Yeung Pui Yam

Background:

Barclaycard is a global credit provider (credit cards and loans) owned by Barclays plc in the UK. Barclay PLC is the largest bank in term of total asset value, which amounts to $1.9 trillion

The Barclaycard was the first credit card introduced in the UK, by purchasing the franchise of VisaÐ'ÐŽÐ'¦s credit card system and technology. The service came into service in 1966. It enjoyed a monopoly until the introduction of the Access card in 1972, which was a consortium formed by National Westminster Bank, Midland Bank (now HSBC Bank), Lloyds Bank (now Lloyds TSB) and The Royal Bank of Scotland.

Nowadays, Barclaycard offers both MasterCard and VISA versions and its market is now not only constrained in U.K. Its subsidiary business unit, Barclaycard International, operate in Germany, Italy, France, Spain, Greece, India, United Arabic Emirates, Sweden and South Africa. Furthermore, Barclaycard US Ð'ÐŽX separate from the Barclaycard global operation, this is the corporation's US credit card business unit (formerly known as "Juniper Bank"). It issues branded credit cards such as US Airways, Midwest Airlines, and Frontier Airlines MasterCard, as well as Airtran Airways Visa card in U.S. market.

Until 2003, Barclaycard was still a market leader in the U.K credit card market. However, its market share has been diluted gradually due to hyper-competition in credit card industry. Besides, the dynamic merger and acquisition among the credit card industry also make BarclaycardÐ'ÐŽÐ'¦s ranking of market share decline. Nevertheless, Barclaycard claims it is still Europe's leading issuer of credit cards with 11 million in circulation.

In the past several years, Barclays PLC made some strategic decision on acquisition of other credit card company and their credit portfolio. For example, acquisition with the Providian (former credit card issuer), recent attempt to acquire ABN Amro despite of unsuccessful take-over and takeover of Absa Group Limited, South Africa's largest retail bank in 2005.

In addition to Barclaycard UK and Barclaycard International, there is also Barclaycard Business UK (Merchant Acquiring, Corporate Issuing and Partnership Issuing). Barclaycard Business was formerly known as Barclaycard Merchant Services (BMS). As a Merchant Acquirer they enjoy around 38% of the UK Acquiring Business. They offer a number of channels including internet payments (ePDQ) and small merchant bank-owned terminals (PDQ Terminals) normally provided by Ingenico (formally Fortronic). Barclaycard have now teamed up with London's Transport for London to combine a credit card with an Oyster card - called OnePulse. The new card is due to be launched in the autumn of 2007.

Barclaycard's main offices are in Northampton, along with several floors of the One Churchill Place building in Canary Wharf, where Barclays PLC main business is based. Barclaycard was also the main sponsor of The FA Premier League since 2001 and will continue the sponsorship until 2010.

(2) Current Internal Situation

(2.1) Business Strategy of Barclaycard

Differentiation Strategy with price premium before 2004

Before 2004, the business strategy of Barclaycard is differentiation strategy which aims to build the competitive advantage to compete with other companies. It offers different types of credit cards and benefits to the customers and provides the value to them. The credit card market in UK is wide competitor base, such as Royal Bank of Scotland, Lloyds TSB, HSBC, and MBNA and so on. There are many local and global company issue credit card in UK. Therefore, Barclaycard aims to provide better and more services than other companies, at the expense of higher price premium, i.e. annual fee charge, higher APR and higher commission charge. The services include travel insurance, fraud protection, purchase protection and emergency card. The main benefit is providing protection when missing the credit card and any sudden event. Therefore, Barclaycard had been priced at a premium and avoid low price strategy to compete to competitors. In late 2001 Barclaycard became one of the last traditional players in the market to scrap its annual fee. Its main rivals such as National Westminster, Lloyds TSB and Bank of Scotland) had abolished annual fees as early as 1999. Finally, Barclaycard cut the annual fee two years late than other companies.

Differentiation without Price Premium Strategy

However, management of Barclaycard started to realize that the competitive advantage of premium service quality is not enough to attract and retain customers.

Today, because of the rigorous competition in UK market, for example, not only carrying out no annual fees for the application of credit cards, many credit card issuer promote 0% of balance transfer, 0% interest of purchase for specified period of time. As a result, Barclaycard also decide to use low price strategy. Some of Barclaycards such as Platinum Credit Card with Balance Transfer and Football Credit Card also promote 0% interest of balance transfer for 13 months and 0% interest of purchases for 3 months. Nowadays, Barclaycards also respond same as other companies to provide low APR for specific periods. In general, the strategy has shift from differentiation strategy to differentiation strategy without price premium.

Competitive Strategy in Hypercompetitive Conditions

Nowadays, Barclaycard is providing more services and create value to customers. However, this competitive advantage is temporary. This service is easily imitated by competitors, as competitors are able to lower their interest rate or include more service easily. The competitive advantage cannot sustain for a long rime period. In a hypercompetitive condition, Barclaycard should able to change fast and response to the changing market. They should always revise the strategy and keep the competitive strategy. Also, the company should have innovation to develop new types of credit cards and services to customers.

Market Diversification

Recently, Barclaycard develop the business in different countries and not only focuses on UK market. In the near non cash world, most of the people tend to pay debit card or credit card when purchasing. There is the opportunity of credit card in growing market of some countries. Barclaycard had developed United States, Germany, Spain, Italy, Portugal, Africa, India and the United Arab Emirates. Part of the development is focusing