Seizing the real opportunity1 The following case study illustrates how management consultants may…

Seizing the real opportunity1 The following case study
illustrates how management consultants may identify opportunities for their
clients and develop solutions to seize these opportunities. This is a stylized
case based on a synthesis of disguised real world situations. The case illustrates
the importance of objective and impartial advice and shows management
consultancy in a broad sense, that is, management advice combined with
assistance with the management tasks of implementing the advice.

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Perceiving opportunities Winter 2012: Univers Bank is a
relatively small bank that offers retail banking, commercial banking, and
investment banking services. Its board wants to substantially increase the
bank’s return to shareholder value to join the league of the world’s 20 best
performing banks. To investigate opportunities for this performance
improvement, the board has done a quick SWOT analysis (see Table 1.4). Based on
these findings, Univers Bank’s board perceives investment banking as a great
opportunity to raise the bank’s return. Investment banking is perceived as
highly profitable and prestigious. Univers Bank is the market leader in
investment banking in its (small) home country. Recently, one well-known
international investment bank, Goldmine Bros, came up for sale. While most
other banks cannot afford an acquisition due to the credit crisis, Univers Bank
is well positioned as it has a low exposure to bad debt. Univers Bank operates
a dense and expensive network of offices around the world. It mainly serves the
retail and commercial banking activities. With the acquisition of Goldmine
Bros, Univers Bank may leverage its worldwide network to become a global player
in investment banking. The board thinks that such a position will certainly
raise the bank’s return to the desired level.

Univers Bank’s board hires the management consultancy firm
Acme & Company to devise a strategy for achieving the desired top position
in global investment banking in order to gain within three years a position
among the global top 20 of banks achieving the highest total shareholder
return.

Debunking false opportunities To understand the client’s
opportunity better, Acme & Company set out to do some preliminary fact
finding. Based on their benchmark data of the global investment banking
industry, they conclude that investment banking is a high return industry for
the top players only. Moreover, Goldmine Bros was not part of the profitable
top level in investment banking, even before the credit crisis forced the bank
to give up its independence. The group of top investment banks is stable.
Despite huge investments, no other bank outside this group has managed to
conquer a top position in this seemingly attractive industry of global
investment banking. Acme & Company benchmarks the combination of the two
banks, Univers Bank and Goldmine Bros, with the top investment banks. The
management consultants discover that their client lacks the resources and the
capabilities to compete with the top investment banks. Moreover, they find that
the investment bank arm of Univers Bank, outside its small home market, has a
weak position and earns a negligible return. To the surprise of the board, the
bank’s highest returns come from its retail division. The board had perceived
retail banking as unattractive.

Identifying real opportunities Moreover, Acme & Company
identify Univers Bank’s new internet-based business model for retail banking,
which has been introduced highly successfully in the home market, as a very
interesting opportunity to roll out internationally. Acme & Company, therefore,
recommend that Univers Bank does not expand in global investment banking.
Instead of building a global investment bank, the consultants point to the much
higher return, and more feasible opportunity, of globally expanding the bank’s
internet retail business model. Moreover, building up an international internet
retail bank will allow Univers Bank to thin out its expensive, dense, worldwide
office network. The board of Univers Bank accepts the consultants’ analysis.

Achieving effect Next, Acme & Company develop a global
competitive strategy for Univers Bank’s internet retail bank. To assist
management with implementation of the strategy, the consultants also formulate
an action plan for the global rollout. The board responds positively to the
recommended solution. They decide to give up their ambitions for a global
investment bank. Instead, Univers Bank reallocates its resources to the global
rollout of its internet retail bank, with a very positive effect on the bank’s
return to shareholders.