Westpac is an Australian banking company
The company started in 1817, and its headquarters are in Sydney. Today, Westpac is considered among the big four leading banks in Australia where the banking industry is ruled by companies like commonwealth bank, New Zealand and Australia banking group and the National Bank of Australia. The big banking corporations face stiff competition amongst them and still face high competition from the regional banks which are less diversified. Australian’s market structure in the banking industry is mainly an oligopoly since its market economy is saturated by a few large banks which contribute approximately almost 70% of the banking output (O’Sullivan, 2015).
Importance of the external environment to Westpac's operation
Westpac has a broadened portfolio whereby the services they provide are divided into two sections. The sections include advisory services and wealth management. Westpac New Zealand, BT financial group, Westpac institutional bank Westpac business, and retail banking are all of Westpac's customer divisions. The company has a very high reputation in Australia, and it ranks second in Australia (O’Sullivan, 2015). The company has an excellent relationship with foreign organizations and even corporates with some of these organizations. Among the various Australian banks, Westpac provides the best services of exchanging foreign currency.
Westpac has a perfect relationship with its clients
The company's mission is to help society members to gain more wealth. The organization has a vast client base, and it aims at providing the best solutions for wealth to each client's individual needs and wants (Ioia, 2014).
The external environment plays very vital roles in the banking sector
Most of the external tools are even beyond what the banks can control. Factors like competition, legal and government regulations, and rules have some influence on a firm's choice of action and a firm's direction choice, and this may positively or negatively impact the bank's internal environment. Westpac conducts its business mainly in Australia and New Zealand. It means that the lending levels of the bank in these two countries determine its performance.
PESTLE factors
International, domestic, political and legal conditions all influence the performance of this bank. The value of the Australian dollar is one of the factors that are likely to have an impact on Westpac and other players in the banking industry. For instance, when Westpac loans money to an individual who is in a foreign country the repayable amount and the amount of interest will change with a change in the charges on the rates of interest. The interest rates will also impact the operational efficiency of Westpac. The central bank is responsible for deciding the rates of interest when there is an increase in the rate of federal funds then there is an increase in the amount of cash flowing in the economy, and this means there will be increased earning by individuals. It means few people will need loans and this can negatively affect their operations (Weber, 2016). When the interest rate hikes then Westpac will have very high profits resulting from their massive cash reserves.
Financial services are also dependent on the country’s political climate. The political conditions in New Zealand and Australia are likely to affect the performance of financial service providers. When we have political instability which may include antigovernment protests, then the operation efficiency of financial sector players like Westpac will also be affected. Another external factor that will affect Westpac is the stock exchange. The bank mainly loans money to its clients like businesses and consumers. The companies will use the loans to make capital investments, and consumers will mostly buy what they need or invest in different ventures (Weber, 2016). When we have a fall in the stock market, then consumers and businesses will lose their confidence towards the financial sector, and they will borrow less. When an economy contracts then very few people can qualify to be granted loans by the bank and consumers may be unable to pay their mortgages which may negatively impact Westpac.
Strengths and weaknesses
Strengths
Westpac is one of the key players in the banking industry; this gives it numerous advantages and powers that help it outperform the other firms. These advantages help Westpac to penetrate the new market and still maintain the existing ones. One of its forces is the automation of the organizations' activities. It has a positive impact in that it has brought consistency to the company's products, and this has improved the company's ability to scale up or down depending on the markets demand conditions (Mika, 2017). Westpac also has implemented a very reliable network of distribution which has given the company the ability to reach a more significant portion of its potential market.
Westpac has a broad portfolio of services and is one of the oldest banking companies in Australia. The company is also present in other global markets like the United Kingdom and Asia. With its extensive portfolio of financial services, it can reach a diverse and extensive range of consumers. Westpac's ability to differentiate its service and have a clear strategic position enables the bank to outperform the other banks in the financial market and leverages a comparative advantage from its strategic positioning.
Westpac has a strong customer base which grows consistently. The bank has maintained the leading position among the local transactional bankers for more than eleven years compared to other Australian banks with a global market share. Westpac is strategically positioned to take advantage of the opportunities that the digital world has created. Westpac also has very impressive ratings and consumer feedback on the global indices which demonstrates the bank's strength and sustainability (Wood, 2015). It has been listed among the 100 most sustainable organizations on the planet among other accolades.
Weaknesses
Competition is a sign of a healthy market, and healthy competition is needed for a business to thrive. Westpac is not an exception as the company faces very high competition from the other three major Australian banks and it has to keep innovating to outperform its competitors. Another weakness is the organizations' low number of branches in foreign countries. When compared to the leading banks Westpac has a smaller number of foreign subsidiaries and also lacks a segment-wise performance analysis. The organization faces a challenge of overcoming the challenges that face a particular segment.
Opportunities and threats facing Westpac
Opportunities
Westpac has many opportunities as a company. The company lacks a global command, and by acquiring the right licenses, they leverage the chance of opening branches across the world and increase their client base. They can also improve their technology which would positively impact the efficiency of the organization.
Westpac can also focus to expand its operations to developing countries where they can benefit from the low costs of operating, an efficiency of human resources, high profits, and economical operation rates.
Threats
The bank is bound to suffer in cases where there are critical changes in the Australian economy because the financial sector is a significant sector to any economy. Regulations on banks help to guide the banking sector in case the laws change then all banks will be affected. Countries that have ties with Westpac may also experience changes in their banking regulations which will impact the bank (Cerutti, 2015).
Drivers of globalization
Globalization is the interdependence among economies from all over the world through the cross-border movement of capital, technology, goods and services. These integrations are evident with the increase of multinational organizations as they expand to newer markets. The four main drivers of globalization are cost, government, market, competition (Schmukler, 2017). Market drivers include things like transferable marketing and if the consumers have common needs. The emergence of global markets for existing products has enabled Westpac to satisfy the needs of the different markets with the existing products without having to create new ones to meet the demands of the new markets.
The influence of the government is also a significant driver towards globalization. Governments can collaborate to put in place different policies that lead to a reduction in the barriers of trade and provide easy access and an economy shift for an open market economy. Westpac could take advantage of the favoring policies to increase their optimum trade levels.
When corporations like Westpac gain access to new and larger markets with the increased human capital, they can achieve strategic advantage through economies of scale acquired through the sale of high quantities of their product.
The growth of competition among nations with foreign direct investments has been Competitive drivers has been affected by competition drivers (Hamilton, 2015). Countries and organizations continue to be more interdependent, and corporations get exposed to new competitors who are good for a company like Westpac to improve on its weaknesses and adopt more unique methods to counter the competition.
Impact of globalization
Yes, globalization has a positive effect on Westpac.one of the advantage acquired from globalizing is the ability to access an entirely new customer base. Any business looks for ways they can increase or improve their consumer base. Globalization helps to reach a new consumer base that the bank would not have acquired if not for globalization.
BRIIC alliance
From Westpac's perspective, collaboration with BRIIC countries would be very beneficial. A company’s size is determined by its operations and customer base and big companies expand to when they have saturated their local markets globally. Brazil, Russia, India, China, and South Africa are the five states who jointly form the acronym BRICS.as by 2014 BRICS represented an estimated of 40% if the world's population (Chowdhury, 34, 2017).
The associations' objectives include support to China one belt and road initiative (OBOR) aimed for human security, trade, communication, eradicating terrorism and the development of technology (Chowdhury, 2017). By joining this association Westpac will increase its business across South America and Africa. The association mainly consists of developing economies like Brazil and South Africa which regional security. In support of the OBOR BRICS can contribute to the development of development of banks and infrastructure. Westpac can take advantage of the benefits of this objective and strengthen its hold on these regions. By allying, a company can enjoy some unique opportunities like new markets, better technologies, reduction of costs and advantages acquired when governments collaborate.
References
Cerutti, E., Hale, G. and Minoiu, C., 2015. Financial crises and the composition of cross-border lending. Journal of International Money and Finance, 52, pp.60-81.
Chowdhury, T. and Islam, S., 2017. Environmental Performance Index and GDP growth rate: evidence from BRICS countries. Environmental Economics, 8(4), pp.31-36.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University Press, USA. Gregory, A., 2016. Public relations and management. In The public relations handbook (pp. 76-100). Routledge.
Ioia, M., 2014. The new rules of Competitive Intelligence. Xlibris Corporation.
Mika, J.P., 2017. 16 Indigeneity and management consulting in Aotearoa New Zealand. Management Consultancy Insights and Real Consultancy Projects, p.226.
O’Sullivan, N., 2015. The Global Reporting Initiative Guidelines and External Assurance of Investment Bank Sustainability Reports: Effective Tools for Financial Sector Social Accountability?. In Responsible Investment Banking(pp. 251-266). Springer, Cham.
Schmukler, S.L. and Abraham, F., 2017. Financial Globalization.
Weber, O. and Feltmate, B., 2016. Sustainable banking: Managing the social and environmental impact of financial institutions. University of Toronto Press.
Wood, V.R. and Wilberger, J.S., 2015. Globalization, cultural diversity and organizational commitment: Theoretical underpinnings. World, 6(2), pp.154-171.
