Virgin Money Canada

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Assignment #1
1.What are some of the issues that Branson should consider in order to ensure that Virgin Money will be a success in Canada? One issue Branson definitely has to consider is the loyalty and strong confidence of Canadians in their banks. This confidence is shown in a recent survey where 85% of Canadians expressed confidence in their banking system, 92% agreed that the strength of the large Canadian banks is critical to the health of the overall economy, and 91% are confident that their deposits are secure. Therefore, Virgin has to come up with a good overall package to convince the Canadians to commit their money to Virgin. Additionally, the Canadian banking system is the soundest in the world since 2008, with well-capitalized, well-regulated, and well-managed banks. Even so the case “from phones to loans” states that there are banks with liquidity issues, which are just looking for a partner with money, it might be nowadays not as easy to find a suitable partner. Aside from the strong established banks, Virgin has to take into account that nearly all Canadian banks offer services online. Actually, online banking is the fastest growing and most popular method of doing banking in Canada. In 2010, 63% of Canadians used online banking, and 45% used it as their main means of banking. This issue therefore needs to be taken into account, but, despite the already established online banks, this can be also an opportunity for Virgin as they have experience and know-how in this kind of doing business. This is also stated in the case where it is said that their expertise in call center operations may provide a competitive advantage in offering quality financial services. Lastly, the timing factor is very important to success. This was the problem when Virgin Money launched their services in the USA in economically difficult times and just before the big crisis in 2008. Due to that Virgin had to close their operations in 2010 after just 3 years. 2.What does the competitive landscape look like in the Canadian banking industry? The Canadian banking industry is very competitive. There are the “big five” Canadian banks Royal Bank of Canada, Toronto-Domino Bank, Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial Bank of Commerce. In more detail: •Royal Bank of Canada had a net profit of C$4,965 million in FY2010, which was an increase of 37% over FY2009. RBS has 72,126 employees and their retail and commercial banking serves about 15 million clients. Their strengths are their leading market position, an extensive distribution network, and a strong balance sheet. •The Toronto-Dominion Bank had net profits of C$5,709 million in FY2011, an increase of 28.3% over FY2010 and the highest of all Canadian banks. TD Bank has 68,725 employees and their retail and commercial banking serves 11 million clients. Their strong market position in North America gives them a competitive edge over its peers. •Bank of Nova Scotia or Scotiabank had net profits of C$4,959 million in FY2011, an increase of 22.8% compared to FY2010. Scotiabank has 75,362 employees and more than 10 million clients worldwide. •Bank of Montreal had net profit C$2,674 million in FY2010 and 37,947 employees. Their retail and business banking has around 8.5 million clients in Canada and USA. The BMO is the best performing personal and commercial banking franchise in Canada. This results in a very strong market position. •The Canadian Imperial Bank of Commerce had net profits of C$2,902 million in FY2011 with 29,106 employees. Their retail and commercial banking has around 11 million clients. One of their strength is their improved customer service. Besides the “big five”, there are some other Canadian banks such as the National Bank of Canada and the globally operating foreign banks HSBC, ING, Citigroup, Bank of America, Deutsche Bank and many more. Threats for the Canadian banking industry are that the interest rate policy changes are likely to hurt,...
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