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Business Management Assignment Question
For the structuring of this final strategic options/objective/mission section of your assessment item, I recommend one of two models:
- The 5 Qs model in the text book provides five salient questions that any organization should be able to answer.
- Alternatively (ie, don't use both models) there is an excellent paper in the 'Unit Resources' tab by Hambrick and Fredrickson. They propose that there are 'Five Diamonds' (Arenas: where will we be active?;Vehicles: how will we get there?; Differentiators: how will we win in the marketplace?; Staging: what will be our speed and sequence ofmoves?; Economic logic: how will we obtain our returns?). This paper also provides two examples (IKEA and BPI) and a fantastic checklist (Table 1 – Testing the Quality of Your Strategy) that you can consider. I really like this paper – it is easy to read, well-structured and logical.
Business Management Assignment Solution
EXTERNAL ENVIRONMENT ANALYSIS
PORTER'S FIVE FORCES ANALYSIS
Porter's Five Forces model is a tool that helps us determine long term attractiveness of a firm or industry. These forces play a very important role in analyzing the environment of the industry as a whole and the position of the firm in the industry. Micheal Porter emphasized on the impact of forces like suppliers, customers, and substitutes etc. on the overall attractiveness of the entity in the subject. Taking into perspective the ANZ bank below is an attempt to analyze the five forces and their effect on the overall profitability of ANZ.
The threat of New Entrants:
· The threat of new entrants for the banking industry is usually quite low.
· ANZ has established itself and gained the position of being the largest bank in New Zealand. Besides this, it also has a good market share in Australia and Pacific countries.
· Considering the above factor, it becomes difficult for a new bank to enter and make a place for itself. In countries like Australia, incumbency is a significant factor which raises the entry barrier to a large extent.
· Banking norms have more and more stringent over the years. The threat in the industry overall has reduced due to these norms and regulations.
· The initial investment required is quite high and it is challenging to put together a skilled workforce to manage the new entrant.
The threat of Substitutes:
· Threat of Substitutes for ANZ is Medium
· This threat is not exactly from other banks, but from other institutions and competitors who are non-financial in nature.
· NBFCs are often very popular among customers due to the variety of options they provide.
· ANZ will face no real threat from rival banks in terms of private banking, but insurance options, funds management and other securities benefits provided by non-banking institutions are a threat in the long run.
· The saving grace in this context is close relations with customers. Ensuring that customers get what they want from ANZ is the key to reduce the effect of this threat to a great extent.
· If the switching costs are high, the benefits that these substitutes provide will not be lucrative enough for customers to switch in the long run.
Bargaining power of Suppliers:
· The Suppliers' bargaining power is Moderate.
· Corporate suppliers include IBM, Dell, Telstra, and KPMG etc.
· Factors that affect the suppliers' bargaining power are interest rates and rise in avenues of investment.
· Suppliers of ANZ bank also include customer deposits, loans from mortgages, securities and the loans provided by other financial institutions.
· It is through these funds that the banks perform their day to day activities and the role of suppliers becomes prominent in such context.
Bargaining power of Customers:
· Customers' bargaining power is high in the banking industry
· Customers can make or break any bank. Most banks try their best to please their customers and offer them the best services at all times. This is to ensure that customer loyalty is sustained and they do not lose customers to competitors.
· The revenue that comes from retail customers has taken ANZ bank to the 2nd position for retail customer satisfaction ratings in Australia.
· With the number of non banking institutions increasing, customers also have a variety of options to choose from while looking at insurance or mutual funds. The customers' bargaining power increases a lot in this context.
· Banks such as ANZ lay a lot of stress on customer satisfaction.
· Diversification of product portfolio is an attempt to provide customers with a range of products to suit their needs. The success of ANZ can be attributed to the popularity that the bank has with the customers.
· Customers prefer banking with modern technology and ANZ has ensured they do not let their customers down.
The degree of Rivalry:
· Rivalry in the banking industry is comparatively on the higher side.
· In countries where ANZ has established its branches, there will be an unending competition from the other banks.
· With numerous market players of the same size, ANZ has to continuously strive towards improving its processes to sustain its success.
· Banking industry players have similar strategies and very less scope for differentiation. The deciding factors are usually technology and global reach of ANZ with respect to the rivals.
· A lot of banks get into the space of mergers and acquisitions to make a bigger impact as a combined entity. This poses a threat to the other players.
· The main reason why such competition is inevitable is that the exit barriers in this industry are very high. There is a constant struggle that firms go through to avoid the risk of failure altogether.
To summarize the above analysis, it is clear that the competition is high with regards to ANZ bank and sustainability has to be a long term goal for the organization. While the environmental conditions are certainly favorable, it is the duty of ANZ to continue to maintain good relations with both suppliers and customers to increase profitability. Risk management becomes an important aspect of such industries. There is an unending need to mitigate risks at every stage. (Sturm, 2007)