Orange Bank Strategic Issues and Frame of Analysis

Panchalee Supanimitkulkit

CASE STUDY: ORANGE BANK

Introduction    
    With the accelerating pace of technological change, many companies try hard to keep up with new products and services to create the more value to their customer. Orange , one of the main players in telecom operators , has also launched the new online banking service to offer a complete of ecosystem and create more value to its customer.
    The banking industry is one of the most important industries that related to everyday life experience of customers. So, Orange Bank has taken this opportunity and entered the banking industries in France with the partnership between two operators : Orange for the knowledge of mobile usages and Groupama for an expertise in banking industries. This new generation bank wants to be a 100% mobile bank, all of the operations and interactions between the customer bank can be made through the mobile phone and aims to reach 2 millions of customers in ten years. Moreover, customer who want some form of human contact, they can also rely on the Orange stores which are located around France.
    However, Orange bank has to face with the traditional banks and also the new entrants that also seek the opportunity of digital revolution to generate the better service to their customer. So, it try to offer a free service for customer under the condition of making at least three payments or withdrawls per month and also provide a virtual adviser that is available 24 hours for customer. Orange bank will make the big changing in the rule of banking industries if it can drive the mobile banking to success in these industries.

Strategic issues and frame of analysis

     How can Orange manage its resources to constantly renew competitive distinction and value creation? How Orange Bank quickly respond to take the opportunities with the speedy technological change?

Explanation of the frames of analysis chosen     

There are two frames of analysis to be discussed :

      First, Disruptive strategies consist in rethinking the rules of the competitive game by offering a new value to the customer to create or expand a market to one’s advantage.  

This frame aims to analyze the ways and strategies that Orange decided to take risk and came to play in the banking industry as Orange Bank.

     Second, Dynamic capabilities is the firm ability to create or modify its resource base to address rapidly changing environments. Firms should develop processes to find high-payoff changes at low costs. This frame aims to analyze the means of Orange try to adapt and differentiate itself from the competitors in the telecommunication industries by taking the opportunity in the banking industries. Orange has launched the mobile bank and transformed the traditional way of banking. Furthermore ,the frame will analyze the possibilities and constraints of Orange Bank in these banking industries.

Application of the frame analysis to Orange Bank
    Many businesses are faced with environmental turbulence stemming from technological advances, changes in consumer demand and new regulations. These can be the new opportunity and also threat for the business in the same time.
    Orange uses the digital revolution to take the opportunity in the banking industry
by launching the orange bank. In the banking industry, there are activities such as storing, transferring or taking out insurance that people and businesses are usually related to.

However, the changing in the technology made many traditional banks have to adapt themselves with the digital revolution by creating the services through the online method. While these also create the opportunity to the new players like Orange Bank that comes to take the new market share in this industry. Orange has the power of its high speed network and also resources that can be use to launch the Orange Bank. Moreover, the company has a large customer database which will be useful to capture the desire of its customer. Launching the Orange Bank will give the more opportunities for the company to differentiate itself from other competitors in telecommunication industry and also create much more value to their customer. However, it can be the threat for the company at the same time because many online banking rely on their parent companies which are also the main players in the banking industry to support their financial and resources. Moreover, the regulation of the telephony operators on the banking market will bring the double regulation to Orange company. These regulation will have the impact on the development of Orange Bank in many terms. So, the company should weight the opportunity and also the threat of the Banking regulation  to find the new and best way for the company to operate the Orange Bank in the long term.
     In order to success in this industry, Orange decided to partner with Groupama to get the expertise in banking and produced the innovative tools and features that are already have in the traditional bank to become in its mobile banking. This was the good decision to be partner with the player that have the expertise in the industries. They try to differentiate the brand from other mobile banking. The customer will know the real time balance of the account and the Orange bank account will include the credit card and also the cheque book which make the easier way for customer in financial service. They used the strategy of free services which not request the income statement to access an account and a free credit card on the condition that new customers have to make at least three payments or withdrawals per months. This strategy is very interesting and can capture a lots of new customers.      
    However, the bank has to struggle with the lack of profit despite the increasing of customers. The bank cannot generate too much interest income which is the main fund for the bank. Moreover, many customer are use the traditional banks because of the trust that they have to the banks. So, the traditional banks use these strength to build  more and create the long term relationship with customers. Orange Bank has to concern about this point to retain their customers.
    Not only the traditional banks that are the main competitors in the industry but also other two new players : Carrefour and Compte-Nickel which come to get into the financial institutions. First ,C-zam is the bank accounts launched by Carrefour which offer the basic and cheap deal to customers. However ,the customers cannot deposit cheques or receive like they can do with the traditional banks. Second, Compte-Nickel also get into the bank services with the low cost strategy. However, the Compte-Nickel has already purchased by BNP Paribas. The new entrants are usually use the low cost or no fee to enter in the online banking and Orange Bank also used the same strategy as other competitors. So, the possibility that Orange Bank will generate the more profit will be lower and lower if they do not try to differentiate itself with other offers and should try to convert the mobile banking by Orange Bank into the platform.
    Many of customer open the account in the Orange stores not in smartphone. So, the company can also use the cross-selling between bank and phone service to generate the profit. Customers will be able to buy their smartphones with Orange Bank consumer credit or get the discount by open the account with Orange Bank. This strategy will not generate only the margins but also the complete ecosystem of services that Orange will offer to their customers. The company also creates the more sustainable value to both product and service under Orange company.