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ACCA Strategic Professional · Strategic Business Leader · E-business: value chain

Verity Bank has a mature branch network. Its board is considering launching a separate, digital-only brand with its own systems and culture, free from legacy processes, while the main bank continues unchanged. Which implication of this strategy is most accurate?

Launching a separate digital-only brand allows innovation free of legacy systems and culture, but it risks cannibalising the existing bank and duplicating costs. Integration of data is not automatic, and the approach is not simply cost leadership, so the first option is the accurate implication.

  1. AIt lets the firm pursue digital innovation without legacy constraints, at the risk of cannibalising existing business and duplicating costsCorrect
  2. BIt guarantees full integration of customer data across both brands without extra investment
  3. CIt removes the need for any change management in the main bank
  4. DIt is a pure cost leadership strategy that cannot involve differentiation

Explanation

A separate digital unit gives freedom from legacy systems and culture, a recognised way to handle disruption. The downsides are cannibalisation of the existing franchise and duplicated cost. Data integration is not guaranteed, change management is still needed for any shared elements, and the move is not restricted to cost leadership.

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