Royal Bank of Canada macroenvironmental analysis

Royal Bank of Canada is the largest bank in Canada. In 1993 decided to expand the scope of bank’s operation to remote parts of Canada. There were two options, one was to increase the number of branches and the second was the option of branchless (online) bank. However the first option being costly, so the bank decided to take innovative decision i. e. direct banking. Royal Bank targeted the 18-34 age groups since there would be large potential consumer base for online banking.

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The large number of customer of Royal Bank was aged 50 years and above. Therefore, keeping in view the fact that the use computers and networking to be more famous and common among younger, Royal Bank decided to start online / direct bank. Royal Bank has undertook good strategies by targeting the individual consumer of 18-50 age group who is a high school graduate or highly educated who is self employed , freelancer or self employed. This age group has special benefits because has the greatest mobility and has the potential of consumer loyalty.

Second is the group of private investors who generate a good amount of revenue yearly but the potential customers are few. The bank has also adopted new ways of reaching potential customers and the marketing strategy adopted accordingly such as offering special rates to companies whose employees match the targeted groups of the bank. Economic environment is an important area and it is paramount to the future success of any banking system to realize the affects the economy will have on future performance/survival.

The economic environment is vital to Royal Bank’s future. Creation of extra jobs will obviously benefit the local economy. The main concern must be the anticipated recession which will affect returns on investments, in turn will have a negative impact on the purchasing of goods. In 1996 there was a culture developed in the Canadian banking industry in which the telephone banking services were being provided by Royal Bank to customers so that convenience and long service hours would be provided to them.

There is an increasing use of technology in the banking sector such as ATM money transfer terminals and direct banking institutions. Royal Bank decided to launch direct bank which had the capability to access and be accessed via telephone, fax, PC, and internet 24 hours a day and 7 days a week. The highly developed and advance call centre architecture has many good features which ensure availability 24/7 a week. The services are personalized in order to comfort the customer and enhance loyalty.

The customers are eased and happy if they are cared in the way they want. With Canada scheduled to announce its new policy on Bank mergers, it’s time to permit consolidation in the financial services industry, or wave goodbye to an increasing number of Canadian corporations, who will finance their international growth abroad rather than at home. This policy has deprived Canada of head-office type jobs for next generation, not only in the banking sector, but in all the businesses which need financing from banks capable of executing at a global level.

Already, in 2003, foreign investment banks received 43 percent of investment banking fees paid by Canadian companies on international transactions. While Canada’s major banks have grown in the last decade in terms of their capital, every one of them has fallen off the list of the world’s largest banks. Only mergers will enable Canadian banks to leverage the critical mass needed to be players in a global industry.

As with most aspects of financial services and, indeed, life in general, what was once innovative has now become commonplace. It was only in 1988 that Direct Line became the first major financial services organization to make a success of direct selling over the telephone, and a year later that First Direct revolutionized the current account proposition by establishing a branchless, telephone-based alternative to traditional banks.

The telephone was rapidly adopted as a means of buying and servicing all kinds of financial products, from shares to bank accounts to household insurance. While telephone sales have become the dominant channel consumers are still very much wedded to the branch network when it comes to banks, generally using telephone banking to supplement the facilities offered over the counter. Traditional banking, despite the success of direct banks, is still the dominant players in the market, and the big have a large number of bank branches.

For these providers, offering telephone banking has not so much been a case of replacing existing distribution channels, but simply adding an extra option. With the advent of the Internet came a fresh set of innovative competitors and fresh challenges for the traditional banking. Rather than just a single bank competing with traditional institutions, a raft of new providers entered the market. Nevertheless, adoption has been slow. Many are simply reluctant to provide personal or financial details online thanks to, perhaps largely unfounded, security fears.