Discuss the Strategic development within an organisation. Conduct analysis of the strategies deployed by the organization. Also, discuss two controversies and outcome. Also conduct environmental analysis and discuss leadership style of the organization
Strategic development planning deals with the informing, shaping and supporting the strategic decision that affects the performance of an organisation. Strategic development in an organization is done through accurate planning that includes setting up of short, medium and long-term objectives, evaluating resources, strengthening operations and motivating employees to lead them towards the attainment of the organizational goals (Dyson et al. 2007). The present report would evaluate the strategic management aspects Westpac Banking Corporation. This is one of the ‘big four’ banks of Australia which has its headquarter in Sydney. Westpac is the largest branch network in Australia with 1429 branches, 13.1 million customers and 3850 ATM’s. The bank has undertaken actions for creating long-term value for the people associated with the bank.
2. Overview and Analysis of the strategies
Overview and Analysis of the strategies deployed by Westpac Banking Corporation is given in this section. Westpac Banking Corporation has developed effective strategies and set down priorities that have helped it to be one of the leading banks of Australia. The mission statement of Westpac Banking Corporation is to be the best bank of Australia by addressing the needs of all the customers. The vision of Westpac is to become the greatest service company in the world and helping the customers, communities and people to grow and to be prosperous (Westpac.com.au, 2018). The core competencies of Westpac include strong operating momentum in the retail and the business banking. The organic capital growth is supported by the strong profitability and capital light mortgage growth.
Westpac has previously deployed successful strategies in the past. Vertical growth strategies: In the late 1900’s, a substantial rejuvenation program was developed that adopted the vertical growth strategies through merger and acquisition in Australia and New Zeeland to expand the banks in market diversification strategy (Westpac.com.au, 2018).
Emergent strategies: Westpac also adopted the emergent strategies in 2002 when the bank commenced strategic reshaping by selling the iconic fiancé company called Australian Guarantee Corporation to GE Australia. In 2008, it merged with St. George Bank Limited that made Westpac a multi-brand group (Westpac.com.au, 2018).
The present strategies of Westpac aim to address the current mission and the vision of the company by increasing shareholder's return, improving the relationship with the customers and to be a community leader.
Despite the above strategies of the company, Westpac borrowed nearly $1.09 billion from the US Federal Reserve in the year 2009 at the time of the financial crisis. Furthermore, the bank encountered challenges related to capital and customer loyalty and employee engagement. Considering the present challenges, the management of Westpac has set down strategic priorities, which are listed below (Westpac.com.au, 2018):
- Performance discipline to manage the business in a balanced way and addressing the needs of all the stakeholders
- Attaining service leadership for improving the experience of the customers
- Attainment of digital transformation through the creation of multi-brand capabilities and simplification of products and processes
- Business expansion in different parts of the world
2.1 Strategic Partnership
Westpac has adopted for the Strategic Partnership with Mission Australia for supporting the disadvantaged families, homeless people and children. Westpac created $1.305 million for sponsorship with Mission Australia for supporting the Mission beat service (Westpac.com.au, 2018). Westpac has also a partnership with Bathurst in New Zealand to fund in coal mining activates in 2017.
The matrix of Porter's Generic Strategic strategies identified four different approaches that re-implemented by the business organization to create competitive advantage in the market. Tansey et al. (2014) commented that section of the right generic strategy help in pursuing other strategic decision of the business. Westpac's mission and vision revolve around to be leading banking service in the world.
Westpac has adopted the differentiation strategy that helped it deliver an exclusive range of financial products and services to address all the needs of the customers. Westpac has adopted for the organic growth and their product and their product and service range appeal to a broader number of customers (Westpac.com.au, 2018).
Diversification strategy: Westpac has also adopted for the diversification strategy by creating its presence in Asia. The business has focused on improving their funding, quality of capital and liquidity position in the market. The low cost to income ratio has helped to improve the quality of service delivered to the customers.
3. Two controversies of Westpac Banking Corporation and their Outcome
Westpac has developed several strategies and carried our different activities that have helped the business to grow and develop. However, some of the strategies have been criticised considering their ill effects on the environment and the different stakeholders of the business.
3.1 Controversy on funding of coal mine in New Zealand
Westpac has funded the organization Bathurst for coal mining in Dennison Plateau in South Island. This strategy has focused on developing a strategic relationship with the brands that would help the financial institution to expand further. The environmental protection and the climate change organization has argued that the mining activities would release 218 million tonnes of carbon dioxide that would ultimately destroy the environment. This would hamper the ecosystem of the country. Along with the climate change organizations, thousands of customers protested against the issues and left the company.
The issue of funding a coalmine created negative goodwill of Westpac bank. Several protests were held to prevent the bank from doing such activity. Finally, all the protest made the management of Westpac bank to create new climate change policy that led down a ban on the coal basin project. This made Westpac rule out the decision of funding the coal mining in New Zealand. The announcement made by Westpac to rule out the partnership plan clearly highlights the fact that people from all over the world are ready to protest against any activities that can affect the nature. Westpac with its new policy has helped to address the reality and thereby create a positive image in the market (Scoop.co.nz, 2018).
3.2 Controversy on misleading Statement
Corporate reporting is essential for any business to ensure transparency, create awareness about the performance of the business, and help the customers to know about their new products and service development in the market (Crane and Matten, 2016). However, in the year 2014, Westpac bank encountered a controversy related to their misleading statement. The statements were associated with investment returns on the Westpac Annuity Deposit and the statements were prepared from 2013 July to 2014 May. ASIC commented that the untrue statement misleads the customers. The statement that the interest rate of the money deposited was computed on investment principal amount. However, the truth was that the interest rate was calculated on the balance amount and this decline in the term of investment (Asic.gov.au, 2018). Westpac aimed to create a differentiated product, which is made public through advertisement. This time the company provided misleading information for attracting the customer and broke the ethics of the business.
The outcome of the misleading statement was quite heavy in the business. ASCI commented that it is the reputability of the business organization to offer a true and clear statement to the customers so that they can obtain the accurate information about their financial product. As per the Australian Securities and Investment Commission Act 2001 the statement released by Westpac has clearly hampered the consumer protection provision. This resulted in it to pay a penalty of $20,400 (Asic.gov.au, 2018). This hampered the goodwill of the business. The penalty was not huge but the business lost the trust and the loyalty of the customers, which was indeed a significant issue. The business clearly disregarded its ethical concern only for the sole purpose of making a profit. This issue made Westpac Banking Corporation improve upon its corporate social responsibility and develop strategies that would help it to abide by the established laws related to consumer protection and business ethics.
4. Environmental Analysis of Westpac Banking Corporation
After the evaluation of the mission, vision, strategies and the controversies of Westpac, it is crucial to evaluate its current business environment, competitive strength, weakness and market opportunities and threats.
The general environment can be evaluated with the help of PESTLE analysis:
1.The ‘four pillars' policy creates separation between the four top banks of Australia to prevent merger and acquisition that includes Westpac. This creates threat due to increased competition that reduces the interest margin.
2.The stable and the transparent political environment of Australia has helped Westpac to prosper (Heritage.org, 2018)
3.Westpac needs to abide by industrial safety regulation and needs to offer mandatory benefits to employees.
1.Australia has developed financial markets and foreign banks and institution compete successfully the domestic ones thereby increasing competition. The financial freedom is 90.0
2.The GDP of the country has increased. The GDP is 1.205 trillion USD (Heritage.org, 2018).
3.The corporate tax rate is 30%, which often create a burden on the business.
1.The improvement in the labour market has brought down the unemployment rate in Australia by 5.5% and this implies that Westpac has to provide proper benefit to the employees to retain them.
2.Australia has an ageing population and this creates a negative influence on the demand of the skilled labour (Abs.gov.au, 2018).
3.The judicial system of the country operates independently and this help to reduce corruption.
1.Digitalization by Westpac has helped Westpac to improve the customer experience and increase its flexibility 24/7.
2.Technological innovation has created an impact on the cost structure of the banking industry. It needs to keep itself updated to remain competitive in the market.
1.The established rule of law protects the property rights and prevent corruption within the country.
2.The regulatory environment of Australia is transparent and efficient and encourage business growth. The business freedom is 89.3% (Heritage.org, 2018).
3.Australia is the 13th least corrupt nation in the world which is positive sign for Westpac (ABC News, 2018)
1.The established laws on climate change and weather create an impact on the performance of Westpac. Westpac has to drop the plan of funding the coal mining at Bathurst due to the protest.
2.Westpac is also affected by the recycling and waste management regulation within the baking industry.
Table 1: PESTLE analysis of Westpac Banking Corporation
The internal and the external environment of Westpac can be analysed with the help of SWOT tool as discussed below:
4.1 Strength of Westpac
- Westpac is one of the four big banks in Australia and has more than 1200 branches in the country. This has also increased the customer base.
- Westpac has focused on technological innovation while carrying its business and this has improved the experience of the customers through ATM’s, online transaction, EFTPO’s (Westpac.com.au, 2018).
- The service of the organization is not only restricted to Australia and New Zealand but also has expanded to the USA and some important countries of Asia and EU.
- Westpac is famous for women empowerment. It has placed the women employees in respectable position within the company. The bank has also focused on increasing the number of the women customers (Beck and Davis, 2005).
4.2 Weakness of Westpac
- Westpac is affected by the intense competition in the market. The three giant banks of the country include Commonwealth Bank of Australia, National Australian Bank and New Zealand Banking Group that create tough competition for Westpac bank (Westpac.com.au, 2018).
- Although Westpac has several branches in Australia and New Zealand, its international presence is very limited. It has fewer numbers of branches in USA and Asia.
- In some cases, the bank was unable to meet the expectation of the shareholders. In the year 2015, the profitability of the business was good but the share of the dividend was ineffective that hampered the expectation of the investors.
4.3 Opportunities of Westpac
- Technological development and digitalization have improved the service of Westpac bank and this attracted many customers. The 24/7 availability of bank has ensured flexibility.
- The division of consumer and commercial banking has simplified the products and service for them and increased accountability.
- The penetration rate of the bank is 20.1% and this has increased its presence. Its further investment in security and wealth management can help it to improve further (Westpac.com.au, 2018).
4.4 Threat of Westpac
- The economic slowdown in Australia due to tightening of the monetary policy can hamper the dividends and the interest rate of Westpac bank.
- The intense competition among the banks, brokerage firms, credit unions and insurance companies create excessive pressure on the interest rate and the products and service (Westpac.com.au, 2018).
- The changing regulation in the banking sector in Australia and New Zeeland also create a threat for Westpac.
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5. Overview of Leadership Style of Westpac Banking Corporation
Girma (2016) commented that leadership style refers to the procedure that helps in offering direction, developing a plan and motivating the individuals. The leadership style is adopted considering the organization culture, structure and the performance of the employees. In Westpac Banking Corporation, the leadership has changed over the years. The CEO Gail Kelly has adopted for the democratic leadership style. Westpac has seen major changes under the leadership of Kelly. She has played a major role in the takeover of St George by Westpac at $19 billion after she became the executive. This helped Westpac to become a powerhouse of wealth (Newton, 2015).
The leadership strategy of Kelly has helped to increase the earning and the market share of Westpac. Her democratic approach has helped to address social issues related to sustainability. Under the leadership of Kelly, Westpac has successfully launched $100 million educational funds. Kelly joined Westpac at the initial stage of the financial crisis (Newton, 2015). The bank was criticized for being technologically backward and was unable to address the needs of the customers. After Kelly joined the banks, she began a five-year program that helped to bring technological revolution within the company.
She concentrated on individuals and enhancing client benefit. Her first ever vital moves were to return bank directors in branches. She presented the "bring back the bank director" system. Kelly has likewise grown the bank's quality in Asia despite the fact that not on the size of ANZ. The bank's Asian income rose 33 for each penny a year ago and it is extending in China and Indonesia. The strategic direction of Kelly helped to increase the core competencies of Westpac Banking Corporation. The cash earnings of the individuals increased from $3.1 billion to $7.6 billion within 6 years (Financial Review, 2018).
Kelly believed that to lead an organization to success, it is essential for the leaders to guide the employees. Autocratic leadership is not at all applicable in this world. She believed collaborative and generous leadership style that would help to direct the right people in the right direction (Kimmorley, 2018). She was one of the significant figures of women empowerment in the world.
The present report provides an overview of the strategic aspect of Westpac Banking Corporation. Westpac has adopted several strategies through its formation and presently it is one of the four banks in the world. The former CEO Gail Kelly has successfully developed strategies to lead the organization towards success. The leadership strategy of Kelly has helped to increase the earning and the market share of Westpac. Her democratic approach has helped to address social issues related to sustainability.
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Dyson, R.G., Bryant, J., Morecroft, J. and O’Brien, F., (2007). The strategic development process. Supporting strategy: Frameworks, methods and models, pp.3-25.
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Girma, S., (2016). The relationship between leadership style, job satisfaction and culture of the organization. IJAR, 2(4), pp.35-45.
Heritage.org. (2018). Australia Economy: Population, GDP, Inflation, Business, Trade, FDI, Corruption. [online] Available at: http://www.heritage.org/index/country/australia [Accessed 8 Jan. 2018].
Kimmorley, S. (2018). Gail Kelly on what it means to be a successful modern leader. [online] Business Insider Australia. Available at: https://www.businessinsider.com.au/gail-kelly-on-what-it-means-to-be-a-successful-modern-leader-2017-4 [Accessed 8 Jan. 2018].
Newton, R., (2015). What kind of leader do you want to be? Harvard Business Review.
Scoop.co.nz. (2018). Westpac rules out funding controversial coal mine | Scoop News. [online] Available at: http://www.scoop.co.nz/stories/BU1704/S00735/westpac-rules-out-funding-controversial-coal-mine.htm [Accessed 8 Jan. 2018].
Tansey, P., Spillane, J.P. and Meng, X., (2014). Linking response strategies adopted by construction firms during the 2007 economic recession to Porter’s generic strategies. Construction Management and Economics, 32(7-8), pp.705-724.
Westpac.com.au. (2018). Our strategy and vision | Westpac. [online] Available at: https://www.westpac.com.au/about-westpac/westpac-group/company-overview/our-strategy-vision/ [Accessed 8 Jan. 2018].
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