Commonwealth Bank Business Report Essay

Section 1 Executive summaryCBA has spue record remuneration of $8.68 billion dollar although the company is facing august Commission inquiry with regard to pecuniary Planning scandal (Yeates 2014). At present, CBA is a dominant leader in the retail- jargoning sector across the Australian monetary services persistence with premium price trade due to its largest customer base in Australia with its disruptive technology (Rose 2014). However, it is important for CBA to confide in service improvements and grounding to maintain its current merchandise leadership position. Therefore to identify the success factor behind CBA, it is important to esteem Australian Financial labor as a whole to test the attractive features of Australian Banking sector and the native strength of CBA to clarify its belligerent advantages and capabilities.Industrial life cycleAustralian Financial effort has exhibited the characteristics of shakeout decimal point lifecycle stages (Shapiro 2014). I n shake out stage cycle, competition and price-war between fiscal knowledgeablenesss gull intensified since double four banks are imposing discounts on variable interest rates available to a broader range of borrowers and punishing their fixed rates on mortgage offers (AAP 2014). Since then, services offered by volumed(a) four banks become difficult to differentiate each other(a) and this has helped the customers to c everyplace their option to have selective acquisition with the major banks. Further depth psychology go out explain CBAs clients and competitors power change due to industry evolution and its regional expansion strategy. Then, the further report will disassemble the reason behind CBA to attain premium stock price over competitors and its ethical implication in monetary industry.Section 2 milieual AnalysisExternal AnalysisTo analyze the external industrial environment that lead CBA to stay ahead of competitors, overall Australian Financial industry will nee d to be analyzed in term of doormans five forces followed by PESTLE model to observe how the scrap of the Australian Financial environment and macroeconomics factors have changed within the industrial twist (Thomas 2007).PESTLE ModelPolitical-LegalConservative supervisory of APRA, which approached more intensive than the Basel II minimum requirement, has assisted Australian Financial Institutions to have minimum cushion during the 2008 GFC period (RBA 2014). Moreover, Four Pillar Policy which prevents mergers between Australians big four banks to main competitive fiscal environment at low risk had also shielded the Australian Banking System from the hit of 2008 GFC (Durie and Gluyas 2009). Consequently, Australias strong and dynamic financial policies have favoured sustainable step-up even in the hard quantify to former government own incumbent CBA to withstand attack from aggressive competitors under a well-regulated financial environment (Brisden 2012).EconomicalDuring the pre GFC time, RBAs interest rate has increased from 5.50% in 2000 to 7% in 2008 (RBA 2014). These inclining rates have lucky big four banks during the crisis period since the elevated interest rates increased the banks touch on and helped Australian Banks to fund their debt in the hard time (Kerr 2011). Beltratti and Stulz (2009) also stated that the larger banks within strict regulations with more deposit financing at the end of 2006 had significant high return during the GFC. Therefore, during the crisis, the nitty-gritty of GFC on Australian Financial Institutions were considerably low compare to other developed economies and CBA had also came through the economic turmoil with strong obtain in deposit partake in by delivering $4.72 billion full-year net bring in in 2008 (Leyden 2009). This has clearly showed that favorable Australian economical scape has favored CBA to retain premium share over competitors in post and pre GFC periods. engineering scienceEyers (2014) st ated that Fintech (Financial Technology) scene is expanding rapidly in world financial centers. Financial Technologies are also challenging existing business models of financial institution since non-traditional players in Australian financial sectors are leveraging new-sprung(prenominal) innovation to deliver flexible services to consumers in a more genial way (Wade 2014). However, CBA is operating efficiently in the dynamic technological environment. This is because, CBA has qualify its strategy to capitalize on the difference between its three big rivals by injecting $1.1 billion upgrade to its core banking system and invest $ccc million a year in the high-tech modernization political program (Smith 2012). So, this has clearly clarified that technology is one of the factors that lead CBA in a dynamic business environment to stay two to three eld ahead of competitors (Faherty 2013).Porters five forcesNext, Porters 5 forces will be used to determine the financial industrys pro fitability, which influence over the success of CBA in Australian financial market.The panic of new entrantsNowadays, the digitalized financial system appears to be reaching maturity and every major big four banks are utilizing different channels of entrants to beat the market share (Eyers 2014). Consequently, there is a high threat from competitors in financial market beyond APRAs highly regulated financial systems since potential competitors from overseas and house servant (e.g woolworths/Coles) could have used technologies to offer realistic and physical financial services in Australian Financial commercialise (Eyers 2014). Since then, this could eventually challenge the growth of CBAs physical banking in the hanker run. However, CBA is still a major incumbent in a financial industry, which captures majority of market share with strong domestic presence in Australia (CBA 2014).Bargaining power of customersIn Australian Financial industry, there is a high pledgeing power of customers since Australian major big banks have brought similar financial packages with competitive rates to expand their market share in a concentrated market. As Australian market is favoring customers to bargain on the high hat rate, CBA has dynamically influenced the bargaining power of the market by offering an aggressive rate at low risk to itself for such customers by dropping its five years fixed home lend rate to record-low 4.99% in 2014(Yeates 2014).Rivalry among existing competitorsTodays, the financial market in Australia appeared to be reaching maturity. Mason (2014) stated that financial industry in Australia has developed at compound annual growth rate of 13% over the past decade and ranked among the most profitable banks in the developed world (Australian Trade Commission 2011). Nevertheless, Australian Financial industry is considered as Red Ocean since big four banks could potentially view more mortgage competition each other for the concentrated market sha re (Janda 2014). Thus, if market leader CBA failed to maintain its current competitiveness in an aggressive market, the market share could be missed out and it will be given away to competitors.Section 2.2 Internal Analysis strategical ResourcesHarrison (2014) stated that combination of tangibles and intangible assets of which control by the CBA could be set as key resources to execute its strategic capabilities. Resources include teamwork among managers and Past/ impersonate Chief executive officers, firms reputation among customers and its strong commensurateness sheet has helped CBA to attain premium share price over competitors. The ownership of CBAs strategic resources ahead of competitors has favored its long-term survival and palliate its competitive advantage. The strategic resources of the CBA will be demonstrated by victimisation the value Chain framework.Value Chain AnalysisPrimary activities deed EfficiencySmith (2012) stated that CBA appears to be ahead of compe titors in its IT information strategy and this has induced CBA to attain not only cost and practicable efficiency but also improve customer merriment. As a result, due to its new modernization in core banking system with crush in class online banking political platforms, CBA has attained the biggest improvement in its customer satisfaction score out of big fours and achieved Money magazines best innovative awards in 2014(News 2014). Moreover, CBAs strong shareholder with a hot balance sheet has also empowered full funded acquisition from internal and external stakeholders (Letts 2014). CBAs significant balance sheet growth with high earning assets and deposit has empowered organic capital growth and investors boldness in investment. Therefore, it is assumed that strong financial strength with high profit return has amplified CBA to stay ahead rivals and trades its shares at premium over their domestic competitors.Outbound ActivitiesCBAs strong acquisitions with Aussie Home lo an and concrete financial brokers network have improved its home loan supply to the new customers in the financial market (Elsworth 2014). Moreover, CBAs 1000 plus big branch network in Australia with highly efficient technology platform has also aided CBA to gain solid netbank customer loyalty bases in Australia (CBA 2014).