Macro Environmental Analysis
Background of the company
Commonwealth Bank was founded in 1911 by the Australian Government which was later on fully privatised in 1996. Its headquarters is situated in Darling Harbour, Sydney, Australia. Commonwealth Bank is one of the “big four” banks of Australian banks along with National Australia Bank (NAB), Westpac and ANZ. The bank listed in Australian Stock Exchange in 1991 and currently, it holds more than 1,100 branches along with more than 4,300 ATMs. Macro environmental factors have direct impact over organizational performance and as company operates in various parts of the globe, thus, organization required to analyse the external environmental conditions of various countries so that operations could easily be managed along with enhancing organizational performance (Commonwealth Bank, 2018).
Macro Environmental Analysis
It is the tool through which impact of external environmental factors could be analysed over organizational operations. PESTLE analysis is one of the crucial tool through which relevant factors could be determined which affects organizational performance (Gutierrez, Boukrami & Lumsden, 2015). Following is the detailed analysis of PESTLE analysis:
Political
Political factors are one of the primary factors which affect the whole banking sector and in relation with the operations of Commonwealth Bank, different types as well as different countries’ political systems affects its performance (Messai & Jouini, 2013). This is because organization is present in more than dozen countries and every country has its political systems. In relation with the Australian political system, it is stable and the regulations imposed by the Australian government are favourable which also supports organizational operations and it also helps the organization to enhance its operations. Apart from this, there are numerous factors such as level of corruption, overnight imposition of policies and regulations, taxation laws, etc. which have direct influence over Commonwealth Bank’s operations (Lasserre, 2017).
Economic
Economic factors such as inflation rate, economic system, growth rate, and economic indicators have direct impact over Commonwealth Bank. With regards to the management of operations, organization has adopted several advanced and dynamic strategies through every type of situation could be handled along with reducing the negative effect of economic factors from organizational operation. From the analysis, several economic factors have been found which mainly affects organizational performance. These factors are stability of economic system, government interventions, exchange rates, labour cost, inflation and interest rates, etc. (Huang, Chiang & Tsai, 2015).
Social
Society’s culture, beliefs, perception, etc. are certain effective elements of social attribute of external environmental analysis. These factors have also direct influence over organizational performance. Commonwealth Bank always tries to contribute towards betterment of society along with generating various employment opportunities for the local public (Wu & Shen, 2013). This helps towards the development of society which ultimately helps the organization to set up its positive image amongst the target audience. Corporate social responsibility is one of the crucial aspects for every organization which needs to be considered in relation with the development strategies. Non-consideration of CSR requirements affects organizational performance which will ultimately decline organizational goodwill in the local as well as in the international market (Wibowo & Wilhelm Alfen, 2014).
Political
Technological
Technological factors have acquired an effective place in every business’ operations. With the help of technological factors, organization could easily enhance its performance, satisfy its target audience’s needs, attain competitive advantage, etc. From last five years, technology has transformed the whole banking industry and this has provided various opportunities to the organizations to uplift their performance along with expanding their business in the local as well as in the international markets. Although, technological advancements have reduced the importance of human resources along with increasing the opportunities for enhance their skills for attainment of desired goals and objectives. Commonwealth Bank is one of the “big four” banks of Australian banking industry and in terms of maintaining the acquired position as well as for acquiring the leading position in the target market, organization continuously invests in R&D department so that unique and advanced measures could be originated (Yeh, Lee & Pai, 2015).
Legal
Every country’s legal frameworks, policies and regulations differ. Legal factors in the banking industry plays vital role as financial institutions are required to execute their operations according to the legal frameworks in order to avoid the unethical practices. Apart from these factors, legal factors which affect banks’ performance are discrimination law, copyrights, patents, consumer protection and e-commerce and the data protection laws so that desired goals could be attained. In order to perform in better manner, organizations in the banking industry should adopt appropriate strategies through which data of clients could be protected as leakage of data could affect organizational performance in negative manner (Pan, 2015).
Environment
Environmental factors does not have much influence over Commonwealth Bank’s operations but in order to avoid even small glitches in the operations, every aspect of external environmental factors needs to be considered. Environmental factors are weather conditions, climate change, waste management, paper usage, etc. Amongst these factors, paper usage is one of the significant factor which affects organizational performance. In order to enhance organizational performance as well as for the purpose of acquiring leading position in the market, it is required for the organization to consider all these aspects (Mare, 2015).
Framework for resolving the challenges
In order to mitigate the impact of external environmental factors over Commonwealth Bank’s operations, it is required for the organization to analyse the challenges so that relevant strategy could be adopted with the motive of reducing its impact. McKinsey’s framework will be the most appropriate framework to resolve the challenges as well as the issues faced by the Commonwealth Bank. This framework is basically dependent over communicating the issue so that the issues could easily be reduced (Hanafizadeh & Ravasan, 2011). Following are steps included in the McKinsey Framework for meeting with the challenges faced by Commonwealth Bank:
- Define problem
- Structure problem
- Prioritise issue
- Develop issue analysis and work plan
- Conduct analyses
- Synthesize findings
- Develop recommendations
These steps play essential role in the accomplishment of tasks of the organization in an effective manner along with reducing the impact of macro environmental factors which have a direct influence over organizational operations. This framework helps the organization to determine the issue and challenges faced by the organization along with structuring the issue in an appropriate manner. Further, issues are segregated as per severity so that appropriate resolutions could be developed in order to meet up with the challenges. In relevance with executing the resolutions, action plan are developed along with development of issue analysis. The last steps of this framework are conducting analyses; synthesize findings and developing recommendations for the purpose of resolving challenges in an appropriate manner (Alshaher,2013).
Economic
Conclusion:
From the aforesaid information, it can be concluded that Commonwealth Bank is one of the largest banks in the Australian banking industry. Every organization requires considering macro environmental factors so that desired goals and objectives could be attained. In this scenario, it is necessary for the organization to determine the influence of these factors so that appropriate resolutions could be implemented for eliminating their impact as well as for enhancing organizational performance. In this report, macro environmental analysis has been conducted in relevance with the Commonwealth Bank’s operations to analyse the impact of these factors over organizational performance. Further, McKinsey framework has been discussed for resolving the challenges faced by the organization.
Commonwealth Bank of Australia is a multinational financial institution operating in various parts of the globe such as Asia, New Zealand, and United Kingdom and in the United States. Company offers variety of financial services such as fund management, insurance, retail and international banking, etc. to its consumers. They target both individuals as well as business enterprises as their service offering is huge and wide. It is the largest company in terms of Australian listed companies on the Australian Securitas Exchange as on August 2015 and it is the largest bank in Southern Hemisphere (Commonwealth Bank, 2018).
In this report identification of environmental factors’ impact over Commonwealth Bank’s operations will be discussed in order to analyse the effect of macro environmental factors. Along with this, the report will also focus over the application of frameworks in order to eliminate or reduce the impact of external environmental factors with regards to the improvement of organizational performance. Being a huge organization along with varieties of services, it is the duty as well as necessity for the organization to manage its operations in an appropriate manner. In addition to these aspects, report will also focus over the frameworks to remove the challenges faced by organization due to macro environmental factors.
References:
Alshaher, A. A. F. (2013). The McKinsey 7S model framework for e-learning system readiness assessment. International Journal of Advances in Engineering & Technology, 6(5), 1948.
Commonwealth Bank. (2018). Our company. Retrieved from: ei=CB-footer_who-we-are”>https://www.commbank.com.au/about-us/our-company.html?ei=CB-footer_who-we-are
Gutierrez, A., Boukrami, E., & Lumsden, R. (2015). Technological, organisational and environmental factors influencing managers’ decision to adopt cloud computing in the UK. Journal of Enterprise Information Management, 28(6), 788-807.
Hanafizadeh, P., & Ravasan, A. Z. (2011). A McKinsey 7S model-based framework for ERP readiness assessment. International Journal of Enterprise Information Systems (IJEIS), 7(4), 23-63.
Huang, T. H., Chiang, D. L., & Tsai, C. M. (2015). Applying the new metafrontier directional distance function to compare banking efficiencies in central and eastern European countries. Economic Modelling, 44, 188-199.
Lasserre, P. (2017). Global strategic management. Macmillan International Higher Education.
Mare, D. S. (2015). Contribution of macroeconomic factors to the prediction of small bank failures. Journal of International Financial Markets, Institutions and Money, 39, 25-39.
Messai, A. S., & Jouini, F. (2013). Micro and macro determinants of non-performing loans. International journal of economics and financial issues, 3(4), 852.
Pan, S. (2015). An overview of Indian banking industry. International Journal of Management and Social Science Research, 4(5), 67-71.
Wibowo, A., & Wilhelm Alfen, H. (2014). Identifying macro-environmental critical success factors and key areas for improvement to promote public-private partnerships in infrastructure: Indonesia’s perspective. Engineering, Construction and Architectural Management, 21(4), 383-402.
Wu, M. W., & Shen, C. H. (2013). Corporate social responsibility in the banking industry: Motives and financial performance. Journal of Banking & Finance, 37(9), 3529-3547.
Yeh, C. H., Lee, G. G., & Pai, J. C. (2015). Using a technology-organization-environment framework to investigate the factors influencing e-business information technology capabilities. Information Development, 31(5), 435-450.
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