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Economic performance analysis

Expain Critical Analysis of Banking set up in UK.
 

 Annual Growth Rate

United Kingdom has an average GDP of 3.3 percent on year on year basis. However during the economic slowdown in year 2008, a huge drop in the GDP was observed bringing it down to 0.9 percent.  Hence the GDP growth faced a serious setback from year 2008. However the economy signs of recovery from year 2012.

GDP again started moving upwards to 1 percent in early 2012, This trend was followed by a steep upward movement up to 1.7 percent till the end of year 2013. Till the upcoming of the year 2014, the GDP started moving back to its earlier position of 2.8 percent. At present the GDP has move back to 3 percent. This shows that the country has been able to recover from adverse effects of recession that was observed from year 2008.

(TradingEconomies, 2015)

Percent Change in Gross Domestic Product

GDP again started moving upwards to 1 percent in early 2012, This trend was followed by a steep upward movement up to 1.7 percent till the end of year 2013. Till the upcoming of the year 2014, the GDP started moving back to its earlier position of 2.8 percent. At present the GDP has move back to 3 percent. This shows that the country has been able to recover from adverse effects of recession that was observed from year 2008.

(TradingEconomies, 2015)

The unemployment rate was at low point of 4.8 in year 2005. This rate of unemployment was very satisfactory and their existed opportunities that could actually bring down this level of unemployment. However the global slowdown of 2008 resulted in the rise of unemployment. The unemployment started rising since January 2008 inception and reached up to 8.4 in January 2012, which was a huge fall in the employment rate since February 1984. The country observed big layoff and low earning and investments. The GDP or Gross domestic product and GNP or Gross national product both fell steeply.

Percent of the Labor Force

Hence we can see that the unemployment rate was on the rise after January 2008. A steep rise in unemployment was a point of worry for the government and society. However this trend came to end with the start of January 2014 when the unemployment started making a steep fall. Hence things started becoming normal and the unemployment started moving back to its earlier position and managed to reach down by 5.8 percent which is comparatively lower than the worse conditions that brought unemployment level to 8.5 percent.

(TradingEconomies, 2015)

The global competitive index consists of all the factors that shows the capability of the country to achieve cutting advantage in the world. The Global competitive index 2014-2014 states that the United Kingdom ranks 9th which is a very place for any country. This proves that the country has the highly competitiveness in achieving desired outcome as compared to various other countries of the world. The population of the country is 64.1 million and the GDP is US$ 2535.8 billion. The per capita income of the country is US$ 39567.41.

Infrastructure provision

Global Top 10

The various business actually poses the actual stage of the business. These stages include boom, recession, slump, recovery and again boom. Based on the data collected the stage of business cycle that the economy is at the moment is at recover stage. This is due to the reason that the GDP is on the rise and the unemployment rate is falling. The global competitive index also confirms that the country is back to its growth pace and will soon enter boom from recovery stage.

Looking at the present stage of recovery it can easily be predicted that in the coming two years the country will observe a boom stage wherein the earlier days of high GDP growth and huge employment opportunities will rise.

The infrastructure provision in the United Kingdom since 2005 has been on the development. Various projects such as water, energy, ICT, transport and support for SME has been administered over time. The steps taken in the last decade includes the followings.

The water preservation and effective utilization projects have been initiated to supply water in farms and home so the public utility can be achieved.

Energy related measures are taken effectively which has assured seamless electricity supply in the country.

ICT has been developing at a high pace ever since the coming up of new technology like Notepad, Smart phones and other electronic devices that have actually added to the benefit of the business.

Transport system including the increasing area of coverage for travelling spots has been developed to facilitate the movement of citizens within country.

Effective support has been provided to the SME so that they could continue to sustain in the slowdown economic conditions.

(TradingEconomies, 2015)

The infrastructure provision includes the air, rail and water transport system development. The supply of electricity, telephone subscription and road facility are all estimated in the infrastructure provisions of the country. United Kingdom ranks 10th out of 144 countries in providing these facilities to its citizens. The country has the most modern infrastructure facility in the world. The roads are well made and the port infrastructure is actually the life line of the country. There is a seamless supply of electricity and the numbers of telephone owners are increasing at a regular pace in the country.

(WorldEconomicForum, 2015)

The productivity of United Kingdom has move up from 96 in year 2005 to 100.90 in year 2014. Although a steep fall was observed in year 2008, but the same was

United Kingdom Productivity

(TradingEconomies, 2015)

The Porter’s five force analysis includes the consideration of the following factors that may affect the industry. The business in the United Kingdom can be analysed as per the Porter’s five analysis in context of setting up new bank is as follows.

The intensity of industry rivalry has been very high in the country. There are a number of national and international banks in the country that offer high end service to the customers. The country has well known century old established Standard Chartered Bank that offers high variety of service to the customers in the country.

Market structure analysis

A number of new banks are entering the markets in the United Kingdom. These banks offer variety of customer oriented service to people in the country. These banks are free to open their establishment as per the directions of the government. Therefore the threat of new entrants is also very high for a new bank establishment.

A lot of facilities offered by banks including investment opportunity, online banking facility, wealth management plans and security trading are offered by different banks in the country. Therefore if a customer requires any of the above service that he has the freedom to port to any bank of his choice which offers similar service.

The bargaining power of the buyers is very high. The buyer of the service from banks in these case are customers who deposit their money in bank and take advantage of various varied facilities offered to them. The bargaining power of the buyers is high as their already exist various national and international banks that offers high quality service to their customers.

The bargaining power of suppliers is low. The number of suppliers of back end support software is very large. Therefore their exist a number of options to chose from the software making company whose software can be applied to achieve high end benefit to the banking service and facilitate the bank customers.

The market structure that banking industry resembles is perfect competition. This is so because homogenous products including banking facilities are offered to the customers. Also the number of suppliers of these banking facilities is large in the United Kingdom. Therefore the market structure that exists in the banking industry is perfect competition.

There are no entry barriers in the country for new establishments. However some preliminary requirements and minimal directions are required to be followed so that the banking system that is established attains customer satisfaction and security. Therefore efforts are made to safeguard the interest of the citizens.

The best international business strategy will be foreign direct investment in the banking system. The bank should open its banking establishment as it has better options and facilities that any other bank can provide in the country. The licensing system however should be fulfilled so that the bank could work under proximity with the local laws and administration. Thus the business strategy of FDI will help the bank to make ties with the already established domestic bank of the United Kingdom. This will help the bank to learn about the business process that is followed In the country. Later the bank can work on its own after finishing the deal that was meant for a limited time frame with a local bank. The local bank on the other hand will provide its expertise so that the new bank can understand and apply its strategy for growth and development in the coming years.

Conclusions 

In the end, the ITAU bank should start its operation in the United Kingdom but with collaboration with another bank so that the desired outcome of better establishment and enhanced business application as per the business strategy can be executed. The time for business establishment is also good and the returns from investment can also be expected very well.

TradingEconomies, 2015. Productivity. [Online] Available at: https://www.tradingeconomics.com/country-list/productivity [Accessed 04 April 2015].

WorldEconomicForum, 2015. The Global Competitiveness Report 2014 -2015. [Online] Available at: https://www.weforum.org/reports/global-competitiveness-report-2014-2015 [Accessed 04 April 2015]. 

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[Accessed 23 February 2024].

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