ING DIRECT CANADA

ING Direct Canada

ING Direct Canada

1.Define the strategic issues for ING Direct Bank and briefly explain if the Canadian banking industry is attractive for current and future players and what is happening to profitability.

The strategy followed by ING Direct includes focus on specific target segments, uniqueness in terms of service offering, and most of all a huge value proposition for customers, all backed up by a solid business model to deliver the service. This is a classic case of how a newcomer competing against a host of very well-established banks can gain the upper hand through creative applications of relatively new technology (i.e., internet services) and a basic, but widely appealing package of standard financial products. ING DIRECT's strategy of simple products, aggressive prices, and direct distribution has created clear differentiation from its competitors, and helped the bank make profits by keeping costs to a minimum.

ING Direct's growth strategy was to provide a face to their “Click Call” retail operations. This is achieved by increasing their product portfolio and effective cross selling of products offered by their parent company. They also ensured that their value proposition is not diluted in this process.

2.What is ING Direct's business level strategy? Discuss three capabilities and how they support this strategy. How are these capabilities rare, valuable, and/or hard to imitate. Briefly explain how ING Direct makes a profit. How does it earn revenues and incur expenses?

Direct banking being a relatively new concept in the US, ING Direct had to build relationships with its customers without face-to-face contact and convince them that it is a safe way to bank. To be successful with this new model ING Direct realized that it should have an organizational culture that attracts people with lot of energy and a zeal for doing the right thing both in terms of higher returns and better service for the customer. In addition they had to want to do things differently. The team that the ING Direct assembled to execute its concept in US comprised of "people who were entrepreneurial with strong operating skills; who either had little banking experience or had been uncomfortable working for larger, bureaucratic banks; and whose average age was in 30s". The culture that evolved within ING Direct ensured that each employee became great ambassadors for ING Direct.

3.Who is ING Direct targeting and beyond the fact that they already multiple banking relationships why are they being targeted? Discuss the pro's and con's of banking with ING Direct from this target customer perspective.

ING Direct chose to sell simple, no-frills products for which the switching costs were low. They typically targeted customers who had money that was earning low interest rates at other banks and made it easy by allowing inter-bank transfers free of cost. Added to that, the customers were not charged a service fee for opening a new account with ING Direct. In the service industry, switching costs are generally associated with convenience; the more inconvenient it is to change banks, the ...