or retail banking in its broad sense, because they are very different areas than the ones FIH are currently involved in and thus, longer from the competencies FIH has developed.
Instead, pensions could be an opportunity – it was earlier a strategic goal to obtain this segment, and with the e-bank it makes good sense. It would be wise to try to make the different business areas span on each other; for example, special pensions could be offered to the corporate customers’ employees and so on.
In relation to the micro- and macro-economic development it must be emphasized that an economic upturn can improve the speed at which FIH can pursue its new strategic objectives – especially in terms of obtaining cheaper funding at the money market.
The ownership problem on the other hand can only be solved through a sale of FIH.
In summary, what FIH’s new strategy should be aimed at is on setting up the image of being a professional bank within the very special areas of MFI; as such, it is not suggested that FIH gets completely diversified – rather it should keep its competitive edge, but widen up its scope and profit potential.
However, all the suggested strategic moves are of course not possible to implement at once.
Therefore, I have in the figure below depicted the strategic plan that I suggest that FIH should follow in order to obtain the defined long-term goals.
The idea is that FIH should take one step at a time, but doing it quickly – and based on the discussion above.
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Figure 19: Strategy plan
Source: Own creation
In conclusion, FIH does not have the time to wait – if it does not act quickly, it is in the danger zone for being outcompeted within a short period of time.