Infinity Bank Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Value Chain Analysis

The value chain analysis on the Infinity Bank is conducted in order to determine how the company can meet the profitability of its peer banks. It is analyzed that the major cost or expenditure of the Infinity Bank occurred due to the overhead cost of retail bank branches which was one of the largest network of branches in the United Kingdom.

The marketing department should focus on the selling activities of credit card and mortgages as these are the highest revenue generating products for the company. Moreover, the current account of the company was the loss making product for the Infinity Bank. Hence, the marketing department should focus on marketing activities related to the products so that the revenue can be increased as well from the current account product.

The operation activities of the Infinity Bank adopted the supermarket strategy which could increase the revenue through the retail bank branches resulting in further increase of the revenue as the supermarket strategy allowed the retail bank branches to enhance their profitability through the selling of the financial product. Hence, this strategy disabled the Infinity banks to increase the profitability in comparison with the banks prevailing in the United Kingdom. Hence, the activities performed by the Infinity Banks should be reconsidered in order to increase the profitability.

Recommendation

The cost structure analysis and value chain analysis of the Infinity bank provided the information that the Infinity bank adopted the supermarket strategy to enhance the efficiency and effectiveness of the retail bank branches in order to generate the revenue so that the current account revenue could be greater than the costs related to current account which led the company to under perform in comparison to their peer banks.

Instead of adopting the supermarket strategy, the company should adopt the cost saving strategy which will assist the company in reducing overhead cost and efficiently managing the operations, which will result in reduction of the overall cost of Infinity Bank. The strategy that should be adopted by the is to adopt the technological and infrastructural change which the other banks have adopted in order to cope up with the increasing challenges of deregulation which led the foreign competition to enter in the market and threat of new entrants increased of the Infinity Bank. Therefore, Infinity Bank should focus on its operating and marketing strategies after implementing technological and infrastructural change with the reduction in number of branches operated by the bank as technology advancement has reduced the need of largest branches network for banks.

Appendix

Exhibit 1

P&L: 1999-2003
	1999	2000	2001	2002	2003
Current accounts
no. of accounts (millions)	8.10	8.19	8.32	8.41	8.60
balances on deposit (₤ millions)	11,259	11,310	11,265	10,849	11,896

Revenue (₤ millions)
Net interest	405	380	350	331	358
Fees	99	94	100	85	67

Costs (₤ millions)
Service costs	650	674	707	701	716
Overhead	182	178	211	171	172


Profit before tax (₤ millions)	-328	-378	-467	-456	-463

Credit card accounts
no. of accounts (millions)	4.80	4.87	4.98	5.00	5.06
balances borrowed (₤ millions)	3,864	3,954	4,089	4,115	4,301

Revenue (₤ millions)
Net interest	465	455	446	424	434
Fees	194	206	233	222	219

Costs (₤ millions)
Service costs	108	109	104	98	91
Credit losses	124	111	129	125	129
Overhead	58	53	50	50	51

Profit before tax (₤ millions)	369	388	396	373	383
	79%	85%	89%	88%	88%
Mortgages
no. of accounts (millions)	0.82	0.84	0.87	0.84	0.86
balances borrowed (₤ millions)	33,090	35,269	37,226	36,111	37,266

Revenue (₤ millions)
Net interest	328	342	372	341	335
Fees	21	20	20	19	19

Costs (₤ millions)
Service costs	12	12	13	12	10
Credit losses	40	32	41	37	38
Overhead	9	9	9	9	9
Setup costs	44	44	45	41	41

Profit before tax (₤ millions)	243	266	284	261	257
	74%	78%	76%	76%	77%
TOTAL PROFIT FOR 3 MAIN PRODUCTS (₤ millions)	285	276	213	178	177
	24%	23%	18%	16%	16%