Government also introduces legislation to cover areas of concern such as health and safety, consumer protection and control of monopolies, it is important for firms and businesses to keep up with the changes in legislation or else they can risk getting shut down.
Government intervention can be seen in the case where both The Hongkong and Shanghai Banking Corporation and the Standard Chartered Bank wanted to purchase the Royal Bank of Scotland in 1981 when UK Mergers and Monopolies Commission ruled against both bids stating that the UK market would become too dominated by such a strong banking power reducing the levels of competition.
Laws are passed by Acts of Parliament and by previous judgements made in courts. Businesses must work within the law to maintain their reputation and to avoid legal penalties. The government plays a major role in the shaping of the UK market in which businesses operate. It does this by implementing legislations which affect business. Almost all areas of business activity are affected by law, including marketing, production, financial activities, the employment of people and the establishment of the business itself.
Some of these legislations include:
Health and Safety, which requires firms to insure safe working conditions and suitable safety equipment for employees. An obligation for each employee to understand and observe the safety rules, any firm with more than five employees must have a written safety policy on display and an union appointed safety representative who can inspect the premises at any time. Health and Safety imposes significant constraints on businesses, if businesses are found in breach of health and safety they can be shut down immediately or given a severe warning and a date by which to correct any faults.
Employment Protection, this promoted the well being of every employee, various Acts have been passed protecting the rights and obligations of workers. Some of these Acts include Equal Pay Act 1970, Sex Discrimination Act 1975, Race Relation Act 1976 and the Disability Discrimination Act 1995. It is important for business to keep up to date with these Acts and to abide by them or else they can risk getting fined and taken to court by any individual employee who feels they have been unfairly dismissed or treated.
Consumer protection Act, laws are passed to protect consumers from unfair business practices. Various acts are passed to protect consumers, most importantly being the Fair Trading Act 1973 and the Food Safety Act 1990. All firms supplying goods and services are affected by this legislation, this legislation ensures that the goods supplied ensure customer satisfaction with an increased emphasis upon quality control however it often leads to an increase in production costs.
There is also other legislation including the competition legislation with the Monopolies and Mergers Commission.
Businesses can also be required to change the way they work due to a change in policies. Policy can vary depending what political party is in power. There are many policies that can affect business activity and the way in which the business works. Some of these policies which affect business include:
- Education and Training
- Unemployment
- Exchange rate policy and EMU
- Import Controls
- Mergers
- De-regulation
- Business taxes
- The minimum wage
Other external constraints include:
- Changing consumer tastes.
If a consumer is no longer prepared to pay a certain amount of money for a set good, or if a cheaper product has entered the market the business will have to re-think their plan, maybe change the price of the good or do more marketing and make their product more favourable. Also if a firm can for see a change in fashion, for example the increase in the desire for fitness equipment ‘to give you the perfect figure’ and slimming low fat foods. If an organisation is able to fore see this change they can enter the market with little competition. Like wise is a firm is able to see the collapse of a product before it occurs this will allow them to plan ahead and develop new ideas.
There are many laws know protecting the rights of customers, due to these laws it is possible for the consumer to question the workings of a large organisation and to expect a quality product. Due to these policies the customers are expecting it is necessary for organisations to ensure their workers have the correct training and knowledge to satisfy the customers or ensure good quality work is carried out.
- Economic circumstances (level of the interest rates, value of the pound, consumer and business confidence, the level of aggregate demand)
The strength of the pound is unlikely to affect an organisation based purely in the UK.
- Social attitudes and pressure group activity.
Due to concern about the impact on business on the environment attention has been focused by the government on how they can help control pollution, congestion etc. There are a number of ways the government can do this:
Government regulation. The government can pass laws, which make it illegal for firms to pollute the environment. Examples of these are the Clean Air Act and the Environmental Protection Act. These acts set strict limits on the maximum amount of pollution the firm may produce. There are controls in the qualities of certain gases which firms are allowed to release into the atmosphere.
Taxation. The aim of taxation is to ensure that the social cost of any pollution caused by a firm is paid for. This means that the government has to estimate the actual cost to society of different types of pollution. For example if a firm produces a product worth £5 with ‘environmentally unfriendly’ packaging the government is able to tax them an additional 50p raising the cost of the good to £5.50. There are two advantages of doing this, the extra money may be used to reduce the impact of the packaging on the environment, and, it may create an incentive to the firm to produce more environmentally friendly packaging so tax is either removed or reduced.
Compensation. Firms forced by law to compensate people who they affect. This is common in the case of airports having to pay grants to nearby houses. This allows the residents to purchase double- glazing and other types of sound insulation, which provide protection from aircraft noise in the early morning.
Government Subsidisation. This involves the governments offering grants, tax allowance and other types of subsidy to firms in order to encourage them to reduce ‘environmentally unfriendly’ products. Subsided can allow environmentally desirable projects, which otherwise may not be profitable, to take place. Government subsides can also be used to encourage more environmentally friendly habits amongst consumers.
Case study of Major changes in banking.
History of Barclays Bank
Today, Barclays is one of the most powerful financial groups in the world. But its origins can be traced back to a much more modest business, founded more than 300 years ago in premises close to the Group's global headquarters in the heart of London's financial district.
In the late 17th century, the streets of the City of London were filled with goldsmith-bankers, who provided monarchs and merchants with the money they needed to fund their ventures around the world. One such business was founded by John Freame and his partner Thomas Gould in Lombard Street, London, in 1690. The name Barclay became associated with the company in 1736, when James Barclay - who had married John Freame's daughter - became a partner.
Private banking was common in the 18th century, bankers would keep their clients' gold deposits secure and lend to credit-worthy merchants. By the 1890s there were some 100 private banks. In 1896, 20 of these companies came together to form a new joint-stock bank. The leading partners of the new bank, which was named Barclay and Company, were already connected by a web of family and business relationships.
The new bank had 182 branches, mainly in the East and South East, and deposits of £26 million - a substantial sum of money in those days. It expanded its branch network rapidly by taking over other banks, including Bolithos in Cornwall and the South West in 1905 and United Counties Bank in the Midlands in 1916.
In 1918 the company - now Barclays Bank Limited - amalgamated with the London, Provincial and South Western Bank to become one of the UK's 'big five' banks. By 1926 the bank had 1,837 outlets in its own name.
The development of today's global business began in 1925, with the merger of three banks in which Barclays held shares, the Colonial Bank, the Anglo Egyptian Bank and the National Bank of South Africa. The new Barclays Bank had businesses in much of Africa, the Middle East and the West Indies. Its name changed to Barclays Bank DCO in 1954, in response to changed economic and political conditions. It became Barclays policy to decentralise, away form London setting up locally-established banks, and 1985 called Barclays Bank.
Today's Barclays has tremendous global strength and a reputation for being first with innovative products and services. As of 30 June 2000, staff worldwide consisted of 70,300, of which 52,300 were in the UK.
Today, Barclays has five business groupings that are managed as international businesses, reflecting changing customer needs and the developments taking place in global financial services.
Barclays
Barclays makes a direct and significant contribution to the well-being of the UK economy. The banking sector accounts for approximately 4.2 per cent of the UK’s national output. In 1998, the financial industry contributed £4.6 billion to government revenues in mainstream corporation tax. Barclays alone paid a total of £533 million in taxes in 1998.
Around 30 million transactions are processed every day through UK clearing systems. The number of ways it is possible to access financial services is dramatically increasing for the benefit of customers. Telephone banking, increased accessibility to cash machines, means that millions of customers can use banking services 24 hours a day. Demand for these services is rising as an alternative to branch-based banking and, as a consequence of this the number of traditional branched will continue to decline. Due to the closure of branches there has been a decline in the number of jobs across the banking sector.
Reasons for Change and Actions Taken
The main reason for the change is the changing needs of the consumers.
More people are working know, leading busier lives with longer days and travelling more and needing instant access to money without having to queue and wait. Customer tastes are becoming increasingly diverse, whilst some people want the immediacy of 24 hour electronic access to their money whilst others still prefer personal, face to face service from cashiers.
Having seen that people want more instant access to their money Barclays have set up over 25,000 ATM’s, expanded their telephone banking service and offer the worlds leading internet banking service. They boast statistic of:
“One million customers have signed up for our telephone banking service. Our call centres receive 25 calls every minute.”
“The number of cash machined available to customers had more than trebled in the past five years.”
“Barclays online banking has attracted more than 450,000 customers since it was launched in1996”
Barclays has to keep its services in the public interest as they face serious competition from multinational banking corporation, supermarkets offering cash back, and even car manufactures can offer banking services. In the last six years the total number of credit card issuers has more than doubled.
The recent advances in technology, particularly digital information, mean that many of the new competitors in the financial market do not need to maintain a nationwide chain of branches. It is possible, and much cheaper, to provide financial services over the telephone, PC or internet.
Due to the increase of competition it has been important for Barclays to aim to lead the way for banking in the future, and also for them to be careful that they handle their customers needs and expectations. One of the biggest challenges for all financial services providers is to develop a new generation of more sophisticated, flexible products and services. Customers want and require straight forward easy access to their cash, whether it be through a cash machine, over that phone or the cash desk.
At Barclays it is possible for customers to chose what kind of accounts they want, for example all in one accounts, such as those offered by Virgin One and Mortgage Trust or they can opt for savings accounts from building societies and insurance companies. Traditional banking providers are offering more advanced current accounts. The number of customers choosing Barclays more advanced current account is increasing.
Services such as internet banking unheard of ten years ago, are now offered as standard by most banks. Barclays has a long history of innovation. They were the first bank in the world to install the cash dispenser, this was located at their Enfield branch in 1967 having previously launched the first credit card in Europe in 1966. In the 1980’s they introduced the UK’s first debit card.
In October 1998, Barclays became the first bank to introduce instant banking, and to allow the credit card to offer customer access to their current account and credit card details over the phone.
Barclays realises that to keep up with competition that they will have to continue their long history of investment in production and service innovation, increase the use of the technology available to them, ie the internet, e-commerce and telebanking. They also propose to provide business customers with full euro capabilities and offering their personal banking customers an even broader range of flexible savings, mortgage and loan plans.
Barclays has spent over £10 million on customer research programmes in 1999 to ensure that they have an in depth understanding of the needs of their customers and their expectations. In total they surveyed more than 1.7 million personal customers during 1999. They found that customers were generally satisfied with their financial service provider. Customers said that they regarded Barclays as solid, safe and reliable in terms of the funds and business they entrusted in them. However it was noticed that customers wanted an improvement in the one to one service and for individual circumstances to be well received.
Having heard this Barclays responded by launching a series of initiatives, many of these involved better use of customer data allowing them to anticipate customers needs and allowing them to pre-approve loans, overdrafts and mortgage arrangements.
Barclays aims to make a contribution to the community, in September 1999 they announced proposals to contribute £100 million to a new regional Venture Capital Fund, offering loans to growing businesses that are unable to gain conventional bank funding, this was part of Barclays aim to promote economic regeneration.
Barclays has also developed three national sponsorship programmes, these include, Barclays New Futures, this is the largest educational sponsorship scheme worth £8 million over eight years, run in conjunction with Community Service Volunteers. Barclays Sitesavers, this is the largest environmental regeneration sponsorship worth £3 million over six years, this is a partnership scheme with Groundwork, they are aiming to turn derelict land into in to parks, gardens, play areas and sports grounds. Barclays Stage Partner aims to allow people who otherwise could not afford to go to the theatre, it will cost Barclays a total of £4.5 million over six years.
However for Barclays to keep up with competition in the millennium it was necessary for them to widen their market and a merger with the Woolwich was proposed. Both the chief executive of Woolwich and Barclays realised that they had a shared philosophy, strategy and vision, as well as their views on the future of banking being similar. A deal between Woolwich and Barclays would double Barclays’ share of both the mortgage and savings market, provide access to the country’s second largest team of independent financial advisers and give it Open Plan, Woolwich’s all-in-one bank account, which was adding a further 8,000 customers a week.
However, due to the merger taking place over 100 Woolwich branches were located within 100 metres of a Barclays, as these were now unnecessary these 100 Woolwich branches were closed, leaving the group with a combined total of 2,000 branches. Barclays said that the Woolwich name would be kept and would become the mortgage brand for Barclays products.
The newly merged group now had more than 16 million customers, with both sets being able to attain the advantages from both Barclays and Woolwich.
However Barclays continued closing banks, closing a further 171 branches across Britain. It was argued that to keep up with their plan and to advance in this world with new improved technology it was no longer necessary to have so many branches. If the bank was not to realise this and change its methods of banking it would go out of business. However as Britain’s second biggest bank it was still difficult for them to justify the closing of so many branches with little pre warning leaving 7,500 people with no job and over 40,000 customers, most from rural communities without there local banking service.
Barclays said that even after the closure of the rural branches people living in those areas would still have a local branch within three miles. This however was not true as now many customers face round trips of twenty miles to alternative branches and fears have been raised for the safety of people carrying cash to be cashed into their accounts. In one case a 79 year old woman staged a sit in at their local Barclays Bank to protest against plans to close it. The locals were said to be ‘devastated and worried to be losing their local bank and the effect it would have on businesses.’ Protest groups across the country are planning sit ins and other forms of disruption to try to deter Barclays from closing their local branches.
Barclays quickly picked up on the negative atmosphere towards them in the areas they had closed the branches and announced that they had agreed a deal allowing customers to pay cash and cheques and withdraw cash from their local post office. The bank arranged this in 155 of the 171 areas were they had closed the banks. Barclays said that they hoped that the deal with the post offices would help to keep them open in areas they were they too were under threat. However locals complained that the new service was no substitute for full time banking facilities.
It is not just Barclays facing these problems, most banks have been closing their local branches and been changing to more modern methods of financial services and issuing money. With more people working, with less time to go to the banks it is necessary for them to be able to withdraw cash at any time of day of night. In the past, when less woman worked it was possible for the woman to go to the bank and to cash in cheques and withdraw money, however now, often with both members of the family working it leaves little time to get to the bank, thus the need for instant services, ie. Telephone, Internet banking and twenty- four hour cash dispensers. Though many jobs have been lost through the closure of all the branches a vast number of jobs have been opened up through telephone banking, with Barclays alone boasting more than twenty- five calls minute. It is often the people who are scared of change who resist to it, though it may inconvenience them at first, in the long run it will benefit them allowing them easier access to their money.
History of Barclays innovation since 1959.
1959 - First UK bank to order a computer to revolutionise book keeping.
1966 - Barclays launches Barclaycard and is the first UK bank to provide customers with credit card facilities.
1967 - Barclaycard becomes the first card to offer extended credit and enables cardholders to budget their payments monthly.
1967 - Barclays introduces the first automatic cash dispensing machine in the world, leading the way to giving customers 24 hour instant access to the money in their accounts anywhere in the world.
1982 - Barclays is the first high street bank to offer a special savings account for children.
1987 - Barclays launches Britain's first debit card, Barclays Connect, to enable customers to pay for goods directly through their current account without writing a cheque.
1989 - Barclays is the first bank to abolish everyday transaction charges when customers are overdrawn.
1991 - Barclays is the first bank to enable customers to select the Personal Identification Numbers on cash dispenser cards themselves.
1995 - Barclays is the first UK financial services company to go on the Internet, providing information to a world wide audience.
1996 - Barclays launches Barclays Additions to provide customers with a value added current account.
1998 - Barclays launches the first UK screen phone banking service, Barclays On Screen Services.
1998 - Barclays announces Instant Banking from Barclays to give personal customers instant access to their money.
