Westpac Banking Group: PESTLE Analysis In Essay.

Each student will write a strategic analysis report of NOT more than 2500 words. The report should demonstrate that the student has thoroughly researched their topic. Students should use examples of business practice from the scholarly journals papers, conferences, books and professional magazines to support their arguments. The strategic analysis will be on a local company. The report consists of two parts and should cover the following requirements:

Part 1(External analysis)

1. Business background

2. What industry is it?

3. General environment analysis (economic, physical, sociocultural, global, technological, political/legal and demographic – and work out what the important facts are).

4. The industry environment ((i.e., supplier power, buyer power, potential entrants, substitute products and rivalry among competitors) and explain briefly what is significant for each).

5. Competitive environment (Is there a strategic group that you need to take account of? What is the rivalry like in this group? What capabilities do the relevant firms have? What strategies do they follow? What threats do they represent?) 6. Opportunities and threats

Part 2 (Internal analysis and proposal)

1. The firm’s resources, tangible and intangible

2. Capabilities identification (explain the capabilities carefully to indicate what the firm really does.)

3. Core competency analysis (For each capability, indicate which of the four tests for a core competency it meets).

4. Propose a suitable information system solution that meets the chosen company needs. 5. Evaluate the proposed system and provide your recommendations

Westpac is as an Australian Bank which is engaged in the business of providing financials and banking services to its customers. It is known to be one of the Australia’s big four bank and its headquarter is situated in the Westpac, Sydney. The name of the bank is the amalgamation of two major names which are “Western” and “Pacific”. As of March 2018, the number of the employees associated with the Westpac bank was 32620 (Nott, 2018). They deliver to a roundabout 14 million customers all cross the world. The team focused on the strategic policies and recorded its current revenue at 21.642 billion with the net income of A$ 8.012 billion. This report is a detailed analysis of the Westpac Banking Group and also discusses about the pestle analysis. Further, the opportunities as well as threats that are prevailing in the market are also discussed which can affect the performance of the company (Roy, Dostaler and Fiset, 2015).

The Westpac belongs to the banking industry and it is involved in the products and the services such as finance and insurance, consumer banking, corporate banking, investment banking, mortgages and facilities of the credit cards. The Westpac bank also helps to manage the global wealth of the company. The Westpac bank provides its services across the 1429 branches with the facility of the 3850 ATMs around the world. The banking industry is the competitive industry and the competitors of the bank are the ANZ banking company and the Commonwealth Bank (Vincent, 2016).  

The pestle analysis of the company is to basically give a detailed analysis of the external factors that are going to affect the working and the operations of the banking company. The external environment is a crucial environment and therefore the company shall have a scrutiny of the factors such as political, social, technological, legal, environmental as well as economical.

Political

There are various regulators of the political nature that will affect the performance of the company. The major gaps of the political factors are the bridge between the governments and the privatisation. Due to political imbalance in the country for the exchange of the money the traditional policies infused the labour party. Due to the financial deregulation the company gets mostly affected and which leads to the charges and the cut down services (Schlagwein, Thorogood and Willcocks, 2014).

Technological

The technological development and the digitalisation of the media is what is the most important factor in case of the banking company. The recent improvements in the payment and the withdrawal of the money from the ATM easily can be a technological development. Apart from this the technological development are the bank’s own website to cater the needs of the customers and the transfer of the funds from one account to the next account is possible (Phillips, 2017). 

Products and Services

The social factor of the pestle is the most important factor as it talks about the customers as well as the employees at the same time. It truly depicts the key variances in understanding the customers and at the same time delivering the services according to their preferences. As per the analysis from the annual report the Westpac reached its target of having 50% of its leadership positions held by women (Westpac, 2018).

The economic factors also pose a great thought in the analysis of the external factors that affect the organisation. The strengthening of the capital framework and the stronger impact of the operations are viable for the purpose of the future. Currently GDP of the Australians is the higher than the UK, Germany, France and the fluctuations due to the inflation and deflation is one of the basic reasons to affect the performance of the Westpac banking Company (Dell'Atti, Trotta, Iannuzzi and Demaria, 2017).

Moreover, the global high-performance benchmark for large companies and a remarkable increase in a year for a company with over 39,000 employees is what makes the bank one of the top four banks in Australia. Demographics and mandatory pensions supporting double digit growth in wealth management (Westpac, 2018)

The existing banks do enjoy the economies of scale with the probability of providing the wide range of products to the along with the fact of the low costs. Moreover setting a new brand against the existing once will take number of years in which the existing banks can revamp their old policies and set up new and innovative products as well as the services (Nott, 2018).

Physically the Westpac Banking Company shall have all he assets to cover the liabilities. Moreover the physical factors also affect the performance of the company. The factors such as the growth and the environment of the company shall be in association with the laws ad regulations. The company shall devise the policies that are supporting the live system and the ecosystem (Pearson, 2017). 

The quality and the culture is what make the bank a reliable one and therefore there are several factors such as the environmental factors which affect the performance of the Westpac Banking Company. The Westpac has retained its position on the DOW jones Sustainability index and to critically follow the environmental policies. An updated change in climate and the renewable sectors are also revamped critically. The Westpac has also improved the energy resources and thereby the effect can be lower down when compared to the other environmental strategies of the competitors (Pearson, 2017).

PESTLE Analysis

There are various amounts of the laws and the regulations that the company needs to comply with are the Environmental protection Act and the US Securities exchange act. Westpac’s New York branch and Westpac Capital Markets LLC maintain an anti-money laundering compliance program designed to address US legal requirements. To study the clients, the auditing of the report also plays a vital role in affecting the legal aspects of the Westpac Banking Company. Moreover the new regulations imposed by the legal authorities are also going to affect the performance of the business (Grant, 2016) 

The analysis of the industry environment is the structure that analyses the business and the strategies developed by the Michael E. Porter. The company revolves around the five major forces and which have been outlined below.

The buying power of the Australia in the commercial bank is mainly the individuals and the households for the purpose of the retail banking and the business for the borrowings. Customers in this industry have the bargaining power to switch from the regional to national or the foreign banks. Even when the cash rate is set typically low by the RBA, the commercial banks are required to form a competitive rate of interest in order to create completion. Since the cost of the funding id heavy there is a fall and steep down in the revenue of the Westpac Banking Company.  Therefore under this scenario since the power of the buyer is not concentrated, the buyer’s power poses moderate danger to the profit of the industry (Murray, 2014). demographic, physical and global, Missing

The main suppliers of the commercial banks like Westpac Banking Company are the customers, accounting services, financial as well as the legal services. Majority of the banks raise funds though the deposits made by the customers and the offshore funding, securitisation. Unlike the domestic banks, the foreign banks do not have the much deposit and they mainly depend on the capital received from the offshore. The net interest margins of the regional banks have increased after the global financial crisis of 2008. In order to capture the greater deposit share the banks offer high rate of the deposit return and therefore the customers can run to any banks. Under this situation the supplier power is not concentrated and the threats posed by the supplier are of medium amount, hence the bargaining power of the suppliers is not going to affect much on the Westpac’s workings (Jackson, 2016). 

Industry Environment Analysis

The entry of the new threats in the industry is pretty low because of the requirement of huge amount of the capital which needs to be invested before entering as decided by the APRA. The cost of switching and the economies of the scale are also the contributing factor in posing less threat of the new entrants. Under the Basel II framework the minimum capital requirement was determined. But as a result of the financial crisis the Australian banking industry adopted the Basel III (Wall Street, 2016)

After the financial deregulation there are four major types of lenders and there a wide range of substitutes available to the customers in case of the commercial banking. Among the ADIs customers are able to the use the power of the other institutions in place of the commercial banks and credit unions. But in the major scenario the ADIs are not the major threat but the financial companies, investment banks and the general financiers that can offer the similar products. The customers are less sensitive to the price changes and they run more towards the quality hence, the threat of the availability of the substitutes are moderate as per the market in case of the Westpac Bank (Franke, 2017).

Rivalry may exist among the competitors and the existing players in the basis of the size or scale of the company. Majorly the rivalry exists because of the innovation and the quality in the products and the services provided by the banks on the basis of the product differentiating. The investment in the technology may reduce the profit for once yet in the longer run this will be helpful against the rivalry with the existing players. To maximise profit, banks commonly apply the bundle of the strategies and also the two sided market strategies. According to PwC the revenue growth of the industry is always settled down by the increase in the credit demand as well as the home loans as a result of the low interest rate. Since the products and the services are the industry concentrated, we conclude that the existing competitors impose the medium level of threat (Keating, 2008).

Capabilities of the company

The major capabilities of the Westpac Company is to engaged into piloting its Lean Techniques across the 12 branches in the 3 of the five banks and the brands (Westpac, 2018). The Westpac has also extended its efforts in the line of the Six Sigma and both the frontline as well as the backline options the company is engaged into training of the employees through the lean workshops and analysing the risk management techniques. The Australians are contended as their money is safe and secure.

Capabilities of Westpac Company

Strategies the company follows

The company follows the customer driven strategy and seeks to deliver on this vision by building the deep and enduring relationships with the customers and being a position leader in the community and delivers the best people and gives the shareholders the premium returns. The company focused on our core markets of the Australia and the New Zealand which provides the wide range of the products and the focus mainly on the customer growth and the chosen segments to build the stronger relationships.

The strategic priorities of the Westpac includes the Service leadership, digital transformation, Performance Discipline, Growth Highways, workforce Revolution and to maintain the sustainability and to provide the integrity and continue to empower the diversity and the inclusiveness (Luke, 2017). 

Opportunities

The major strength of the Westpac Company is the 200 year old brand with a wide range of the banking and the financial services. The strong level of the capital structure places the Westpac in the top quartile range of the other banks such as ANZ Company, Commonwealth Company (Westpac, 2018). The Westpac have also received a higher and the impressive ratings and citations on the global indices. The development of the strong customer and the consistent growth of the customer franchise is one of the major opportunities with the Westpac Banking Company (Woods, 2018).

Threats

Financial sector is an important organ of an economy ad yet it is exposed to many threats such as changing in the banking regulation by the government and changes in the economies of scale will have a major impact on the performance of the Westpac.

The consumer centric rise of the fintech is again the major competition to the Westpac Company and hence is the major threat to the traditional banking players (Woods, 2018).

The tangible analysis of the company starts with analysis of the book value of the assets close to 1466 million and this has been increased by 5% as compared form the previous year, the tangible assets are necessary to perform the operations further. On the contrary, the intangible analysis is an important analysis since it provides the value of the non-monetary resources which in fact is important scenario. The monetary value can be seen through the figures but the non-monetary value can be felt only through the responses of the customers. The value of the intangible assets as on 31^st March 2018 is 11652 and has been increased from the previous year which was 11520. The external orientation of the economy showcased the mixed economy of the intangible assets majorly involving the exploration of the mining which were up by 10%, while the in non-residential buildings and transport equipment fell down (Skroupa, 2017).

The core competency of the Westpac Banking Company is the ability to provide the solutions to the financial problems and to advise the clients over the investments for the future purposes. The motive of the core competency of the Westpac Company is to meet the expectations of the customer and to exceed the benchmark set so that the company can steer the intended outcome quickly.

The Westpac has also extended its efforts in the line of the Six Sigma and both the frontline as well as the backline options the company is engaged into training of the employees through the lean workshops and analysing the risk management techniques. Fundamentally as per the core competency tests the capacity of the bank to give the monetary administrations go under the class of the resources in which the assurance of whether the assets are sufficiently skilled to provide the benefits to the customers are recorded (Keating, Quazi, Kriz and Coltman, 2008).

In the world of the automation and the evolution through the digital medium, the Australian banks are not behind the pace of the technology. The Westpac Bank must engage into the designing of the portfolio of the financial service brands, which enable to appeal to a broader range of the customers and provide the flexibility to the solutions that meet the needs of the customer in a better manner. The bank shall introduce the faster and the simpler way to make payments via ID of the Pay ID or a BSB and the account number (Nott, 2018). Hence it is recommended that the Westpac shall introduce new digital mediums to cater customers with new solutions.

The second major evolution of the information system and the technology is the evaluation is the Westpac’s rivals and has also been the mounting major in training its employees and the programmes in the recent month. Westpac shall also launch the internal IT University through the publishing of the online courses regarding to the future technologies. Around 4000 of the employees are working in the Agile teams and this technological development not only helps to evaluate the performance of the employees but also it gives the new kind of perspective and the abilities to the mind of the employees (Hull, 2002). 

References

Dell'Atti, S., Trotta, A., Iannuzzi, A.P. and Demaria, F., (2017) Corporate social responsibility engagement as a determinant of bank reputation: An empirical analysis. Corporate Social Responsibility and Environmental Management, 24(6), pp.589-605.

Franke, M., (2017) Innovation: The winning formula to regain profitability in aviation?. Journal of Air Transport Management, 13(1), pp.23-30.

Grant, R.M., (2016) Contemporary strategy analysis: Text and cases edition. United States: John Wiley & Sons.

Hull, L., (2002) Foreign-owned banks: Implications for New Zealand's financial stability. New York: Springer.

Jackson, S., (2016) No variance for filed orders: Hayes v Westpac Banking Corporation [2015] QCA 260. Proctor, 36(2), pp.42-43.

Keating, B., Quazi, A., Kriz, A. and Coltman, T., (2008) In pursuit of a sustainable supply chain: insights from Westpac Banking Corporation. Supply Chain Management: An International Journal, 13(3), pp.175-179.

Luke, B., (2017) Statement of social performance: Opportunities and barriers to adoption. Social and Environmental Accountability Journal, 37(2), pp.118-136.

Murray, D., Davis, K., Dunn, C., Hewson, C. and McNamee, B., (2014) Financial system inquiry.

Nott, G. (2018) Westpac’s CIO on banking’s next technology [online] Available from https://www.cio.com.au/article/640660/westpac-cio-banking-next-technology-battleground/ [Accessed on 30^th August 2018]

Pearson, G., (2017) Further challenges for Australian consumer law. In Consumer Law and Socioeconomic Development (pp. 287-305). Springer, Cham.

Phillips, N., (2017) Legal threat exposes gaps in climate-change planning. Nature News, 548(7669), pp.508.

Roy, M.J., Dostaler, I. and Fiset, J., (2015) 11 Governance and environmental performance. The Global Commercial Banking Industry, p.344.

Schlagwein, D., Thorogood, A. and Willcocks, L.P., (2014) How Commonwealth Bank of Australia Gained Benefits Using a Standards-Based, Multi-Provider Cloud Model. MIS Quarterly Executive, 13(4).

Skroupa. C, (2017) How intangible assets are affecting the company value in the stock market [online] Available from https://www.forbes.com/sites/christopherskroupa/2017/11/01/how-intangible-assets-are-affecting-company-value-in-the-stock-market/#37de7a922b8e [Accessed on 30th August 2018]

Vincent, J., (2016) Westpac Banking Corporation v Wittenberg (2016) 330 ALR 476. Brief, 43(11), p.21.

Wall Street, (2016) What are accounting polices? [Online] Available from https://www.wallstreetmojo.com/accounting-policies/ [Accessed on 20^th August 2018]

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Woods, R. (2018) Australian to revamp IT with lean Six Sigma [online] Available from https://www.isixsigma.com/industries/financial-services/australian-bank-revamp-it-lean-six-sigma/ [Accessed on 30^th August 2018]