Portfolio Report for CommBank
Executive
The report discusses how sociopolitical factors are impacting the operations of organizations. The discussion narrows on CommBank, a large financial institution with over 1,000 branches across Australia and other markets. Comprehending the sociopolitical factors is achieved by applying the PESTEL framework. The results confirm that CBA is exploiting opportunities arising from politics, technology, environment protection, and a favourable economy. However, some areas are proving a limitation, including legal restraints and changing consumption patterns in the social context. The paper recommends the adoption of appropriate services to attract more clients. Lastly, adding the legal team’s number is also recommended in helping reduce possible conflict or lawsuits.
Introduction
The ASX “Australian Securities Exchange” is the largest market that companies across Australia use to trade their stocks. Some businesses have performed exceptionally well in this market, making it possible for them to be listed in the top 50 due to the large stock they generate in ASX. One such organization is CBA “Commonwealth Bank of Australia.” As of 1st April this year, CBA was in the top 50 due to its high market cap of 109,436,000,000 shares (ASX 50 List 2020). CBA, also referred to as CommBank, is a leading financial institution founded in 1911 in Australia. The company has grown to reach a valuation of $72.6 billion (Forbes 2020). CommBank has expanded its operation, serving different markets such as the UK, the USA, Asia, and New Zealand. According to the organization’s website, it helps these markets by offering banking services in broking, investment, insurance, superannuation, funds management, personal loans, and credit cards (CommBank 2020). The operations of CBA are often affected by macro-environment factors in the form of political and social elements. A perfect example is an ongoing debate about environmental conservation making large companies like CommBank adopt “green” policies (Sial et al. 2018). The report will focus on a detailed discussion of sociopolitical elements using the PESTEL framework to understand what is affecting CBA operations.
Methodology
The comprehension of sociopolitical elements affecting CBA will be facilitated by using the PESTEL framework. The discussion on CommBank will only focus on the Australian market since that is the region that has enabled the firm to be listed in the ASX. The selected framework will allow us to understand sociopolitical elements in the form of legal, politics, environment, social contexts, economy, and technology (Issa, Chang, and Issa, 2010). Concerning politics, the framework will help the report understand how the Australian government is impacting the operations of the business. This opens the avenue to discuss tariffs, political stability, foreign policy, and existing trade restrictions. The framework also opens the chance to understand how the Australian and global economy disrupts the services and strategies adopted by the organization. Through this, one gets a clear picture of how the business deals with disposable income, inflation, exchange rates, interest rates, and economic growth (Reinhardt et al. 2017). The utilization of PESTEL in the report also helps understand the social elements, including the attitudes and beliefs of the Australia community. A company stands to succeed in the market only if they strategize on ways to addresses career attitudes, health consciousness, age distribution, and population growth (Issa, Chang, and Issa, 2010).
The sociopolitical elements outlined by the PESTEL also describe the environmental issue that can influence the development of CommBank. According to Reinhardt et al. (2017), the environmental elements helps to underline how businesses manage to address concerns on pollution, sustainable operations, and carbon footprint. The framework also proves critical in illustrating the matters of technology advancements that banks use in dispensing their services. In the financial sector, technology (trade) has been a core step that continues to influence service delivery through issues such as the use of automated machines and the development of accounting software. Lastly, using the PESTEL to discuss the operations of CBA in Australia helps in understanding the legal elements. The Australian government has some set of legislations that govern the establishment and functioning of organizations. For instance, this aspect touches on product safety, product labelling, consumer rights, advertising standards, and safety requirements. Generally, the application of PESTEL will provide much needed detailed understanding of the external environment underlining areas where CBA is doing a good job.
Analysis
Political Factors
Political issues continue to affect the operations of CBA in Australia. Most specifically, the bank is affected by political stability that continues to characterize the Australian society. According to Uddin, Ali, and Masih (2017), balance and lack of terror activities make it possible for companies to operate freely and even expand operations. Such has been the development in Australia as the nation is characterized by being 15th globally for the conducive environment needed by companies to trade. The country has been experiencing favourable stability ranking where the scale is 2.5 being strong while -2.5 is a week and unstable. Since 1996 the country has been experiencing a positive rating on this scale (see Figure 1). The latest figure was in 2018, where Australia was marked to have 0.98, a positive value confirming stability for businesses to operate (The Global Economy 2019). About this, CBA has responded positively by increasing its operations since the environment favours business operations.
Figure 1: Australia Political Stability
Source: The Global Economy 2019
The other political aspect that can affect CommBank is the bilateral ties between Australia and other trading partners. The Australian government has good trade relationships with other nations across the globe and even joins agencies to ensure increased corporation. For instance, the nation is a member of the WTO “World Trade Organization,” G20, and Commonwealth. Most specifically, the leadership in Australia has helped the country to have close trade partnerships with India, Korea, the USA, China, and Japan (Austrade 2019). The warm trading ties encourage organizations to establish markets in these respective markets. CBA has managed to meet this expectation as it has set braches in the UK, the USA, Asia, and New Zealand (CommBank 2020).
Economic Aspect
The economic perspective also helps understand the operations of CommBank in Australia. The country has been experiencing positive economic growth indicates a good market for companies as people have more funds to save or make purchases (Jayakumar et al. 2018). Australia has been experiencing a steady growth of the economy for a long time, with average growth being 3.46% (The Global Economy, 2019). For instance, in 2018, it increased by 2.94 (see figure 2). The implication has been an increase in disposable income among Australians, helping them to have the funds to save to a bank like CBA. In addressing this aspect, CommBank appears to live to this expectation as it has covered a large part of Australia and offered a pool of financial services. As of 2016, the organization had 1,000 branches indicating its commitment to operating in an economy that continues to grow (CommBank, 2020). It is the availability of clients that the bank continues to strategize and increase its operations.
Figure 2: Economic Growth for Australia
Source: The Global Economy 2019
Social Aspect
The social factors also dictate the strategy which CommBank adopts in setting up its operations and adding services. One key element has been an improved saving culture across the diverse Australian population. This means that banks continue to experience an improved demand for their services. As pointed by Duncan and Cassells (2015), the saving portfolio for Australians rose by 54% from 2005 to 2015. On this element, CBA seems to be performing poorly compared to other three leading institutions such as ANZ “Australia and New Zealand Banking Group,” Westpac and NAB “National Australian Bank.” For instance, between 2011 and 2015, ANZ grew its number of customers by 8.8 while NAB had 15.4%; at such period, CBA only had a 5.8% increase in customers (Roy Morgan 2015). Such a trend confirms that CommBank, despite serving in a market that is experiencing demand for saving, it still need to improve services to attract more Australians.
Trade and Technology
Trade and technology elements also prove a crucial component of the PESTEL. Australia is among the leading innovative nations as depicted by companies adopting or creating new technologies. The vast trend of technology results in the creation of mechanisms that often promote growth in the community. Banks depend on technology as a way of enhancing their risk management capabilities, product offerings, and ensure cost-base management. One trend that is now popular across Australia is digital and cloud-based banking capabilities that give financial institutions an advantage in appealing to the younger generation. Such a factor has compelled CBA to develop an appropriate strategy, as evidenced by the company allowing users to access bank services remotely without limitation to the geographical area. The organization is thus meeting the expectations as it has embraced technological advancements such as the CommBank app, digital wallets, and NetBank (CommBank 2020).
Environmental Aspect
Another sociopolitical issue that can affect CBA is the environmental elements. Organizations operating in Australia often face the need to be active in promoting sustainable practices. Banks in Australia are required to follow some standards that promote climate protection. For instance, it is expected that these financial institutions adopt paperless technology, thus reducing the felling of trees. Additionally, any organization is encouraged to be proactive in protecting endangered species, adhere to pollution laws, adopt renewable energy, effective waste management, and practice recycling (Al-Hadi et al. 2019). In these aspects, CBA has been performing well in promoting sustainable practices. CommBank has a plan to ensure that by 2050 they have zero emissions by adopting appropriate green technology and activities. For instance, by 2025, the company intends to invest $15 billion to promote projects to encourage a reduction in carbon emission (CommBank 2020). Such an active role underlines the commitment to ensuring environmental protection.
Legal Issues
Lastly, CBA is also affected by trade, consumer, and privacy laws. These and other laws restrict the operations of any financial institution across Australia. The most notable laws that CBA is required to adhere to “Banking Act 1959, 2001 Corporations Act, 1999 Financial Sector Act, and 2001 Collection of Data Act” (Patterson and Mallesons 2020). Managing to adhere to all the outlined regulations means that a company will face lesser legal problems, especially lawsuits and restrictions. In this aspect, CommBank has failed some areas of legal elements giving rise to open condemnation by authorities. For instance, the company was accused of 53,700 breaches related to counter-terrorism and money laundering laws (Knaus, 2017). In these incidences, about $77 million was transferred without the bank raising any alarm with regulatory bodies. Such an accusation confirms that the organization is yet to make significant strides in dealing with legal elements (see summary in figure 3).
Figure 3: CommBank PESTEL
Source: Student’s Compilation
Conclusion and Recommendations
The paper provided a detailed analysis of sociopolitical analysis using CommBank as the case study. The organization is a leading financial firm in Australia, providing services such as superannuation, insurance, personal loans, and funds management. The critical analysis was enhanced through using the PESTEL framework which outlines areas where CBA need to improve and where it has managed to work relatively well. The aspects the CBA has managed to be effective include economic, political, environmental, and technological issues. However, it faces challenges on legal and social factors as witnessed by lower number of new clients and lawsuits.
Finally, the paper recommends two solutions for the CBA to ensure it addresses the areas where it appears to be weak. On social issue, the company need to increase affordable and convenient bank services. This can include increasing security features and crowd-banking facilities to encourage users to save more with CBA. In relation to law suits, CBA need to increase the legal team and provide it with necessary resources. Empowering such a team will make it possible to move across different branches and ensure they are adhering to existing laws.