Infinity Bank HBS Case Analysis

Infinity Bank Case Study Analysis

Overview of External Environment of Infinity Bank

Infinity bank originated in the United Kingdom and was considered one of the ten largest banks operating in the United Kingdom. The bank focused on retail banking activities which were considered the heart and soul of the bank by Andrew Shebbeare, Vice President of retail operation. However, the focus on retail banking by the bank did no provide greater profitability in comparison with other banks located in the United Kingdom which were the peers of Infinity bank from the period of 1998 to 2003. The reason for the under performance of the Infinity bank was considered that the bank didn’t cooperate with the change in banking industry that were adopted by the other peer banks over the previous twenty years i.e. adoption of technology, infrastructure and customer services to enhance the profitability of the bank. Moreover, other banks such as Barclays reduced its headcount of employee i.e. from 11800 to 97800 within the period of 1988 to 1993. Hence, all these changes and adaptability by disparate banks in the United Kingdom led other banks to perform and enhance profitability in comparison with the Infinity Bank.

Supermarket Strategy

The supermarket strategy involves the selling of product to the customers by the retail branches of banks through which their profitability will be derived. The branch managers were completely responsible for the selling of the product which would determine the profitability for a specific retail branch through which the product was sold. Hence, showcasing the retail branches of banks as the financial shops from which the customers could buy different financial products is called the supermarket strategy.

Achievement through Supermarket Strategy

Infinity Bank adopted the supermarket Strategy to increase the efficiency and effectiveness of its retail branches which were the huge assets of the banks and were subjected to large overhead costs. Infinity banks desired to increase its profitability by letting retail branches to sell different financial products which could compel the banks to work effectively and efficiently as the profitability of a particular branch was related to profitability of selling the financial product by the company according to the supermarket strategy adopted by the Infinity Bank. Therefore, Infinity bank was trying to achieve efficiency and effective work through retail bank branches to increase profitability.

Efficient and Effective

The adoption of supermarket strategy was not much efficient to reach the goal of increase in profitability by the Infinity Bank. The reason that why the approach was not efficient is that even if the retail branches manage to increase the selling of product through supermarket strategy even than the overhead costs of retail branched would be much larger as compared to the other banks competing within the similar market.

The adoption of supermarket strategy can be effective due to its nature of compelling to retail branches that they must sell the financial product to generate profitability for the infinity bank which in turn will generate profitability for that particular branch. Hence, the application of this strategy did not result in the increase in profitability for the bank within the period of 1998 to 2003. Therefore this supermarket strategy is not considered effective for the infinity bank.

Analysis of Cost Structure

The three vital product of the retail branches are current account, credit cards and mortgages. The most profitable product out of all these three products was mortgages with the highest profitability among the three products. Hence, the cost of all these three products are discussed in detail below:

Current Account

Current account was one of the vital product of the infinity bank in terms of volume regarding bank account which is essential for almost every bank to run the business. The cost of operating this product was highest among all the products which was mainly due to the overhead cost related or retail branch activity.

Credit Cards

The credit card was the highest revenue generating product among all the three products and also one of the source of generating highest profit for the Infinity Bank among all the three products. Although, the components of costs in credit cards are greater than the components of cost of the current account but the overhead and service cost of credit card are far less than the current account product.


The components of costs of mortgages are greater among all the three main products offered by the retail branches of the Infinity Bank but the values of these costs are far less than the costs of the other two products. Hence, mortgages were one of the revenue generating product for the period of 1998 to 2000 which was one of the profitability driver for the Infinity bank.

Value Chain Analysis

The value chain analysis on the Infinity Bank is conducted in order to determine how the company can meet the profitability of its peer banks. It is analyzed that the major cost or expenditure of the Infinity Bank occurred due to the overhead cost of retail bank branches which was one of the largest network of branches in the United Kingdom.

The marketing department should focus on the selling activities of credit card and mortgages as these are the highest revenue generating products for the company. Moreover, the current account of the company was the loss making product for the Infinity Bank. Hence, the marketing department should focus on marketing activities related to the products so that the revenue can be increased as well from the current account product.

The operation activities of the Infinity Bank adopted the supermarket strategy which could increase the revenue through the retail bank branches resulting in further increase of the revenue as the supermarket strategy allowed the retail bank branches to enhance their profitability through the selling of the financial product. Hence, this strategy disabled the Infinity banks to increase the profitability in comparison with the banks prevailing in the United Kingdom. Hence, the activities performed by the Infinity Banks should be reconsidered in order to increase the profitability.


The cost structure analysis and value chain analysis of the Infinity bank provided the information that the Infinity bank adopted the supermarket strategy to enhance the efficiency and effectiveness of the retail bank branches in order to generate the revenue so that the current account revenue could be greater than the costs related to current account which led the company to under perform in comparison to their peer banks.

Instead of adopting the supermarket strategy, the company should adopt the cost saving strategy which will assist the company in reducing overhead cost and efficiently managing the operations, which will result in reduction of the overall cost of Infinity Bank. The strategy that should be adopted by the is to adopt the technological and infrastructural change which the other banks have adopted in order to cope up with the increasing challenges of deregulation which led the foreign competition to enter in the market and threat of new entrants increased of the Infinity Bank. Therefore, Infinity Bank should focus on its operating and marketing strategies after implementing technological and infrastructural change with the reduction in number of branches operated by the bank as technology advancement has reduced the need of largest branches network for banks.


Exhibit 1

P&L: 1999-2003          
  1999 2000 2001 2002 2003
Current accounts          
no. of accounts (millions) 8.10 8.19 8.32 8.41 8.60
balances on deposit (₤ millions) 11,259 11,310 11,265 10,849 11,896
Revenue (₤ millions)          
Net interest 405 380 350 331 358
Fees 99 94 100 85 67
Costs (₤ millions)          
Service costs 650 674 707 701 716
Overhead 182 178 211 171 172
Profit before tax (₤ millions) -328 -378 -467 -456 -463
Credit card accounts          
no. of accounts (millions) 4.80 4.87 4.98 5.00 5.06
balances borrowed (₤ millions) 3,864 3,954 4,089 4,115 4,301
Revenue (₤ millions)          
Net interest 465 455 446 424 434
Fees 194 206 233 222 219
Costs (₤ millions)          
Service costs 108 109 104 98 91
Credit losses 124 111 129 125 129
Overhead 58 53 50 50 51
Profit before tax (₤ millions) 369 388 396 373 383
  79% 85% 89% 88% 88%
no. of accounts (millions) 0.82 0.84 0.87 0.84 0.86
balances borrowed (₤ millions) 33,090 35,269 37,226 36,111 37,266
Revenue (₤ millions)          
Net interest 328 342 372 341 335
Fees 21 20 20 19 19
Costs (₤ millions)          
Service costs 12 12 13 12 10
Credit losses 40 32 41 37 38
Overhead 9 9 9 9 9
Setup costs 44 44 45 41 41
Profit before tax (₤ millions) 243 266 284 261 257
  74% 78% 76% 76% 77%
TOTAL PROFIT FOR 3 MAIN PRODUCTS (₤ millions) 285 276 213 178 177
  24% 23% 18% 16% 16%