From this chapter, I can conclude that among the strategies put forth by Ansoff, market penetration and product development are not reasonable choices to pursue for FIH because of the competitive challenges it is facing – in terms of competition, but also in terms of technology.
Instead, I have found that FIH should pursue a strategy in combination of diversification and market development. This choice is based upon the need for repositioning the bank due to competition and a failing strategy.
The new strategy that was determined emphasizes the need for an image update and development of the market and customer base in order to strengthen the business model in the short-term and also, that FIH needs to focus on being strategically adaptable in the longer-term as this is the way to consistently ensure that the business model is pointing in the right direction.
~ 83 ~
6 Source Criticism
I have utilized a variety of sources in this project which give different angles on the subject.
The main point of critique is the exclusion of inside-information from FIH and from other outside contributors, like competitors, which could have given valuable information regarding the problem area.
Due to the method choice, the criticism of the sources is not aimed at their strict objectivity;
the hermeneutic circle ensures that full objectivity is only reached by indefinite analysis.
In general, the sources view upon the world is based on their pre-understanding and as time goes new processed information will influence the insight21 – this indicates, that time sets a standard for the level of validity.
Individual authors’ background matters for how deep they are able to go into depth – appendix 8 provides an overview.
I have throughout this project selected the sources with great care because if they don’t have a satisfying degree of validity and reliability then they will limit the understanding.
Some sources, like statistics and accounting numbers, are in nature very high at both factors, whilst newspaper articles and websites to a greater extent must be seen as based on the authors understanding rather than very clear black-on white facts.
Journals, reports and textbooks are very good starting points for the hermeneutic circle, but as all the other sources they only contribute to explaining the issues – and thus, letting it be up to the analysis to find the underlying reasoning.
In general, the validity and reliability of the sources are concluded to be satisfying, but limited by the source base.
21 See section 1.3
~ 84 ~
7 Main Conclusion
In this project, a strategic view was placed on FIH with the aim of investigating how FIH can improve its business model to withstand the current strategic challenges; the funding difficulties, the weakening competitive advantages, increasing competitive attacks upon FIH’s niche position and the dependency on environmental uncertainties and trends.
The business model is characterized by flexibility, a narrow customer segment, a problematic ownership structure and a huge dependence on external funding sources. Also, the special market position was based on FIH’s historical aspects where environmental support had played an important role.
RBV was utilized to analyze the internal aspects of FIH which gave a deeper understanding of the problems.
FIH’s core strengths were defined to be its customer relationships, its brand and competencies related to its historical presence in the market. The main weaknesses, on the other hand, were found to be its strategic management, its locked position regarding its owner and its dependency on external interest groups.
The composition of the business model with the funding setup, the ownership and the strategic commitments have all implied that FIH’s situation is critical as it is on the edge of losing its competitive advantages.
The external part of the strategic analysis was carried out through an assessment of the Financial Industry and FIH’s position herein.
The industry analysis showed that the competition in the Financial Industry can be defined as differentiated oligopoly, where a small number of large participants control the market and where both the customers and suppliers bargaining powers are limited.
Moreover, the industry products were concluded to be heterogeneous from an overall perspective, but much more alike within the different market segments.
In brief, FIH’s niche position in the market is diminishing; increasing competition from the large banks and the beginning presence of global market players imply that FIH’s strategic focus on Danish corporations are in fact a strategic failure.
~ 85 ~
The ownership issue has worsened FIH’s conditions for making strategic changes, but the current business model setup also implies that FIH has not fully understood its future threats and opportunities, and this has now put it in a vulnerable position from which is not easy to escape.
The analysis of the micro- and macro-economic relations underpinned that FIH is influenced from different sides; political decisions, legislation, the economic climate and technology are all significant factors for the market conditions and thus, profit potential.
In brief, the analysis resulted in the understanding that FIH strongly needs to redefine its business model to ensure that it does not lose its future profit potential, and on the basis of Ansoff’s growth matrix, different strategies was outlined; market penetration, product development, market development and diversification.
In the end, the best strategic choice was found to be a combination of the market development and the diversification strategy.
Subsequently, I can conclude that FIH needs to pursue that strategy in order to strengthen its business model. That is founding a strong platform for future funding options through a development of its e-bank and brand, together with an introduction of new business areas as well as increasing the physical presence in the market.
When these are established, FIH should also achieve to quickly expand globally in order to get the strength to fight its competitors from an international position where diversification, scope and a stream-lined business model is the foundation.
Moreover, FIH should also consistently question its business model and make the necessary strategic changes so that its survival and competitive advantages can be secured in the long-run.
In conclusion, FIH’s current strategic challenges are not only a product of the circumstances – rather, they are stemming from strategic decisions which have not contributed to strengthen the market position.
Thus, the vital point for the future of FIH is to ensure that its business model gets closely linked to the aspect of strategic management, because if the business groundwork has not been laid well, the future will teeter on a knife’s edge.
~ 86 ~
8 Outlook
On the 19th of September 2010, it was announced that FIH had been sold to PFA Pension, ATP and two Swedish companies.
The two Danish buyers acquired 69.93 % of the shares whilst the Swedish companies got the rest with the exclusion of 0.11 % owned by employees. (Appendix 9)
The price was DKK 5 billion, and ATP, the dominating owner, stated that it believes in FIH’s current market, but that the funding is still an issue. (business.dk (Ritzau), 2010)
In relation to the turning point of this thesis, the sale is highly interesting because it puts the ownership issue into a completely different picture; now FIH is no more limited by an owner in moratorium, however, the question is if the new financially strong owners really intend to pursue FIH’s current strategic focus?
The sale must be seen as breaking the funding problem into much smaller parts; capital injections can now be done and it would be notable if the rating situation was not improved too.
The fact that the two buyers, ATP and PFA, are the heavy market participants is interesting, because it raises the question if their purchase of FIH was more based on their individual interests, or if they truly intend to strengthen FIH’s position on an broader scale than just the Danish market?
However, from the sight of this project’s conclusions, I will once again accentuate the importance of a general remodeling of FIH’s business, because the current competitive situation infers that FIH should make some wise strategic choices rather than playing Russian roulette with the current, but diminishing, niche position.
~ 87 ~