Unit 35 BIS1100 Introduction to Business and Organisations UK College of Business and Computing

Background of Royal Bank of Scotland

The Royal Bank of Scotland is a profitable government organisation which is the central bank ofScotland. The Royal Bank of Scotland, also known as RBS provides a wide range of products and services to personal, commercial and large corporate and institutional customers through a number of well-known banking brands (Scotland, 2013). What they actually provide for their customers is Royal Bank of Scotland is making steady progress towards building a simpler, smaller and fairer bank, and remains focused on delivering the commitments for personal and business customers. Some services provided from the royal bank of Scotland can include the free software application Royal Bank of Scotland where you can pay, check and request to take out loans from your very own home. The Royal Bank of Scotland has around 700 branches in which maximum are in Scotland and some branches in major towns of England and Wales. The management of Royal Bank of Scotland declares that they have single purpose which is to serve their customers more effectively and efficiently so that their retention and attraction increases towards the corporations (Cameron and Green, 2015). It is one of the largest bank functioning the European continents with enormous goodwill and greater customer satisfaction. The banking services provided by the Royal Bank of Scotland aids them to stay forward from their competitors.

Business model for the RBS

The Royal Bank of Scotland Group (RBS), the RBS provides service to 24 million customers in the UK and internationally. However, simply being one of the biggest names in UK banking no longer guarantees substantial market share. The Royal bank of Scotland is a public limited company therefore, 82% of shares are owned by the UK government (McShane and Von Glinow, 2013).

RBS main products and services

The bank can offer two things, Retail banking and corporate and investment banking. Alongside the announcement of an £8.2bn loss, RBS also outlined its plans to become "a smaller, simpler and smarter UK-focused bank that puts the needs of its customers at its core". The bank said it would be improving customer service and making some big changes to the products it offers borrowers and savers (Ho, Yusuf and Zamzamin, 2014). The management of Royal Bank of Scotland focuses on provided precise quality of services to their customers in order to boost up their motivation and morale. Through this the management were able to accomplish their desired goals and objectives. The major customers of the Royal Bank of Scotland includes general public of United Kingdom and small medium enterprises who seek for loans in order to promulgates their business productivity and profitability.

Revenue stream of RBS

Like every other bank the revenue stream of RBS is slightly different. They earn revenue from the interest and other charges on the loans and other essential services provided to the customers. They also make investment in high growth market sector in order to raise their capital and profits adequately (Hautsch, Schaumburg and Schienle, 2014). Overall the management of RBS believed to serve their customers to the optimum level in order to boost up there motivation and morale. This enhances their attraction and they keep on retaining towards the organisation. The table below shows the net income of Royal Bank of Scotland for five years:

Table 1: Net Income of RBS in 5 years

(Source: Annual Financials for Royal Bank of Scotland Group PLC ADR, 2018)

Interest Income	2013	2014	2015	2016	2017
Interest and fees on loans	15.13 Bn	12.34 Bn	11.2 7Bn	10.71 Bn	10.41Bn
Interests on Bank deposits	430 M	367 M	340 M	246 M	277 M
Interests income on Fed Repos	1.19 Bn	-	-	-	-
Other Interest or Dividend income	87 M	378 M	279 M	617 M	576 M
Total Interest Income	16.83 Bn	13.08 Bn	11.89 Bn	11.57 Bn	11.26 Bn

Analysis of Banking Sector in UK

The banking sector in United Kingdom is dominated by very large banking groups such as HSBC bank, Lloyds Group, Barclyas and Royal Bank of Scotland. In terms of market shares for all categories of business, the market is clearly oligopolistic. The global financial crises occurred in 2007 - 2008 impacts on majority of sectors negatively which includes banking industries (Cull and Peria, 2013). Many merger and acquisition of banking group has been observed after global financial crises in United Kingdom. In January 2009 the Halifax Bank of Scotland (HBOS) merged with Lloyds TBS to create the single biggest banking group, the Lloyds Group.

From the above illustration it can be depicted that major stakes in banking share has been held by Lloyds group (27%) after that Barclays (18.52%) and RBS (18.52%). In order to cope up with global financial crises banking sector at United Kingdom begins to enlarge their level of concentration.

Key Competitors and Business Strategies

The management has specialised team that analyses the market positions, competitors moves and strategies in order to devise a plan which incorporates them to sustain in the competitive environment. The key competitors of Royal Bank of Scotland in United Kingdom is HSBC bank, Lloyds Banking group, Barclays and Standard Charted. In order to sustain in the competitive environment, the management of Royal Bank of Scotland formulates effective strategies and decisions which helps to attract more and more customers towards the organisation (Woods, 2012). RBS ambition is to become number one for customer service, trust and advocacy as we meet the aspirations and needs of our retail, business, commercial, corporate and institutional customers. RBS core businesses are centred around the UK and Republic of Ireland markets with a focused international capability.

Supply chain analysis

Supply Chain management is the process of acquiring raw materials to distributing products and services to the end user in the most efficient and cost effective way. Supply chain is essential and important process of the organisation and which required immense planning, controlling and executing flow of products and services. In order to enhance business productivity and profitability it is important for the management of business organisation to improve supply chain management system (Lips, 2013). There are different and various types of processes conducted in the banking companies as there are numerous types of departments associated with it. In this context, the supply chain analysis of making and distributing bank notes by Royal Bank of Scotland will be described in this part (Dermine, 2013). The supply chain process of RBS is divided into three streams. Which are Upstream, mid stream and downstream. The description of analysis is provided below:

Upstream analysis: In upstream process of supply chain analysis, the management of Royal Bank of Scotland invest their time in designing the bank notes. They have delegated the responsibility to Innovia Security Pty Ltd (Turner, 2014). Designing of raw materials are important and management needs to do it thoroughly through complying with prescribed laws and legislation. In this phase the management of RBS needs to consider the design of currency used in UK i.e. Great Britain Pound and used prescribed methodologies in order to develop it effectively. The information regarding raw materials needed has been given to the supplier. The essential ingredient is polymer is required to create the currency. It is the duty and responsibility of the management of Innovia Security to provide the notes effectively and efficiently (Coen and Roberts, 2012).

Mid-stream or Internal analysis: In the upstream process, the management design and gather the required raw materials required to manufacture notes. In this phase, the manufactures at Innovia Security begins producing bank notes (Dutta, Meilicke and Ponzetto, 2013). This has been produced in tight security and with strict monitoring so that possibilities of theft or misuse of raw materials cannot be made. Only authorise entities are permitted to the manufacturing site and proper measure of security has been maintained by the organisation.

Downstream Analysis: Downstream activities in supply chain process is refers to the distribution and delivering the products and services to the end users. The management of Innovia security begins the distribution process by delivering bank notes to Bank of England. Bank of England is considered as federal bank (Kerr and Robinson, 2012). The responsibility of Bank of England is to distribute the new currency notes to other banks and ATMs. In order to do that, the management has made contract with the third party. G4S is a third party company which distributes the notes to banks. It is the role and responsibility of the management of G4S to distribute the new currency notes to other banks as well as refill the ATMs with newly made notes.

The above shown illustration is the process of manufacturing and distribution of the new currency notes to the market. RBS has numerous other departments in which different types of supply chain management process has been implemented (Sharma and Mani, 2013). From the above supply chain management process it can be understood that supply chain is complex and essential task which helps the organisation to manufacture and delivers the final goods and services to the end users through effective and streamlined process. It is the duty and responsibility of the Royal Bank of Scotland to enhance the effectiveness in their supply chain management process in order to reduce the errors and issues (Cranston, 2017). In this manner, the management of Royal Bank of Scotland will be able to attain the desired goals and objectives effectively and efficiently.

Information and communication technologies

In order to survive in competitive era, it is important for the management of Royal Bank of Scotland to implement the latest technologies and utilised them adequately so that productivity and profitability of the organisation can be increase (Avkiran, 2015). Internet and communication technologies have indeed revolutionised the perception of banking sector. These technologies enables users to interact with banking personnels efficiently through which they were easily able to solve their problems and disputes.

ICTs support key activities and functions of RBS

Providing a service to 24 million customers in the UK and internationally means that your system has to be up-to-date, safe and secure. With that being said RBS along with other banks have to come up with information and communication technologies which make the customer’s experience with the organisation bother secure and more easier for example; Firstly, we have the credit card chip Once again, adds convenience to its customers making the bank’s services more attractive (Benmelech, 2012). A contactless card allows payments to be made in seconds. The actual chip technology itself helps uniquely identify each customer and draw their information because data that is input to the system is quantifiable (chip no/user no that is assigned to that one chip) Lastly, Rapport is a security software developed by IBM to protect customer bank, card, and personal details online – this adds value to the organisation as the customers are now protected against criminal and fraudulent activities as well as suspicious transactions; the bank becomes more secure and is better for them and the customer.

Alignment of Information and communication technology with other organisation functions

In order to survive in competitive market, it is essential for the management of the business organisation to utilise Information and communication technology efficiently. In this context, the management of RBS has aligned the information and communication technologies with other division appropriately so that the management would be able to attain its desired goals and objectives.

• Manufacturing: In the manufacturing process, the management of RBI has installed effective monitoring systems and automated applications. Systems such as high tech computers, security devices, CCTV cameras, wireless phones, etc (Therivel, Heaney and Thompson, 2013). The information and communication technologies helps the management of Royal Bank of Scotland to enhance the effectiveness in the quality of the production.
• Logistics: The management of RBS needs to keep in touch with the suppliers and have to maintain effective relationship with them. In this case, the management uses partners relationship management systems (Shivakumar, 2014). This technology provides effective communication with suppliers and management will able to monitor their movements and track their activities efficiently.
• Customer Service: To embrace the success of the organisation, it is important for the management to maintain effective customer relationship. There is no denied that information technology in present era helps in developing and maintaining effective relationship with the customers (Fouquau and Spieser, 2015). RBS uses advance technologies and customer relationship management software in order to gather real time customer inquiries and feedbacks.
• E-commerce and marketing: RBS has online website for both retail and commercial banking. Furthermore, the management uses advance integrated systems in order to attracts and retain customers (Gillespie, Dietz and Lockey, 2014). Through advance information and communication technologies, Royal Bank of Scotland has developed good image and respect within the market of United Kingdom.

Strategic Value and benefits of ICT

Information and communication technologies helps in accomplishing the desired aims and goals of the business organisation. With the help of these technologies, organisations can enhance their productivity and profitability adequately and effectively. RBS uses HPD’s Core Solution package because it is RBS’s Core Business System (Levy, 2013). This package provides Factoring,

Invoice Discounting, Asset Based Lending, International Factoring, and Shadow ledger software.

Factoring Software

This is a real-time web portal that enables clients to interact with RBS’s services 24 hours on desktop and mobile devices (Scotland, 2013). The self-service includes requesting finance and new limits as well as building customised reports.

Invoice Discounting Software

Another real-time web portal for RBS clients which allows them to notify new sales and deductions, and submit reconciliation reports on both desktop and mobile devices. RBS Uses the software package because it provides the functionality the bank requires and it is also good to integrate because it is from one company so internal business functions are fluent and smooth. (This adds strategic value) Enterprise systems and Business Intelligence systems also adds strategic value (McShane and Von Glinow, 2013). The Enterprise systems are large-scale software packages that are able to track and control all of the complex operations of a business. These systems are used as a central command hub to help automate the business and make reporting and decision making easier. For example with this system RBS will be able to know when RBS needs to expand or whether a service RBS is offering isn’t.

Organisational culture and structure

Organisational culture refers to the environment or atmosphere within the organisation, that defines the working styles, employee behaviours and reputation of the organisation. In studies conducted by researchers, they identified that those companies which posses efficient and good environment with highly motivated employees able to sustain for long run, for example Microsoft and Google (Cameron and Green, 2015). They also elucidated that organisations with negative environment, highly dissatisfied employees, loads of workload, etc. has not been able to sustain for the long run in the competitive environment. In this context, the corporate culture and structure of RBS is described below:

Organisational culture and structure of Royal Bank of Scotland

In order to sustain in the competitive and unstable economy of United Kingdom, it is important for the management of Royal Bank of Scotland to devise strategies and plans to keep their employees satisfied and motivated (Ho, Yusuf and Zamzamin, 2014). The management of RBS believed that employee engagement in essential in order to boost up their motivation and satisfaction. Workers participation practice has been followed by the management where they invite each and every employee and ask for their suggestions and recommendations for implementing any new policies or regulations. Building healthy culture that embodies the value of Royal Bank of Scotland is the top notch priority of managers. Through listening strategies, the management of Royal Bank of Scotland listens the feedbacks, issues and suggestions of employees in order to enhance their performance and remain outstanding in the market economy of United Kingdom (Hautsch, Schaumburg and Schienle, 2014). The management has implemented performance based rewards scheme in order to boost up the motivation and morales of the employees. High performers are provided with rewards which boost up the motivations of other employees and workers. The Royal Bank of Scotland has been awarded with various rewards such as Top Rated Sontewall employer, Diverse Company of the Year, Employer of the year, etc. This implied that the overall organisational culture of Royal Bank of Scotland is positive where employees remain highly motivated and satisfied. In order to survive in the competitive environment, it is essential and crucial for the management to keep their employees satisfied (Cull and Peria, 2013).

RBS Organisational Structure

• Finance: The finance department in Royal Bank of Scotland is responsible for allocating and maintaining budgets (Woods, 2012). Finance department is important department within the organisation who are accountable for controlling the expenditure of the banks and generating ideas to enhance the revenue of the organisation.
• Human Resource: Human resource department is responsible for managing, recruiting and allocating the manpower within the organisation in precise and appropriate manner. The HR managers at RBS are accountable for identifying the gaps in the manpower and create efforts in order to fill the gaps so that the desired goals and objectives of the company can be accomplish.
• Risk Management: The risk department of the Royal Bank of Scotland is responsible for managing the risk and devising strategies in order to reduce the future risk that can affects the productivity and profitability of the organisation (Lips, 2013).
• Communication and Marketing: Communication and marketing department of Royal Bank of Scotland is responsible for promoting of the organisational products and maintaining effective relationship with the customers.
• Legal: The legal department of the organisation is responsible for formulating rules and regulations which are aligned with national laws so that legal uncertainties can be prevented.
• Services: RBS has initiated various services in order to increase their revenues and profits (Dermine, 2013). For this they have established a separate department which monitors and provides information regarding the additional services provided to the customers.

Internal issues faced by the organisation

Every organisation faces one or many issues that creates obstruction in the growth and development. In similar way, the management of RBS has faced many internal issues that affects the productivity and profitability of the organisation (Turner, 2014). The internal issues faced by RBS is described below:

• Legacy Issue: RBS has faced many legacy issues in the past with affects the profitability of the organisation. These issues impact the profits and revenue of the organisation negatively. However, the management of RBS were able to solve number of legacy issue including settling a large £2 bn fine with a US authority (Coen and Roberts, 2012).
• Employees dissatisfaction issue: During global financial crises, the management of RBS has faced ample amount of employee turnover due to employee dissatisfaction. Employees were highly dissatisfied with the stricter policies and regulations formulated in order to prevent bank loss.

Ethical Issues

A code of business conduct is the code of ethics which is a management tool for setting out an organization's values, responsibilities and ethical obligations. The code of conduct provides employees with guidance for handling difficult ethical situations related to the business. To survive in the competitive environment, it is essential for the business organisation to follow certain code of conducts which helps them to enhance goodwill and reputation (Dutta, Meilicke and Ponzetto, 2013). Sometimes many organisations fails to follow certain code of conducts that creates issues and difficulties in long run. The Royal Bank of Scotland has been trying to claw back some level of acceptable public image after a wide range of misdemeanours. Beyond the bail-out, the bank’s finance of fossil fuels has brought a cacophony of criticism over the past five years – from students kicking RBS off campus, to an attempt to sue the Treasury for failing to prevent public money servicing finance to the fossil fuel sector. There were certain climate laws and regulation which has been broken by Royal Bank of Scotland. It has been identified the tension between RBS's coal finance and its attempts at garnering climate credibility. The organisation has further faced many legacy and litigation issues that hampers its image and credibility. In order to rectify the errors and eliminate the issues, the management has devised specific strategies and guidelines in their CSR policies so that they can thrive in the market economy of United Kingdom.

The corporate self regulation implemented in the business model is termed as Corporate Social Responsibility (CSR). Corporate Social Responsibility is the concept whereby companies integrate social and environmental concerns in their business operations. This helps them to enhance their brand reputation and profitability (Kerr and Robinson, 2012). The management of RBS in order to reduce the impact of ethical issues they faced in the past, has implemented various strategies in order to build a sustainable bank. RBS board for sustainable banking committee hosted four stakeholder engagement sessions, inviting broad mix of stakeholders to share their perspective on the key issues. The management of RBS has invested in sustainable and renewable source of energy in order to reduce the carbon footprints emitted in the environment. Offering lending advice and services to individuals. Supporting customers with financial life events, including £33.9 billion of gross new mortgage lending to help our customers buy homes (Sharma and Mani, 2013). In order to survive in competitive era, it is important for the management of Royal Bank of Scotland to implement the latest technologies and utilised them adequately so that productivity and profitability of the organisation can be increase. The management of Royal Bank of Scotland declares that they have single purpose which is to serve their customers more effectively and efficiently so that their retention and attraction increases towards the corporations. It is one of the largest bank functioning the European continents with enormous goodwill and greater customer satisfaction. The banking services provided by the Royal Bank of Scotland aids them to stay forward from their competitors.

Conclusion

From the above report, it can be understood that RBS is one of the leading bank operating in the market economy of United Kingdom. The Royal Bank of Scotland is a profitable government organisation which is the central bank ofScotland. The Royal Bank of Scotland, also known as RBS provides a wide range of products and services to personal, commercial and large corporate and institutional customers through a number of well-known banking brands. The Royal Bank of Scotland Group (RBS), the RBS provides service to 24 million customers in the UK and internationally. However, simply being one of the biggest names in UK banking no longer guarantees substantial market share. The Royal bank of Scotland is a public limited company therefore, 82% of shares are owned by the UK government. In this context, the business model which has been used by the management of RBS has been discussed in this assignment. The supply chain analysis in the process of manufacturing and delivering bank notes has been assessed and ethical issues has been identified in this report.

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