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Pernille Orthmann Copenhagen Business School October 11, 2010 A Strategic Analysis of FIH Erhvervsbank Name: Pernille Orthmann Program: Cand.Merc(fsm) Counselor: Carsten Kyhnauv 178.649 STUs corresponding to 79 pages ~ 1 ~ Executive Summary The purpose of this Master’s Thesis is to evaluate the challenges that FIH Erhvervsbank is facing and to find out how FIH’s business model can be improved by dealing with these issues. The challenges are identified to be internal problems, a ownership issue and a general business model setup which does not take the environmental influences into account. The project examines the subject by incurring an extensive evaluation of the links between the business model and the stated strategic challenges by approaching it from an internal, an external and a systemic point of view. The main findings in the internal analysis are that FIH is losing its profit foundation because it is failing in managing the business elements that makes it special. From the external point of view, FIH’s problems are related to the competitive changes which have evolved during the past years and have been accelerated due to the Financial Crisis. The conclusion is that FIH’s niche position in the market is diminishing – it is no longer a unique market player and is therefore, in the range of being weakened by further losses of market shares. Also, the impacts from the surrounding systemic environment – that being both in economical, political and technological terms – are significant because they are determining for how FIH can exist in the market. The solution which is being proposed is that FIH should redefine its business strategy. Basically, it should develop its brand, expand its position in terms of products and markets and last, but not least, it should develop a sustainable funding model based on an expansion of its current e-bank platform. In conclusion, what FIH needs to do is to initiate a new offensive strategy which gives potential for cost advantages and increases its earnings. ~ 2 ~ Table of Contents 1 Introduction ........................................................................................................................ 5 1.1 Problem Diagnosis ....................................................................................................... 5 1.2 Problem Statement ....................................................................................................... 6 1.3 Choice of Model and Method .................................................................................... 12 1.4 Delimitations ............................................................................................................. 18 1.5 Structure ..................................................................................................................... 19 2 Presentation of FIH Erhvervsbank A/S ............................................................................ 20 2.1 The History of FIH .................................................................................................... 20 2.2 Ownership Structure .................................................................................................. 25 2.3 The Management ....................................................................................................... 28 2.4 The Organization ....................................................................................................... 29 2.5 Markets ...................................................................................................................... 30 2.6 Products ..................................................................................................................... 31 2.7 Financials ................................................................................................................... 34 3 Strategic Analysis ............................................................................................................. 37 3.1 Internal Analysis ........................................................................................................ 38 3.2 External analysis ........................................................................................................ 52 3.3 Sub-conclusion .......................................................................................................... 66 4 Empiricism for Micro- and Macro-Economic Relations .................................................. 67 4.1 The PEST framework ................................................................................................ 68 4.2 Political and Legal Factors ........................................................................................ 68 4.3 Economic Factors ...................................................................................................... 69 4.4 Social Factors ............................................................................................................ 71 4.5 Technological Factors ................................................................................................ 71 4.6 Sub-conclusion .......................................................................................................... 72 5 Empiricism to forward-pointing Short and Long Term ................................................... 73 ~ 3 ~ 5.1 Strategy Choices ........................................................................................................ 73 5.2 FIH’s Strategic Options in the Short- and Long-Run ................................................ 77 5.3 The New Strategy ...................................................................................................... 78 5.4 A Reflection on the Analysis and on the Results ...................................................... 81 5.5 Sub-conclusion .......................................................................................................... 82 6 Source Criticism ............................................................................................................... 83 7 Main Conclusion .............................................................................................................. 84 8 Outlook ............................................................................................................................. 86 9 Bibliography ..................................................................................................................... 87 9.1 Books ......................................................................................................................... 87 9.2 Scientific Journals ...................................................................................................... 88 9.3 Articles ....................................................................................................................... 88 9.4 Reports and Publications ........................................................................................... 90 9.5 Web Sites (www) ....................................................................................................... 91 9.6 Other Sources ............................................................................................................ 91 10 Appendix .......................................................................................................................... 92 10.1 Organization Structure ........................................................................................... 92 10.2 Geographical Markets ............................................................................................ 93 10.3 Financial Information for the FIH and SEB Group’s Business Segments ............. 94 10.4 ROE after tax and income/cost ratios .................................................................... 96 10.5 FIH’s ROE after tax for the years 2000-2009 ........................................................ 96 10.6 Debt ........................................................................................................................ 97 10.7 The Financial Industry in Numbers ....................................................................... 98 10.8 Overview of Utilized Materials’ Authors ............................................................ 104 10.9 The Sale of FIH .................................................................................................... 105 ~ 4 ~ 1 Introduction 1.1 Problem Diagnosis The Danish FIH Erhvervsbank A/S (FIH) is currently floating in a grey area. Its focus on lending activities and other services for Danish companies has throughout the years manifested FIH’s position in the market as “a well-driven and healthy bank with a solid and diversified loan portfolio”1 (Nielsen, 2008, p. 29). As of the year 2009, FIH was the 6th largest bank in Denmark (Sørensen, 2009a) and is as such one of the big players in the financial industry. However, the past two years have made FIH fragile – not only because of the Financial Crisis, but also due to other upcoming issues. I find that FIH is fascinating - not only because of its size, but also because it is facing many interesting challenges. Over the past decade, the bank has gone through some rapid internal modifications as well as external impacts in its field of operations. In relation to this, the strategic perspectives have also changed, and today, several matters are of great concern regarding FIH’s ongoing activities. The issues are not something to easily pass by because they relate to several hugely important problems
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