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Thursday, April 14, 2011

Why operations and marketing count big time in banks-beyond retail banking

Veterans of 1st year Bschool would almost certainly have realized the importance of both marketing and operations to create a successful retail banking franchise. You need to segment customers very well to decide the number, location and mix of branches, products, loan book etc. And for executing that master plan well to turn in a profit in an increasingly competitive environment, you need Operations to pitch in well by constructing branches on time, hiring people when needed and with the sufficient skill sets, ensuring the IT infrastructure is cost effective, scalable, safe and needs business needs..and the list goes on.

But the Wholesale banking arm also needs operational expertise, and not just the stud wizard traders/structure rs/researchers. Take for example a derivatives product which needs frequent margining, interest and other payments over the life term. Or even a trade finance product which needs frequent collections. Or that documentation management program for a key client. All these need precise levels of coordination, on shore presence and superb payment systems-which is the heart of the bank. In fact, a bank which is operationally sound has a strong moat which errects formidable entry barriers. And of course, the sales/relationship function in investment banks are all about marketing. So these two functions-operations and marketing-can break or make any bank, and that is why aspiring finance MBAs should not ignore them

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