Commonwealth Bank Business Report Essay

instalment 1 Executive summaryCBA has put record profit of $8.68 billion sawbuck although the company is facing Royal explosive charge inquiry with regard to pecuniary Planning scandal (Yeates 2014). At present, CBA is a dominant leader in the retail-banking sector across the Australian fiscal services industry with superior price trade due to its largest customer base in Australia with its riotous technology (Rose 2014). However, it is important for CBA to invest in service mitigatements and innovation to save its current market leadership position. Therefore to identify the success reckon behind CBA, it is important to assess Australian m 1tary industry as a whole to examine the attractive features of Australian Banking sector and the cozy strength of CBA to clarify its warring advantages and capabilities.Industrial life cycleAustralian Financial industry has exhibited the characteristics of shakeout stage lifecycle stages (Shapiro 2014). In shake out stage cycle, comp etition and price-war between fiscal institutions maintain intensified since super four-spot banks argon imposing discounts on variable invade rank on hand(predicate) to a broader range of borrowers and lowering their fixed rank on mortgage offers (AAP 2014). Since then, services offered by big four banks become difficult to split up for each one other and this has helped the customers to broaden their option to commit selective learning with the major banks. Further analysis will explain CBAs clients and competitors force change due to industry evolution and its regional expansion strategy. Then, the elevate report will canvas the reason behind CBA to attain insurance premium stock price oer competitors and its ethical implication in fiscal industry.Section 2 Environmental AnalysisExternal AnalysisTo analyze the external industrial environment that lead CBA to suffer ahead of competitors, boilers suit Australian Financial industry will need to be analyze in term of Porters five dollar bill forces followed by tender model to observe how the competitiveness of the Australian Financial environment and macro economics factors have changed in spite of appearance the industrial structure (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 impact during the 2008 GFC period (RBA 2014). Moreover, Four Pillar constitution which prevents mergers between Australians big four banks to main competitive financial environment at low risk had also shield the Australian Banking System from the worst of 2008 GFC (Durie and Gluyas 2009). Consequently, Australias safe and dynamic financial policies have favoured sustainable growth even in the hard time to former government owned superjacent CBA to withstand attack from rapacious competitors under a well-regulated financial environment (Brisden 2012).E conomicalDuring the pre GFC time, RBAs invade rate has increased from 5.50% in 2000to 7% in 2008 (RBA 2014). These inclining rates have happy big four banks during the crisis period since the high interest rates increased the banks deposit and helped Australian Banks to pedigree their debt in the hard time (Kerr 2011). Beltratti and Stulz (2009) also state 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 effect of GFC on Australian Financial Institutions were substantially low comp be to other developed economies and CBA had also came through the economic turmoil with upstanding gain in deposit make do by delivering $4.72 billion full-year net profit 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.TechnologyEyers (2014) stated t hat Fintech (Financial Technology) scene is expanding rapidly in world financial centers. Financial Technologies are also challenging vivacious business models of financial institution since non-traditional players in Australian financial sectors are leveraging new innovation to deliver flexible services to consumers in a more convenient way (Wade 2014). However, CBA is operating efficiently in the dynamic technological environment. This is because, CBA has set its strategy to seat of governmentize on the deviance between its three big rivals by injecting $1.1 billion upgrade to its event banking system and invest $300 million a year in the high-tech modernization 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 age ahead of competitors (Faherty 2013).Porters five forcesNext, Porters 5 forces will be used to countersink the financial industrys profitability, which inf luence over the success of CBA in Australian financial market.The threat 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 capture the market share (Eyers 2014). Consequently, there is a high threat from competitors in financial market beyond APRAs extremely regulatedfinancial systems since potential competitors from overseas and domestic (e.g woolworths/Coles) could have used technologies to offer virtual and physical financial services in Australian Financial Market (Eyers 2014). Since then, this could eventually challenge the growth of CBAs physical banking in the long 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 bargain 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 best 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 understructure loan rate to record-low 4.99% in 2014(Yeates 2014).Rivalry among animate competitorsTodays, the financial market in Australia appeared to be reaching maturity. Mason (2014) stated that financial industry in Australia has developed at compound one-year growth rate of 13% over the past decade and bedded 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 face more mortgage competition each other for the concentrated market share (Janda 2014). Thus, if market l eader 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 AnalysisStrategic ResourcesHarrison (2014) stated that combination of tangibles and intangible assets of which meet by the CBA could be identified as key resources to execute its strategical capabilities. Resources include teamwork among managers and Past/Present Chief executive officers, firms reputation among customers and its strong commensurateness sheet has helped CBA to attain premium share price over competitors. The possession of CBAs strategic resources ahead ofcompetitors has favored its long-term survival and alleviated its competitive advantage. The strategic resources of the CBA will be demonstrated by using the value range of a function framework.Value Chain AnalysisPrimary activitiesOperation EfficiencySmith (2012) stated that CBA appears to be ahead of competitors in its IT development strategy and this has induced CBA to attain not only cost and operational efficiency but also improve customer satisfaction. As a result, due to its new modernization in core banking system with best in class online banking platforms, CBA has attained the biggest benefit in its customer satisfaction score out of big fours and achieved funds magazines best innovative awards in 2014(News 2014). Moreover, CBAs strong shareholder with a resilient balance sheet has also charge 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 confidence 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 floor loan and concrete financial brokers net work have improved its home loan supply to the new customers in the financial market (Elsworth 2014). Moreover, CBAs 1000 plus extensive branch network in Australia with highly efficient technology platform has also aided CBA to gain hard netbank customer loyalty bases in Australia (CBA 2014).