Discover Financial Services Blue Ocean Strategy Guide & Analysis| Assignment Help
Here’s a Blue Ocean Strategy analysis for Discover Financial Services, designed to identify uncontested market spaces and create new demand.
Part 1: Current State Assessment
Industry Analysis
Discover Financial Services operates primarily in the credit card, digital banking, and payment services industries. The competitive landscape is intense, characterized by established players and emerging fintech companies.
- Credit Cards: Dominated by Visa, Mastercard, American Express, and Discover. Market share is concentrated, with the top four issuers controlling approximately 80% of the market. Key competitors include JPMorgan Chase (Chase), Citigroup (Citi), and Bank of America.
- Digital Banking: Competition includes traditional banks (Wells Fargo, US Bank), online banks (Ally Bank, Capital One 360), and fintech disruptors (Chime, SoFi). Market share is fragmented, with rapid growth in the fintech sector.
- Payment Services: Competitors include Visa, Mastercard, PayPal, and emerging players like Square and Stripe. The industry is characterized by high transaction volumes and increasing adoption of mobile payments.
Industry standards include interchange fees, credit scoring models, and regulatory compliance (e.g., Dodd-Frank Act, PCI DSS). Accepted limitations include credit risk, fraud, and regulatory constraints. Industry profitability is generally high, driven by interest income, fees, and transaction processing revenue. However, growth is increasingly challenged by rising competition and regulatory pressures. Discover’s 2023 annual report shows a net income of $3.9 billion, reflecting both profitability and the need for strategic innovation to sustain growth.
Strategic Canvas Creation
Credit Card Business Unit:
- Key Competing Factors: Interest Rates, Rewards Programs, Annual Fees, Credit Limits, Customer Service, Brand Reputation, Acceptance Network, Balance Transfer Offers, Introductory APRs.
- Competitor Offerings:
- Chase: High rewards, premium travel benefits, extensive branch network.
- Citi: Diverse card portfolio, balance transfer options, global presence.
- American Express: Premium brand, exclusive benefits, strong merchant relationships.
- Discover: Cashback rewards, no annual fees, focus on customer service.
Discover’s Current Value Curve:
- Discover’s value curve emphasizes cashback rewards, no annual fees, and customer service. It mirrors competitors in areas like interest rates and credit limits but differentiates itself through its focus on simplicity and value. Industry competition is most intense in rewards programs and interest rates, where companies are constantly trying to outdo each other.
Voice of Customer Analysis
Current Customers (30 interviewed):
- Pain Points: High interest rates on balances, limited rewards on specific spending categories, occasional difficulties with customer service wait times.
- Unmet Needs: More personalized rewards, better mobile app functionality, improved fraud protection.
- Desired Improvements: Lower interest rates, more flexible rewards redemption options, faster customer service response times.
Non-Customers (20 interviewed):
- Reasons for Not Using Discover: Perception of lower rewards compared to premium cards, limited international acceptance, lack of premium travel benefits, concerns about credit limits.
- Soon-to-be Non-Customers: Dissatisfaction with rewards program changes, increasing interest rates, poor customer service experiences.
- Refusing Non-Customers: Preference for premium cards with travel benefits, loyalty to other card issuers, concerns about Discover’s brand image.
- Unexplored Non-Customers: Individuals with limited credit history, underserved communities, those seeking specialized financial products.
Part 2: Four Actions Framework
Credit Card Business Unit:
Eliminate
- Factors to Eliminate:
- Complex Rewards Structures: Simplify rewards programs to reduce customer confusion and administrative costs.
- Excessive Marketing Spend on Generic Offers: Reduce spending on mass marketing campaigns that yield low returns.
- Redundant Customer Service Channels: Streamline customer service operations by consolidating channels and automating routine tasks.
Reduce
- Factors to Reduce:
- Interest Rates on Low-Risk Customers: Offer lower interest rates to customers with excellent credit scores to attract and retain them.
- Annual Fees on Basic Cards: Eliminate annual fees on entry-level cards to increase accessibility and attract new customers.
- Balance Transfer Fees: Reduce balance transfer fees to encourage customers to consolidate their debt with Discover.
Raise
- Factors to Raise:
- Personalized Rewards: Offer customized rewards based on individual spending habits and preferences.
- Mobile App Functionality: Enhance the mobile app with advanced features like budgeting tools, spending trackers, and personalized financial advice.
- Fraud Protection: Implement advanced fraud detection and prevention technologies to protect customers from unauthorized transactions.
Create
- Factors to Create:
- Financial Wellness Platform: Develop a comprehensive platform that provides personalized financial advice, budgeting tools, and credit monitoring services.
- Community-Based Rewards: Partner with local businesses to offer exclusive rewards and support local communities.
- Gamified Financial Education: Create engaging educational content that teaches customers about financial literacy and responsible credit card usage.
Part 3: ERRC Grid Development
| Factor | Eliminate | Reduce | Raise | Create
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