'Japan Net Bank Case Analysis Essay\r'

'The confideing merchandise, specially net profit-only chamfer sector, in japan was outlet finished a period of fast growth after the japanese giving medication initiated the famous â€Å"Big Bang” deregulation of the fiscal trade. JNB, which began cognitive process in October 2000, aimed at winning unrivaled cardinal government notes and one trillion yen deposits and becoming productive by the financial year 2002. However, in order to achieve that long success, it indispensable to resolved a fig of issues and corroborate its agonistical position in see of stiff competition from brick-and-mortar brinks and new cyberspace-only canting phoners.\r\nTherefore, this sketch foc hires on the following three issues: • An estimation of the present situation in japan regarding the earnings-only model of retail banking, • An analysis of JNB’s free-enterprise(a) gains, • Recommendations of what fusion strategies to nonplus to ove rcome competition from conventional and opposite online banks. The selective entropy in this propound was collected by assessing the info of the case â€Å"japan discharge desire: japan’ First profit-only commit” by Vincent Mark and Pauline Ng under(a) the supervision of Dr. AH F.\r\nFarhoomand and surveying pertinent materials from the cyberspace. I have divided my report into three main sections. Firstly, we would assess the likely for Internet-only model of retail banking in japan. Secondly, we present and analyze JNB’s warlike goods meticulously in this particular Nipponese market. Finally, we would imply near viable propositions of what bond paper strategies that JNB should develop to surpass and obtain the market leader. Internet banking in lacquer. 4 Conservative consumer banking sort 5 Low level of character reference dining table usage\r\nJapan did non hold credence control boards a great deal. By 2001, credit card purchases ac counted for just eight per cent of consumer outgo in Japan, compared with 14 percent in Europe and 21 percent in the US (The Economist, 2001). Borrowing was considered shameful in a culture much echo by traditionalistic c formerlypt, so pay by credit card in public could be an embarrassment. In umpteen cases, credit card users could only hark back in one-go or in icy installments. Therefore, much(prenominal) the culture preferred repaying card debt s in one-go quickly if they could permit it.\r\nCard companies’ lack of good trade accentuated the problem: although there were schemes involving credit card points, customers could only use their points to redeem low-quality gifts. In contrast, the consumer outmatchow market in Japan was doing much better since it was worth(predicate) 7 trillion yen by beforehand(predicate) 2001, double the market size of credit card. 6 The availability of ATMs for cash withdrawals Japanese consumers generally preferred to pay by cash or money reassigns. A survey conducted in summer 2000 asked respondents which Internet bank they would deposit their money in.\r\nThe 3,825 respondents were loosely in their 20s and 30s. Figure 1 illustrates the results: the draw of the online banks in Japan in 2000. [pic] The pie map illustrates that the success of a Japanese bank relied heavily on its ATM table function. clincher include whether the ATMs were conveniently located, whether they charged a teensy-weensy or no treatment fee, whether they were open for long hours, etc. That leads to the tolerant distributions of ATMs service in Japan. We could recognize that the place equity likewise played an beta role to attract the customers. 7 Internet usage in Japan\r\n online banking with limited run-as an extension of traditional banking-was already available in Japan in 1997 with Sumitomo swear. The integral number of Internet accounts at study commercial banks r separatelyed 1. 4 one million million at th at time. According to a Nielsen/NetRatings report, the Internet macrocosm in Japan was some 38 million in January 2001, and 41% of them were active users. However, a study by Yankee Group in archean 2001 found out that some 20% of all Japanese households had a stubborn line Internet connection at the end of 2000, less than the 50% Internet insight in the US.\r\nLow penetration of fixed line Internet connections had determined a lot of nation to use i-mode, which could cost only about several(prenominal) hundred yens a month. I-mode was a cellular Internet service proposeed by NTT DoCoMo, allowing emails and other Internet functions to be carried out via handsets. It had much than 22 million subscribers by April 2001. In fact, i-mode becomes so popular that Miyai, director of JNB, once said â€Å"Internet banking is really â€Å"cellular banking” in Japan”. 8 The private-enterprise(a) situation rivalry from traditional banks JNB blush had to face stiff compe tition with kn give bricks-and-mortar banks in a crowed banking market even though it was considered as the Japan’s first Internet bank without personal branches. slanging habits and conservative consumer culture in Japan facilitate traditional banks to gain competitive vantage in the market. Further more than, traditional banks were reservation their services more convenient by installing more and more ATMs and providing a variety of value-added financial services.\r\nThe most simple factors which make JNB’s competitors pay financial aid to JNB seemed to be trim overheads, competitive rates, inflict fees and healthy conglutination backing. 10 Competition from domestic Internet banks Sony beach JNB as well as had to compete with new entrants that provided similar services, atomic number 53 of those competitors was Sony wedge, an Internet-only bank with 37. 5 one million million million not bad(p) investment expect to start operation in mid-June 2001. So ny Bank’s strategy was similar to that of JNB in terms of higher(prenominal) arouse rates, lower fees, a small workforce and no physical branches.\r\nIn particular, the new bank’s counselling stressed customized, one-to-one services. Sony bank took advantage of its strategic stakeholders to deliver high-quality services to consumer. For example, customers of Sony Banks could use SMBC’s ATMs at â€Å"am/pm” convenience store chain as contact point, or J. P. Morgan Chase, one of its classic stakeholders, would provide personal financial advice through the Web or Sony Bank patently benefited from the Sony Empire by utilizing Sony Bank’s settlement service to purchase Sony products online. IY Bank\r\n some other Internet-only bank to enter the disturbance was IY bank, whose â€Å"internet” was predominantly a excursive ATM ne devilrk although Internet-based minutes would also be possible. It was expected to install nonstop ATMs in 3659s Ito-Yokado supermarkets and Seven-Eleven convenient stores within two years of operation. It had already joined up with a combined network of social club city banks, including one of the Japan’s largest commercial banks Sanwa, and charged commission whenever a customer of another bank in the network withdrew money from an IY Bank ATM.\r\nIY Bank intended to be settlement-focused and would develop loan and card short letter and Internet-based services later. IY Bank planned to install 24-hour ATMs at 3650 stores under the assort by spring 2002 and at 7150 stores within five years of operation. Its lay seemed to be practical since it could take advantage of the Ito-Yokado group’s existing customer base, which is 10 million customers per day, and its low-cost operation. 1 Competition from international Internet banks Another Internet-only bank, called eBank, was expected to start operation in June 2001.\r\nIt would specialize in the settlement of payments for small-v alue online purchases worth up to 100,000 yens and would charge a lower commission than routine bank. eBANK was operate by Japan Electronics Settlement Planning Inc and invested by Japan Telecom, Yamato Transport and Ericsson Holding International. Its jacket was about US$37 million. Japan Net Bank’s competitive advantages JBN, one of the core Internet businesses of call down company SMBC, aimed to build up its independent, own brand name and aspired to become the de facto threadbare of the Japanese- room â€Å"Internet Specialized Bank” for twenty-first Century’s Internet community.\r\nTherefore, the bank adopted the customer-centric principle seriously in order to survive and develop. JNB diametricaliated its financial products and services from those of its competitors by its distinguished characteristics: 3 24/7 availability JNB customers enjoyed circular-knit financial functions and 24/7 approachability to their accounts through the Internet. They co uld carry out transactions or check their accounts through quadruplex access channels, including physical channels (ATMs or the Head Office) and mobile internet service (i-mode). The interfaces were designed to be in truth user-friendly.\r\n besides, JNB began to metamorphose into services other than basic bank transactions such as ordinary and term deposits. For example, it allowed on-line payment for bills and services of Tokyo Electric Power, Nomura Securities and Nifty Corp. ’s on-line shopping mall. 4 clandestine-enterprise(a) interest rate JNB offered attractive interest rates and fees compared with conventional Japanese banks [see expose 3]. Its deposit interest rates were more than twice that of the average rates offered by major Japanese banks, and its charges for fund transfer were less than half those of conventional banks. Customized services Every customer had his/her own limited information page on the Web. Customers would nail e-mail notifications of tr ansaction details such as receipt of fund transfers, end point of term deposits, errors in automatic account debits, etc. 6 Confidentiality of usage The confidentiality of JNB customers’ private information was strictly secured; private information could not be used without customers’ agreement. knowledge transferred through the network was encrypted by 128-bit SSL (Secure Sockets Layer).\r\nThe database and servers storing JNB customers’ information were protected by a firewall and an access-surveillance system. both Internet banking transactions could not be processed without a password. Moreover, the last login consider and time was always indicated at each login to a JNB account, so customers would know whether their accounts had been accessed illegally. 7 Flexible organization and IT system JNB hold a flexible, flat, and team-like structure which had a very low cost base. Its management style was dissimilar from the top-down approach of traditional J apanese corporations.\r\nIts structure allowed for the contingency mingled with different departments in the organization to order and solve problems. JNB also adopted a flexible, open information technology system which is divided systematically and functionally. The building of JNB’s IT application was quite innovative since it is in the main outsourced under the supervision of IT Department staff. strategical alliances to develop In the face of barbaric competition, JNB had the advantage of strong, broad, strategically important and multi-industry alliances.\r\nAn abstract strategic alliance would increase its revenues and market share. The advantages of strategic alliance include: • Allowing each partner to concentrate on activities that best match their capabilities. • Learning from partners and developing competences that may be more widely ill-used elsewhere • Adequacy a suitableness of the resources and competencies of an organization for it to survive. 9 Shareholder alliance JNB has been forming alliances and partnerships with many blue-chip corporations possessing huge customer bases.\r\nSince JNB could acquire customers through its shareholder alliances, it had relatively low reliance on mass-media trade and whence had low marketing budget. In next five years, it should continue diversifying its alliances from different sectors of economy to broaden its business and employ its alliance’s customer base. For instance, JNB aptitude negotiate with ORIX Corporation RIX, one of the Japan’s largest leasing and diversified financial services conglomerate, to obtain equity strategic alliance.\r\nThis alliance will enable the company to bugger off a larger share of the Japanese consumer finance market, and make consumer finance trading operations more efficient and responsive to the finance needs of creditworthy consumers. 10 orbiculate strategic alliances SMBC, as a major stakeholder of JNB, signed a m emorandum of joint understanding (MOMU) on a strategic partnership with The Bank of East Asia (BEA) to co-develop their business potentials in Mainland China, Hong Kong, Japan and other countries. In China, SMBC established a wholly own subsidiary, Sumitomo Mitsui Banking Corporation (China) Limited, in April 2009.\r\nSMBC has formed alliances with Kookmin Bank in Korea, First Commercial Bank in Taiwan, The Bank of East Asia in Hong Kong, PT Bank Central Asia Tbk (BCA) in Indonesia and other Asian banks. With Barclays, a major British financial institution, the company is exploring venues of cooperation in wealth management, operations in southmost Africa and other business fields. JNB should take of advantage of this opportunity to establish its relationship with these unknown banks to market and expand its business to international. These strategic alliances would enable the company to expand its market hare and generate incremental revenues. 11 Non-shareholding alliances Agein g population in Japan likely to increase demand for indemnification and pension products The Japanese population is aging fast. The 65 and over age group as a percentage of total population is expected to increase from an estimated 21% in 2005 to 35. 7% in 2050. Moreover pension assets under management in the Asia Pacific region are expected to grow from current E1, 100 billion to E2, 900 billion in 2015. Ageing population in Japan would boost demand for the pension products of the company.\r\nThe bank should cooperate and offer pension plans services, through Japan subsidy Navigator Company to gain a certain advantage. Discerning that changing demographic profile of Japan profoundly therefore would increase demand for JNB’s business. last Japan Net Bank (JNB), Japan’s first Internet bank without physical branches, began operation in October 2000. It attracted in the first place upstart customers looking for convenient, round-the-clock bank services with much mo re competitive interest rates and transaction charges than traditional Japanese banks.\r\nIts access channels included the mobile Internet service i-mode and fixed-line Internet. JNB relied on flexible, open computer systems and a young workforce of only 100 people to minimize operational costs. Its stakeholders, including parent company Sumitomo Mitsui Banking Corporation (SMBC) and NTT DoCoMo (provider of i-mode), were all large companies from different industry sectors. This stakeholder base gave JNB market depiction and access to their established customer bases. By April 2001 JNB had 130,000 customers.\r\nIt aimed at winning one million accounts and ? 1 trillion deposits and becoming juicy by the financial year 2002. just now it needed to resolve a number of issues before it were able to achieve long-term success in the face of strong competition from bricks-and-mortar banks and new Internet-only banks. One of of the essence(p) issues was about how to meet with wide fluctua tions in usage without over-investing; the other was alliance management, how to co-operate with alliance partners to achieve competitive advantage.\r\n'