Introduction
Every organisation has to carry out an audit after a certain period of time. This is done to establish the performance of the company, how the finances of the company are being used, whether the company is making losses or profits and what needs to be changed to better manage finances of the company. Once the audit has been done, a business report is prepared.
This report contains details of breakdown of the finances of the company and how they have been used over a given period of time. In addition, recommendations are made in the report on how the handling of the finances can be improved.
The focus of this discussion is on the business report on commonwealth bank of Australia. The specific points of focus include a SWOT analysis, Porter’s five forces analysis, PESTEL analysis, value chain analysis and BSG matrix and Position map.
Background Information
The Commonwealth Bank of Australia is provider of financial services that are integrated. Based in Australia, the bank provided wide array of services to their wide clientele in Australia. Some of the services provided by the bank include institutional banking, retail banking, business banking, premium banking, management of funds, share broking, insurance, superannuation and investment.
The company offers its services and products to well over 10 million people who are account holders with the bank. Other than Australia, the bank has other branches in New Zealand, Asia-Pacific and Europe. The headquarters of Commonwealth Bank are in Sydney in Australia (Commonwealth Bank Australia 2005).
SWOT Analysis
In order for the Commonwealth Bank of Australia to improve on its financial management and provision of better quality services and products to their clientele, there are a number of aspects that must be put into consideration.
The first thing that the bank will need to do is to carry out a SWOT analysis which will involve analysing the strengths, weaknesses, opportunities and threats that the company faces. (Commonwealth Bank Australia 2005)
The strength of any company or firm is all the resources it has together with all its capabilities. This is because a company can use its resources to place itself competitively especially if the competitors do not have similar resources. The strengths of the Commonwealth Bank of Australia include:
- The high number of customers it has – over 10 million
- The good reputation and image that the company has managed create over the years
- Having been in the business for long, the bank has the relevant knowledge on various ways of cutting cost so as to realize higher profits.
The networks that this bank has having been able to tap into other markets like New Zealand and the European market is another strength that the bank enjoys.
Weaknesses
The weaknesses of any given company may be the inadequacies of its strength. For instance if the Common wealth Bank of Australia finds its difficult to penetrate in some foreign markets perhaps due to the stringent measures put in place by the government, then that can be termed as a weakness.
The weakness of the brand name of the products and services provided by the bank can also be seen as weaknesses. However, this bank has managed to remain consistent in the quality of products and services that the offer to their customers and thus this has not been a problem.
The other problem is the cost of putting up structures especially when the bank wishes to penetrate foreign markets. This is usually because governments of different countries have put in place mechanisms that govern foreign investors and this may prove to be a weakness for the bank.
Opportunities
Usually every company can carry out an analysis to explore the possible opportunities that may exist to help the organisation make profits. The Common wealth Bank of Australia can consider investing in other regions of the world. Embracing technology to the fullest to improve the quality of services and products provided to customers is yet another opportunity (Porter 1980).
Threats
These are some aspects that can cripple the operations of the business. Some the threats that Commonwealth Bank of Australia faces include emergence of new banks which provide cheaper banking services (Bohm 2009). Introduction of new banking services that are could also threaten the operations of the bank
Pestel Analysis
PESTEL analysis comprises of political, economic, social, technological, environmental and legal factors. The political factors dictate the extent to which the government interferes with matters economy. Such areas include matters regarding tax, restrictions of trade and tariffs. This will affect the manner in which Commonwealth Bank of Australia conducts its operations.
Economic factors include among others the rate at which the economy is growing, the rates of exchange and the rate of inflation as well. These factors will affect the manner in which the bank will conduct its operations. Social factors are some of the aspects that intertwined with health, population and culture. Emerging trends in the social scene will affect the rate of demand of financial services and products of the bank.
Change in factors of technology like automation will affect how the bank will operate and failure to embrace technology could see the company lose some of its clientele. Shifts in technology could also mean that the company will have to incur higher costs.
Environmental factors are issues regarding the ecology, change of weather and climate and how these changes could affect the business. Legal factors include issues to do with any laws that may be enacted that affect the manner in which the bank carries out its business. Some of these laws include laws of employment among others.
Porter’s Five Forces
Threat of entry of new competitors
The banking and finance markets is one of the markets that has the potential to yield returns that are quite high; for that reason, there is a high likelihood that the market will attract new players. When the new players come into the market, they will be a threat to the Commonwealth Bank of Australia who might in turn loose their customers to the competitor.
Intensity of competitive rivalry
If the rivals in the banking field are projecting high and intense competition, then this may pose a problem to the bank especially if it is not able to counter the competition (De Wit and Meyer 2010).
Substitute services or products
If other players in the market come up with alternative substitutes of what the Commonwealth Bank of Australia is currently offering, then there may be a decline for the demand of the services and this will have an effect on the profit margins of the company.
Power of bargaining for customers
When the customers or clients of the Commonwealth Bank of Australia have a greater bargaining power, this will affect the current prices at which the bank is offering its banking and financial products and services. This may mean that the company will have to revise the prices downwards and this will have an effect on the profit margins of the company.
The other thing that the bank should consider is Supplier’s bargaining power because this will entail that when the suppliers’ power of bargaining changes, then there is bound to be a change in the operations of the company and margins of profit will be affected.
Value chain
This refers to a series or chain of activities that help a company develop an advantage against their rivals. There are several activities in this chain, all of which are key to the survavival of the bank. The need ford coming up with a value chain is to enable the Commonwealth Bank of Australia establish its key competencies and areas that the bank can use and take advantage of.
BSG Matrix and Position Map
Matrix refers to a framework whose basis is on four classifications of units of business. The matrix is therefore used to map a position of units of business within market growth and relative market share parameters.
Following the positioning of the business on the matrix will help determine the total amount of money consumed and the amount of money that the company is generating. (Haberberg & Rieple 2008) The Commonwealth Bank of Australia will therefore be ranked in one of the categories.
The four main categories in which a business can be positioned include cash cows, stars, dogs and question marks. This model has however lost popularity as other new models have continued to emerge. It has been argued that despite its effectiveness, it has a number of weaknesses as it overlooks some of other key factors that influence the positioning of business.
References
Bohm, A., (2009) Swot Analysis. London: Green Verlag
Commonwealth Bank Australia (2005) Annual Reports. Sidney: Australian Stock Exchange Listing CBA
De Wit, B and Meyer, R., (2010), Strategy: Process, Content, Context – An International Perspective, 4th ed. South-Western, Cengage Learning
Haberberg, A. & Rieple, A., (2008) Strategic Management: Theory and Application. Oxford: Oxford University Press
Porter, M.E., (1980) Competitive Strategy: Techniques for analyzing industries and competitors. New York: Simon and Schuster